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How Do Solar Panel Leases Work

Editorial Team
By
Updated Mar 07, 2024

If you are considering an investment in solar panels, one of the things you may want to learn more about is a solar lease. What is it? How could a solar lease help you get a solar panel system installed in your home? A solar power system can transform the way you power your home, enabling you to move to green energy and help you to use clean energy from solar power while reducing your electric bills. Yet, you have to pay for solar in some way. For some, solar leases work well.

At SmartSolar.org, we work closely with our clients to help you find the best way to obtain a solar system for your home. If you’re interested in buying solar panels, reach out to us now to learn more about doing so.

What Is A Solar Lease?

A solar lease may make it easier for some people to buy a solar panel system and install it on their home. You may not want to make a large upfront payment to purchase solar panels. It could be out of your budget, but you still want to do your part in moving to a source of clean energy instead of using expensive fossil fuels. A solar lease can help you.

With a solar lease, you do not have to worry about having the money to cover the upfront costs of installing solar panels. Instead, you will pay a monthly lease payment. Leases are an option and a viable one for many people. Yet, there are limitations that you need to keep in mind before you elect to go this route.

How Does A Solar Lease Work?

A solar lease works much like signing a car lease. You will pay a fixed monthly payment on the account, often directly to the solar installer or the solar lease company. In this situation, you do not outright own the solar panels. Instead, the solar company maintains ownership of them.

The benefit to you is that you get all of the solar energy that is produced by the panels to use. That immediately reduces your electric bill.

In most situations, the solar company will work with a solar leasing company to provide this service. The solar installer will design, install, and then maintain the solar panel system for you. You just have to pay for access to solar power.

Is A Solar Lease Different From A Solar Power Purchase Agreement?

A solar Power Purchase Agreement (PPA) is another type of way to cover the cost of purchasing solar. Solar PPAs are very similar to solar financing. In both a solar PPA and a solar lease, the solar company will install the system on your home that will provide power to your home. You do not own these systems. Instead, you pay monthly for the power produced.

So, what is the difference? With a solar lease, the amount you pay for the system is the same, no matter how much solar energy your solar panel system produces. That’s a bit different from a solar PPA, where the contract you sign with the company will dictate the price for each kilowatt hour of power produced. In this situation, it is much like paying your electric bill, however, the solar PPA rate will be lower than the utility rate you are paying for your electricity now. In other words, it will still help you to save money.

With a solar lease, your payment is the same each month. With a solar PPA, the amount you pay depends on how much solar energy the system produces. 

What About the Federal Solar Tax Credit?

When you lease solar panels, you are not purchasing solar panels. That means you are not able to qualify for the federal solar tax credit. These tax incentives are specifically designed to cover the upfront costs of the purchase of solar panels. Installing solar panels that you will own will allow you to benefit from the federal tax credit.

The same applies to power purchasing agreements and a solar lease agreement – you will not qualify for solar tax credits with these opportunities. Your energy bill will be lower, but you will not qualify for tax credits.

What About a Solar Loan?

If you want to buy a solar energy system and want to take advantage of the federal solar tax credit but don't want to pay the upfront costs of installing solar, you might want to think about getting a solar loan. Solar loans are much like the mortgage on your home or the loan on your car. You buy solar panels and use a loan to pay for them. Unlike a lease agreement, you own these panels and are responsible for them. You also own all of the energy the solar panels generate. This is the most common option for residential solar panels purchased.

If you want to own solar panels, consider solar loans. If you want someone else to install and manage solar panels, and you want to benefit from having a lower energy bill, consider a solar lease.

Let SmartSolar.org Help You With Renewable Energy

How much energy do solar panels produce? Is leasing solar panels worth it to you, or should you consider buying a solar system? You likely have a lot of questions, and today’s solar companies can answer them for you. Set up some time to talk to SmartSolar.org now to learn more about what your monthly payments could be and how you to stop relying on the utility company.

Editorial Team
By Editorial Team
Our Editorial Team, made up of seasoned professionals, prioritizes accuracy and quality in every piece of content. With years of experience in journalism and publishing, we work diligently to deliver reliable and well-researched content to our readers.
Editorial Team

Editorial Team

Our Editorial Team, made up of seasoned professionals, prioritizes accuracy and quality in every piece of content. With years of experience in journalism and publishing, we work diligently to deliver reliable and well-researched content to our readers.
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