Solar Lease vs. Solar PPA

Two of the major options for purchasing the solar power are PPA and lease plan. Each have its own benefits and demerits. Quite a few terms and conditions are the same. Below is an overview of the two schemes.

Down Payment and Upfront Costs

Solar  Lease

PPA stands for power purchase agreement.  Power purchase agreement offers a very low upfront cost.

On the other hand the lease plan asks for zero down payments.

Tenure

The agreement varies from 15 to 18 years. During this period you can transfer it to a new owner or home but of course you can never terminate it. In a lease plan the agreement is for 15 years or more. This is also transferable to a new owner or home, so pretty similar to PPA here.

Tariff Plan

The tariff plan of PPA includes a fixed rate which occurs as a direct result of the use of solar panels. These rates generally are higher for peak usage hours and flat for the rest of the day. Therefore you don’t have to pay for fluctuating oil prices which are characterized by varying electricity tariffs from the grid.

On the other hand in a lease plan you don’t have to pay for any power that your solar panel generates.  Pay the lease and any extra payment which comes due to the use of extra electricity from the company. The lease payment usually increases 3 to 4% every year. However there are some lease plans available in the market, which are flat.

Repair and Maintenance

You don’t need to bother about the repair and maintenance of your solar system. The seller continuously manages your system. In lease plan, it is not necessary that your maintenance and repair requirements are looked after by the company. However this rarely occurs.

No Tax Exemptions or Rebates

In PPA you don’t have any savings of tax exemptions or reimbursement from the state or renewable energy credits. Similar is the case of a lease plan.

Lingering Price

There is an option of buying at a later time or a fixed unit price. Lease plan offers the same scenario.

However it is usually better to take the solar panels off your roof because they are not usable any more. Even if you are buying try to negotiate the most economical price.

Credit Rating

Solar PPA

In order to qualify for a PPA your credit rating has to be excellent. For a lease program you can have a good to excellent credit rating.

Grid Tied System

In PPA, the system on offer is grid tied. Therefore, most of the time, there is a back up for your solar system. Lease plan offers the same luxury. So no difference here.

In essence when we adopt the option of PPA with some percent down payment we pay for the power generated by the solar panels and by adopting a lease plan, usually we don’t have to give down payment and pay a leasing fee that is incremented every year.

There are many other programs in the market which are becoming popular. One example is property assessed clean energy (PACE).

 

 

 


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