Solar: Buying vs. leasing
Going solar is full of choices. What kind of panels should I buy? Should I opt for a central inverter or a micro-inverter? What about adding battery back up? Perhaps the most vexing question is how to pay for the system. As the market for solar has grown, the choice to either lease a system or purchase one outright has become more complex. This is the case because there is no one-size-fits-all answer.
Buying a solar system
Purchasing a system entitles you to not just the power generated by your system, but all of the associated tax credits and renewable credits that come along with going solar. Currently, the federal government offers a tax credit for 30% of the total cost of the system, with no maximum credit amount. This credit expires at the end of 2016 for residential systems.
Solar energy system owners earn renewable energy credits based upon their system’s output. These credits can be sold similar to stock in a company. The combination of tax credits and renewable energy credits can add thousands of dollars back into your pocket over the life of your system.
These benefits do come with a significant initial start-up cost. Think of purchasing a solar system as paying for your next 20 years of energy use up front. It is an investment.
You may be able to lower your upfront cost of solar, but still get the benefits of ownership, with a solar loan. New solar loan products are coming on to the market regularly. The most attractive loan can often be a home equity line of credit leveraging the value of your home to improve it with the installation of a clean energy system. The interest rates on home equity lines of credit are often very low and the interest paid on them is usually tax-deductible.
Leasing a solar system
Unlike buying, leasing requires little or no upfront investment. This makes it an attractive option for individuals who want to lower their monthly electricity bills, but don’t have a large reserve of cash they can spend on buying a system. The downside is that if you lease your system, you are not entitled to tax credits or renewable energy credits. These credits go to the system owner, likely the company that installed your system.
While it is true that solar increases a home’s resale value, selling a home with a leased solar system on it does add another layer of complexity to the sales process. If you are leasing a system and want to sell your home, be sure to work closely with the company that leased your system to avoid any issues.
