residential leasing

lesyl · July 2010

Greetings,

I'm afraid maybe posting a question that's been addressed ad nausea. I did a search and found some, but not a lot of information of this subject. Please feel free to let me know if I missed something...or to move this to a different thread...

We've got two companies, Sungevity and SolarCity coming to our city. We've gotten quotes from each for a 20 year lease. We're looking at prepay plans so we would pay one price up front and then we're done. The costs would basically be in the $4K to $6K range. One system would meet about 75% of our usage. Another would meet nearly 100%. Maintenance, repairs and insurance are included in both plans.

I've always avoid leases like the plague, but in this case I honestly don't see the downside. But maybe I'm missing something. At this point, the cost of purchasing a similar system makes it a no-go. And frankly with these plans, purchasing doesn't make financial sense for looooong time anyway.

So, thoughts?
And does anyone have any experience with either company?

Thanks.

BB. · July 2010

Re: residential leasing

Here is a thread discussing SunRun's solar leasing program and a few of us read the contract that was posted last year.

SunRun had the customer paying, roughly, for the system output at a few cents discount wrt to utility power whether or not they used the power...

It appeared, for example, if you kids moved out of the house in year 10--you would still be responsible to pay for 100% of the power generated (there is actually a range of power estimated/generated) through the end of the contract on year 18.

The other thing I have seen is that there is an inflation adder to the kWH pricing in some contracts. The SunRun was 2.9% (we think)--But interestingly, the last 14 years for my utility in Northern California was around 2.4% increase in average rates for all customers--and my actual power costs went down in that time frame instead of up (California, historically, has kept prices down for small users of power (<300 kWH per month)--the poor?--and increases were jammed on the larger users (>1,000 kWH per month)...

That is now changing because business and others are leaving the state because of the extremely high power costs for those that use a lot of power... And they are raising the lower tier rates at a higher rate...

Anyway, you are betting on your 20 year energy usage (and if you sell the house--are the new people going to want to take that bet?) and what happens with rates.

And, if you pay to your leasing company for your power--your local government may be able to add utility taxes and fees to your bill (possibly even proper taxes--varies greatly by state/locality)--which you will be responsible for.

The SunRun contract looked pretty fair and reasonable (to non-lawyers and even to the poster's lawyer). You just need to see if the terms and conditions are ones that you will want to sign up for or not. The leasing companies appear to be getting their monies from tax credits, rebates, and probably green tag--as well--I am sure--from investment and depreciation credits which are not typically available to a home owner. And the SunRun company was responsible for system maintenance, repairs, and parts.

However, the customer was responsible for shading on property (trees, additions, etc.). And if, for example, you took a 3 month period to rebuild/remodel your home, with SunRun the customer would still have to pay for the "lost power" that would have been generated (as well as still buying power from the utility).

One thing I will caution you about adding solar PV system to your home... I would not count on it adding any value to your home... Perhaps you might be able to justify $0.30 on the dollar in the sales price to a potential buyer--but many folks are afraid of solar PV and it may actually decrease the value of your home (unless you remove it).

If the affect on your home's price is important--check with a local real-estate agent to get better guidance.

-Bill

lesyl · July 2010

Re: residential leasing

Thanks Bill for the long and thoughtful response. I had already read through the thread you provided. If I understand SunRun program correctly, there are some differences between them and Sungevity and SolarCity.

For example, we'll still be paying our local utility for any electricity when the system can't keep up with our demand.

Under the plans we're considering, we make one payment upfront and then we never have to pay either company again. The estimates show we would save approximately $15K over the 20 years.

If we were to sell, the lease (since it's already been paid for) would be transferred over to the new owners, if they want it or removed if they don't. Things change, of course, but we have no plans of moving, possibly ever, so what happens if we sell the house isn't too much of a worry.

At the end of the lease, we have the option of either renewing the lease, purchasing it at fair market value, starting all over with a new lease or either company will take off the system for free and we're done.

We live in Tucson in a house with a new roof and a 20 degree pitch facing south. And except for one youngish tree, shade shouldn't be an issue....

Obviously, we would save more buy purchasing a system, but there's no way we could do for several years. We can do this now albeit a bit painfully. So far anyway, we're still not seeing much of a downside.

nvyseal · July 2010

Re: residential leasing

Hi lesyl,

Are you absolutely sure you do not have to pay anything for the power you use? Normally on these leases, you pay a lower kWh amount than what the electric company would charge for the first year, then it gradually increases over the term of the lease. If you use more than it generates then you pay the utility charge.

There is some missing ingredient here we dont know about. got a link to an online contract we can look at?

lesyl · July 2010

Re: residential leasing

Thanks nvyseal for the response.

I don't have the contact yet. At this point, the best I can do is point you to sungevity.com or solarcity.com.

But...I'll see if I can answer your question...

These companies each offer a $0 down lease. On those, you pay a fixed amount each month for the lease. That amount increases by 2.5% each year. And then you pay the utility for any usage above what the system produces. With these plans, you don't really save much over the life of the lease.

So under one company's $0 lease plan we would pay $51 a month for the lease + any usage above what the system produces. That comes to $12,700 for just the lease itself at end of 20 years.

However, they both offer "prepaid leases," which is what we would do. Under these you pay one price up front and that's it for the 20 year lease. Again, you pay the utility for any usage above what the system produces. For us, one quote is $4,000 and the other is $5,900.

Does that answer your question or am I way off base?

FreeWatts · July 2010

Re: residential leasing

that sounds pretty good

nvyseal · July 2010

Re: residential leasing

things that bug me:

What are the estimated savings by going with a Sungevity Solar Lease?

Savings will vary depending on how much energy you use, where you live and who your utility company is. A typical customer will save about 15% on electricity in their first year, and the savings will increase every year as grid electricity rates rise. Your iQuote will tell you what savings you can expect based on your historic energy usage and custom-designed home solar system.

I think your going to be paying a lower price per kWh than what your power company would charge

Will solar help lower electricity bills?

Yes! Becoming your own power source by installing solar panels is a giant step towards gaining energy independence and freedom from rising electricity rates. You can lower energy costs and reduce your bills immediately when you install solar. When electricity rates in your state climb, you’ll be largely protected because you will only be buying a small amount of electricity from the utility.

They dont say anything about the amount of electricity you'll be buying from them.

From Huffington post http://www.huffingtonpost.com/david-roberts/sungevity-offers-cheap-us_b_108956.html

Sungevity's 1.5kW starter system is around $8,000 installed.

That seems like a lot, and its not going to give you much! What is the size of your system, and just how much are your power bills a month, Average for a year?

I'm sorry if i ask way too many questions, but i really want you to be happy with your decision. I have solar, and im truly happy with my decision and i am generating just about what i use over a year.

lesyl · July 2010

Re: residential leasing

I really appreciate the questions, nvyseal. I want to make sure we're doing the right thing. I'll take a crack at responding to your questions.

To be clear, unless there's something fundamental I don't understand, we won't be paying either Sungevity or SolarCity (haven't decided which company yet) for electricity. Anytime we need to pull power off the grid, we'll pay the power company at regular rates for it -- minus any built up credits we may have from net metering. Does that answer that question?

Both quotes we have are for 4.2kWh systems. The Sungevity system would produce approximately 6,300 kWh/year. The SolarCity system would produce 7,000kWh/year (apparently they use higher quality panels). We use about 6,700 kWh/year.

If we were to purchase the Sungevity system is would cost $15,024 after all the various rebates and incentives.

I don't have the purchase price for the SolarCity system, but my guess is that would probably approach $17K or so.

That's why a 20-year lease with Sungevity for $4K or $5,900 from SolarCity seems like such a good deal.

Unless, I'm missing something...Which is why I appreciate the questions...

nvyseal · July 2010

Re: residential leasing

Well, if there is nothing lurking that you haven't been told about, I'd say thats a great bargain even if you bought it outright

lesyl · July 2010

Re: residential leasing

I appreciate the input.

a0128958 · July 2010

Re: residential leasing

I decided to lease this year, and so far so good. I'm in TX so I'm not sure leasing terms are the same as in AZ, but, here's a summary for comparison / learning.

I have an 8.1 KW system. I pay to the leasing company a monthly amount based on system output at 70% of whatever my prevailing retail kWh rate is.

For example, my electric rate is 10 cents and I've produced so far this year 4608 kWh. Thus, at 70%, my payments so far total $323.

My lease term is perpetual. For as long as I'm in the home and the panels are producing I'm responsible for payment.

My system was zero cost. I signed away all credits, rebates, and anything else.

I don't own any of the equipment, nor am I responsible for repairs. i am responsible for insurance.

Bottom line is I'm about $20 each month cash flow positive, comparing my utility bill savings to my outgoing lease payments. Not a lot of money each month, but, on the other hand, I don't have to otherwise wait well over a decade to reach break even had I done a traditional purchase.

Best regards,

Bill

lesyl · July 2010

Re: residential leasing

That's an interesting set up. As I've written, we'll pay up front for the lease. For some months of the year w may not even have an electric bill at all except for the connection fee because our system will be producing more than we're using. In the first year, we should save around $550. The lifetime cost is estimated at 4.7 cents per kWh.

a0128958 · July 2010

Re: residential leasing

Another thing that I think is an important factor to consider in the 'lease vs. buy' analysis is what the plan will be in the 10 - 15 year period when the inverter most likely will need to be replaced.

In my case, I have an SMA Sunny Boy SB7000 central inverter, for which a replacement cost 10 - 15 years from now will be at least a couple thousand dollars or more.

If you have a lease that's finished in 10 years, or, you buy out at the 10 year point, it's possible/probable you'll have a significant maintenance event in the next few years (after the first 10 years), setting back positive cash flow, or delaying the eventual break even point out a few more years beyond the decade point.

With a lease term longer than 10 years (i.e., 15, 20 or perpetual), and with ownership of the equipment remaining with the leasing company, then the cost impact of an inverter maintenance event can be avoided.

Best regards,

Bill

lesyl · July 2010

Re: residential leasing

Thanks Bill.

Yep! It's a 20-year lease that includes all maintenance and repairs, including replacing the inventor.

BB. · July 2010

Re: residential leasing

Beware (for at one supplier) that you are on the hook for all 10/20 year lease payments if you sell the home and the buyer does not want the system or cannot qualify based on credit score.

-Bill

lesyl · July 2010

Re: residential leasing

Since we'll be paying for the lease in one upfront payment, the new buyer won't have to make any lease payments or do anything really. It seems like if they could qualify for a home loan, they would have the credit score (which is 700) for the lease if they need...unless, we go back to the subprime days.

nvyseal · July 2010

Re: residential leasing

lesyl wrote: »

Since we'll be paying for the lease in one upfront payment, the new buyer won't have to make any lease payments or do anything really. It seems like if they could qualify for a home loan, they would have the credit score (which is 700) for the lease if they need...unless, we go back to the subprime days.

I'm really happy for you. I do hope you'll show us the installation pictures and also a link to what you are generating and what your power bill has dropped down to. For once we can see a positive on what a solar lease can give

When are you scheduled for install?

lesyl · July 2010

Re: residential leasing

I sure appreciate that. I will do all those things. No date yet on the install it could be two or three months.

nvyseal wrote: »

For once we can see a positive on what a solar lease can give

Which is still what makes us a little nervous and is why I'm here. This sounds so good that I'm wondering if we're missing anything. I've read though threads on leasing in this and other forums. It doesn't sound like people have had great experiences, but those lease agreements seem to be completely different than the one we're signing on for.

We've decided to go with SolarCity. Given how large they are, I'm surprised I can't find any discussion about them. But maybe that's a good thing. They're just moving into Tucson and we may literally be their first customer here though they've done a large install on new housing at the Air Force base here.

Anyone out there have any experience with SolarCity?

BB. · July 2010

Re: residential leasing

In SF Bay Area, some reviews on YELP for Solarcity.

For the most part, they seem to get good write-ups...

Things to confirm for you--Looking around solar leasing companies set their "rates" ~15% below the current power costs and put in a 2.9% per year adder--Don't know how that affects you when you pre-pay 15 years up front.

The other issue is make sure you understand the 15 year buy-out price. Not sure if it is too high or not.

-Bill

a0128958 · July 2010

Re: residential leasing

SolarCity just moved in to the Dallas area too. Don't know of anyone yet who has proceeded with SolarCity, though, and don't know of any local reviews favorable or not.

Best regards,

Bill

Jburgess · July 2010

Re: residential leasing

BB. wrote: »

In SF Bay Area, some reviews on YELP
The other issue is make sure you understand the 15 year buy-out price. Not sure if it is too high or not.

-Bill

I had solar city quote a sysytem for me about a year ago. This is what the lease said about buyout:

10. Options to Purchase the Solar Panel System Prior to the End of the Lease Term.

You may not purchase the System prior to the end of the Lease Term.

11. Option to Renew Your Lease.

You have the option to renew your Lease Term for up to fifteen (15) years in three (3) five (5) year renewal periods. We will send you renewal forms three (3) months prior to the expiration of the Lease Term, which forms shall set forth the new Monthly Payments due under the renewal Lease, based on our assessment of the then current fair market value of the System. If you want to renew and you are in compliance with this Lease, complete the renewal forms and return them to us at least one (1) month prior to the end of the Lease. In the event that you do not agree to the new Monthly Payments or do not submit a renewal form, the Lease shall expire by its terms on the termination date.

And that is why I did not go with them.

BB. · July 2010

Re: residential leasing

Jburgess wrote: »

...which forms shall set forth the new Monthly Payments due under the renewal Lease, based on our assessment of the then current fair market value of the System...

That was always the part that worried me too... What appears to be open ended lease terms for buy-back or renewing.

I appears, if you get a wide 15 year spread between the "contract price" and "utility price" for power--they could re-evaluate the payments and bring them back to a 15% discount like when the lease was first written (although from what little I have found, there is nothing in writing that appears to be enforceable from the customer point of view--accept the offered terms or remove the system

).

-Bill

lesyl · July 2010

Re: residential leasing

Jburgess...Is #11 talking about at the end of the 15 year (20 years in our case) lease? You can renew in 5 year increments at different terms at the end of the lease.

Or is it saying that every 5 years they will reassess the value of the system and change the terms accordingly? A 15-year lease broken up into five years increments.

Thanks again for all the responses.

Jburgess · July 2010

Re: residential leasing

It is talking about the end of the lease.

Here’s the options at the end of the end of lease. If you choose not to renew. I do not know if they still use the same contract or not.

17. Returning the System at the End or upon Termination of This Lease; Early Termination.

(a) Returning the Solar Panel System at the End or Termination of This Lease. If you don’t renew this Lease, then there are three (3) possibilities with respect to returning or keeping the System at the end or termination of this Lease:

(i) If at the end or termination of this Lease Term you have not defaulted on this Lease, then within ninety (90) days:

(A) SolarCity may at its choosing, remove the System from your home at no cost to you; or

(B) if SolarCity does not tell you that it wants to remove the System and you want to have the System removed from your Home at no cost to you, you must make a claim under the Limited Warranty which
governs your rights in this respect.

(ii) If at the end or termination of this Lease you are in default, and SolarCity chooses to remove the System from your Home then you agree to pay SolarCity the reasonable expense of removing the System from your Home. (iii) If at the end or termination of this Lease SolarCity chooses not to remove the System and you do not require removal within 90 days pursuant to the Limited Warranty, then you will be considered to be the new owner of the System and it will automatically be conveyed to you AS IS, WHERE IS.

lesyl · July 2010

Re: residential leasing

Okay good. And sorry for being dense, but what exactly was it that turned you off?

Also, SolarCity offers two different kinds of leases. Which one were you looking at?

Here's a like to the lease we're considering :
http://www.solarcity.com/residential/solar-lease.aspx

And here's a link to the other lease they offer: http://www.solarcity.com/residential/pure-power.aspx

Thanks.

solar_dave · July 2010

Re: residential leasing

I too looked at solar city and the residuals at the end of the lease were nearly the full value of the system at install time, basically you are just mostly just paying the interest on the installation for the life of the lease.

It looks like they have changed the end terms somewhat from when I look a 18 months ago. I don't think I like the sliding interest payments and they make the assumption that the rates will increase steadily, while their initial install value remains the same.

Jburgess · July 2010

Re: residential leasing

I was turned off by the lack of a purchase option at the end of the lease and the escalating payments when paid monthly. I do not remember them offering a lump sum payment at the time. I went with a purchase from a local company using utility, state and federal rebates.

The version of the lease I am looking at is one they e-mailed with the proposal.

lesyl · July 2010

Re: residential leasing

Ahhh, okay.

Under the lease we're considering, we will have the option to buy it, have them remove the system for free, start all over with a whole new system and lease or renew the existing lease (perhaps a new terms) with the existing system for another 5 years.

They're FedExing the contract to us. Should be here tomorrow. I'll post any interesting or confusing sections.

Slappy · July 2010

Re: residential leasing

A little concern, I know it is a lease, but is their a lean put against your home. This is a snip-it from your link. If you sell your home before the end of the lease, you can transfer the lease to the new owners if they qualify with excellent credit, or you can prepay the lease and add it to your home asking price. I would be very careful about stuff that requires a "house lean" because stuff does happen in life that we can not control? Just a thought and wondering???

lesyl · July 2010

Re: residential leasing

We got the contract today. For the most part things look fine and fair. We're not sure what to make of the following clause however:

8. TRANSFER
SolarCity may assign, sell or transfer this Lease or the exhibits, without your consent. Assignment, sale or transfer generally means that SolarCity would transfer certain of its rights and certain of its obligations under this Lease to another party.

Thoughts?

Slappy: No leans.

Thanks.

BB. · July 2010

Re: residential leasing

The "Transfer" sounds like how home loans are sold now-a-days. No idea who will actually end up with your "paper". In theory, the subsiquent owners cannot alter the terms of the lease (except, I would presume, during the renewal periods--which the original company can too).

Regarding leans--I would check that out carefully--Any tradesman supplying material, performing labor, or even supplying pre-fab material to a job-site can put a lean on the home/property.

Heck, we even had a lean placed on our house because the delivery guy wrote the wrong address for a delivery to remodeling project across the street from our home.

Some states require the contractor/etc. to notify you that they will be applying a lean to your property--And others do not.

If they are not going to place a lean on your home--then I would get that in writing... Normally, you should get a receipt for every payment you make/supplier that is paid so that you can contest accidental leans later.

Check out the laws for your state for details.

-Bill

PS: Any information on how they calculate the values/renewal costs at the end of the lease?

residential leasing

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