Home Solar Panels: Pros, Cons, and Hidden Costs

Solar energy has hit the mainstream. Once limited to consumers with deep pockets and strong environmentalist values, solar panels are less expensive than ever and are saving customers huge amounts of money per year.1 As a result, solar has a fast-growing appeal among middle-class Americans.

But if you’re considering making the solar switch, how will you pay for the equipment? Who installs the panels, and under what terms?

There are two ways to switch to solar panels for your home– leasing or buying. Each option has unique advantages and disadvantages, not to mention short and long-term financial implications. We’ll examine the options, and help you understand what’s best for your budget and electricity needs.

Leasing Solar Panels

According to the Solar Energy Industries Association (SEIA), solar energy now powers more than 600,000 US homes. Every three minutes, another home makes the switch to solar. That kind of growth is substantial, but many solar enthusiasts don’t own the panels on their rooftops. They lease them.

Solar Panels On Your Home

Pros of Leasing

Leases allow to you go solar even if you don’t have thousands of dollars for a down payment. While leasing won’t allow you to maximize energy savings when you switch to solar (for that, you’ll have to buy your panels), it can still significantly lower your monthly energy costs. The advantages of leasing include:

  • Low-cost financing: Leasing lets you put solar panels on your home and start saving right away, usually for $0 down. Instead of paying your local utility company for power, you’ll just pay the solar panel leasing company to use the system.
  • Multiple financing options: Depending on your circumstances, you can usually choose a solar lease or a power purchase agreement (PPA).3 With a solar lease, you only pay the leasing company for the solar equipment; you can use as much energy as you please. On the other hand, a PPA lets you pay for the power you consume at a set price per kilowatt hour. With a PPA, monthly fees account for the power itself, not the equipment.
  • Maintenance and repairs: Since you don’t own the panels, you don’t have to fix them when they break! The leasing company will handle all solar panel maintenance and repairs.
  • Option to purchase: At the end of your lease, you can purchase the solar energy system at a depreciated market value or, sometimes at a discounted price,4 depending on  the terms of your lease.
  • Lower energy costs: Leasing home solar panels is not like leasing a car, which usually results in overpaying for use of the vehicle. If you live in a state where solar energy is at least as cheap as the grid,5 you’re likely to enjoy equal or lower monthly energy costs even though you’re leasing a system from someone else. You can use the solar energy cost calculator from the Institute for Local Self-Reliance to estimate your saving.

All in all, there’s a lot to like about leasing rooftop solar panels! When you combine low to nonexistent startup costs with instant energy savings, and it’s easy to see why so many people are going solar.

Cons of Leasing

While leasing might be ideal for some buyers, it isn’t right for everyone. As a lessee, you will have to reconcile the benefits of leasing with:

  • Contractual terms: Solar leases or PPAs typically last 20 years – sometimes longer.6 On one hand, two decades is a long time. On the other hand, many utility companies already enjoy a local monopoly, which is tantamount to a lifetime “contract.”
  • No tax benefits: Owning your own solar panels usually qualifies you for various tax credits and rebates (more on those in a bit). If you lease your system, the leasing company gets to enjoy those benefits – not you.
  • Lack of ownership: Those solar panels aren’t yours, they belong to somebody else. To many homeowners, not having control over equipment that lives on top of their homes simply isn’t appealing.

In most cases, these disadvantages shouldn’t discourage you from switching to solar. You’ll likely save on current monthly electric bill, and can always purchase the panels later if you want.

Hidden Costs of Leasing

As with most home improvement efforts, leasing solar panels isn’t free from obscure or unexpected costs. Even if things appear straightforward and you like what you’re hearing from the leasing company, keep the following possibilities in mind and mitigate them by performing due diligence.

Graphic of the social & environmental benefits of solar panels
  • Insurance premiums: Depending on your homeowners insurance policy, installing solar panels on your roof could leave you with a higher premium. By the same token, solar panels could lower your premium, but you should talk with your insurance provider before committing to a lease.
  • Roof damage and rebuilding: Solar panels are mounted to your roof, and there’s a chance they will damage it. Be sure your lease specifies who is responsible for damage to the roof and who will cover any necessary rebuilding or restoration.7 If you’re responsible for those costs, you need to know about it.

Remember, you’re about to make a serious modification to your home. Checking with your insurance company and understanding your lease are part of your homework. “Hidden” costs won’t be hidden if you’re aware of them!

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