Updated: Jun 6, 2019
At National Energy Partners, we provide solar development services for residential and commercial clients alike. In our 10+ years of operation, National Energy Partners has consulted with thousands of clients. A common question that arises during the consultation is: “What are the benefits of leasing a solar panel system, with a Power Purchase Agreement.” Our answer? It's tricky.
In this report, featured on 6ABC News "Troubleshooter" series, consumers learned this lesson the hard way from their local solar company.
At National Energy Partners, we advise residential clients to purchase their solar panel system, through either direct purchase or 100% financing. This method gives the consumer "ownership" of their system. Why does this matter?
What is a solar lease, or "Power Purchase Agreement (PPA)?"
As Solar Energy Industries Association (SEIA) explains: “A solar power purchase agreement (PPA) is a financial agreement where a developer arranges for the design, permitting, financing and installation of a solar energy system on a customer’s property at little to no cost. The developer sells the power generated to the host customer at a fixed rate that is typically lower than the local utility’s retail rate. This lower electricity price serves to offset the customer’s purchase of electricity from the grid. [However] the developer receives the income from these sales of electricity as well as any tax credits and other incentives generated from the system. PPAs typically range from 10 to 25 years. The developer remains responsible for the operation and maintenance of the system for the duration of the agreement. At the end of the PPA contract term, a customer may be able to extend the PPA, have the developer remove the system or choose to buy the solar energy system from the developer.”
There are many misconceptions about a "Solar Lease" or "Power Purchase Agreement (PPA)":
1. Energy Savings:
With solar PPAs, residential consumers pay a fixed monthly rate as a lease payment. This provides savings from the standard electric rate and can reduce energy costs. However, buying the system outright, consumers can eliminate their electricity bills entirely.
Bottom line: A solar PPA provides long-term savings. With traditional utility rates consistently rising, these savings will only continue to increase. However, consumers gain the most savings by owning the solar panel system.
2. Solar Lease or PPA Contracts:
Most PPAs lock residential consumers into contracts with a duration of 20 years (or more). During this time, residential consumers are locked into their fixed rate but are typically prohibited from purchasing the solar panel system. Further, once the PPA contract concludes, residential consumers are typically left with three options. They can:
(1) Extend the lease. But, after 20-30 years, their system will likely have decreased production.
(2) Have the solar panel system removed. This option leaves them to "start over" with solar energy, or return to traditional fossil fuels.
(3) Purchase the solar system from the developer. As noted, after 20-30 years, the system will likely have decreased production.
Bottom line: Residential consumers can benefit from utility savings with a solar PPA. However, contracts of a solar PPA often have a downside.
3. Solar Energy Incentives.
A PPA allows consumers to avoid up-front costs when converting their home to solar energy. However, a PPA also makes the consumer ineligible to the many financial incentives that come with owning their solar panel system.
Incentives, such as State and Federal Tax credits, dramatically reduce the cost of a solar panel system. Other programs, such as SRECs, allow consumers to sell the energy that their solar system produces. With a PPA, all of these incentives go to the owner of the solar power system. For residential consumers, ownership of the solar panel system will increase property value, allowing further returns when selling your home.
Bottom line: Leading State and Federal incentives can offset the cost of owning a residential solar panel system. When combined with long-term utility savings, direct purchase or 100% financing options far outperform a solar PPA.
4. Solar System Warranties.
A common misconception about a Solar PPA is the maintenance of the solar panel system long-term. PPAs promise full maintenance and monitoring throughout the duration of the contract. While this may sound appealing, the same guarantees are available to consumers who purchase their solar panel system.
At National Energy Partners, we offer industry-leading warranties as provided by the manufacturers of our solar panels (25 years). Further, we provide full monitoring and maintenance of our solar panel systems throughout the system's life. Online technology allows consumers to track their system’s energy production in real-time. A notification is sent to provide alerts of any downtime, allowing us to provide highly-responsive, immediate service. Simply put, that warranties of PPAs give no real advantage.
Bottom line: Residential consumers receive the same warranties, maintenance and monitoring with solar panel systems that they own.
Take the first step towards owning a solar panel system for your home or business, and learn more about Direct Purchase and Solar Loans.
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National Energy Partners (NEP) is a solar energy development company dedicated to bringing clean, renewable energy to businesses and residential consumers alike. At the forefront of the solar energy landscape, our passion is in fostering relationships through integrity, knowledge and efficiency. NEP embraces the specific needs and challenges of each project, offering our valued clients the best experience through strategic management, trusted relationships and eco-friendly solar energy solutions.
With over 10 years of experience in the solar industry, our portfolio includes over $100 million of projects with more in development.