I Wish They Gave Me All The Facts!!! – The Pitfalls of Solar Leasing
We hear from so many clients who did make the investment of solar but their comments to us:
“I wish I was given all the facts about the pitfalls of leasing!” – “I wish I was told about the incentives I forfeited when I chose to lease”
Solar is the fastest growing industry in Massachusetts – The early adopters and innovator thinkers have already invested in solar and now the majority of homeowners are moving forward with the great investment of solar.
As with all high growth industries, you can expect to have companies come forward with set agendas. Companies come into a striving industry driven by profits and mass production. At times, the home owners interest becomes secondary.
Some of those set agendas come forward in the form of leases and power purchase agreements (PPAs). So what are the pitfalls of these leases and PPAs?
Avoid a UCC Lien on Your Property
First – if you lease, you are allowing the leasing company or bank to place a UCC lien on your property. This lien is in place for the entire term of the leased agreement! In most cases, this is 20 to 25 years!!
- What is a UCC lien? – it’s simple – it means that someone (leasing company) has an asset (solar system) on your property. So you, the home owner, become partners with the leasing company for your solar system and become partners with the leasing company on the equity in your home!!!!!
- What does this mean? It means they have an attachment on your home – which means that the lien must be satisfied (bought out) before you sell your home or even want to use the equity in your home to get some money for a future home improvement!! So we hope that you never need to tap the equity of your home for any home improvements, emergency needs, college educations, or something else of critical need.
What are the incentives?
Second – understand what you are forfeiting. Make sure the solar companies are giving you every option for financing and reviewing the incentives you will be forfeiting with leasing and PPAs
- Federal Tax credit – the Federal Government provides you with 30% credit on the retail price of the solar system
- Massachusetts State Tax credit – this is 15% of the retail price – capped at $1,000.
- Electricity savings – with leases you only save 25% of the electricity production – with ownership you receive 100% of your solar system productivity offset.
- SRECs – Solar Renewable Energy Credits – this is a cash bonus. SREC income is not based upon electricity savings. It is based upon the electrical production of the solar system.
- Each 1000 KWH of solar production equals one SREC – an average system produces 6,000 KWH of electricity or 6 SRECs in each year. – Each SREC is worth about $285 in 2016 – so the owner of this system receives about $1700 in cash for the year – and the SREC program runs for 10 years!!
- 100% of a homeowner’s solar system should be paid for with State and Federal money – just paid over time.
- If not, then the productivity of the solar system is substandard or the contractor is charging too much!
Massachusetts Solar Loan program
Third – with State financing, leasing is not necessary.
Massachusetts – recently rolled out the Massachusetts Solar Loan program. This provides homeowners the opportunity to keep all the incentives and get a low cost loan between 1.9% to 3 % depending upon ones credit score.
- If the home owner combined income is below $80,240 annually then you may qualify for an additional 20%-30% write down off the original cost of solar.
- With the Massachusetts income based assistance and the Federal Tax credit – This could equate to over 60% of the cost of solar being paid for with state and federal monies. The SREC income is above and beyond.
Get All of the Facts
Summary – Before you jump at the offer of no money down or free solar offerings get all the facts.
- Ask the solar contractor for all options available
- Ask what incentives are being forfeited if you choose leasing
- Ask about the UCC liens being placed upon your home
- Ask about other financial options