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Own your solar or lease?

 

Decision Criteria

Solar Lease & Pre-Paid Liability

(solar photovoltaic only)

Own Your Solar® Asset

(solar PV electric, solar water heating, solar thermal AC)

 

Best option if you…

 

 

  • have limited resources for the larger down payment required to finance or to make the purchase outright
  • have a tax liability that is smaller  than the amount of credits you could receive
  • do not want to wait until the following year to receive the tax credit benefits
  • are planning to stay in your property for a long time.
  • have a tax liability that is larger  than the amount of credits you could receive or want to roll it to as long as 2016
  • have access to money to pay for the system (either through savings or the ability to borrow at low rates)
  • are a business and can realize tax benefits through treating the system as a depreciable asset
  • plan to sell your property within the next few years.  (Note:  The solar photovoltaic system would increase the value and make the property easier to sell)

 

Cost

 

  • Low upfront cost generally ranging from $0 to approximately 50% of the system’s purchase price
  • No offsets from rebates, tax credits or incentives
  • Requires full payment upfront (either out-of-pocket or borrowing)
  • Cash rebates can reduce the cost of the system by 10%-50%.  PEP manages all the paperwork involved with rebates and incentives for you
  • Tax credits reduce your Federal income tax liability for the year in which the system was purchased or can be spread to 2016 if your tax liability is less than the credit amount.

 

Maintenance

 

  • Maintenance and repairs are the responsibility of the leasing company that owns the system.
  • Most companies offer free online, smartphone, or tablet programs to track your system’s performance and report any issues to the leasing company.
  • You own the system and are responsible for maintaining it  Solar PV systems generally require little or no maintenance.  Solar panels carry a up to 30-year performance guarantee and solar inverters carry  up to 30 year warranty
  • With Mage Solar Panels you receive life-time monitoring

 

Terms

 

  • Terms are generally for 20 years,

 

Terms for purchases financed with loan terms  available up to 30 years

 

Offsets

 

  • You do not qualify for any tax credits, depreciation, rebates or incentives

 

You qualify for all applicable:

  • Federal Investment Tax credits (consult your CPA)
  • State tax credits
  • Depreciation
  • Cash Rebates and other incentives

 

Savings / Returns on Investment

 

  • Ok returns that can range from 4% to 12% (if you use a lot of power).
  • With $0-down and small down payment options of  solar lease you will realize savings of 4% to 12% on your electricity bills unless you have an escalator

 

  • Excellent returns that can range from 10% to more than 30%,
  • Free electricity  up to 50 Years
  • Potential to make additional revenue by selling SRECs (if the customer refuses the utility rebate)

 

 

Pros

 

  • Low upfront  payment (let’s be serious this is not an investment its a liability)
  • Some reduction in carbon footprint
  • No risk with respect to maintenance and repairs (contract will void if panels are not cleaned or if sun hits inverters)
  • As a general rule (only if you own the equipment), every $1 saved in electricity costs / year translates to an increase of $20 in the property’s value.

 

  • Significant reduction in carbon footprint
  • Qualify for all rebates, tax credits, and revenue from SREC sales
  • Attractive return on investment, especially if you borrow to finance the system.  Generally, the savings generated will be much larger than the cost of the money borrowed
  • Significant increase in property value. As a general rule, every $1 saved in electricity costs / year translates to an increase of $20 in the property’s value.
  • Fewer issues to address when selling the property
  • Add as many saving products as needed even if your family grows or if you sell your home or business to a larger user of electricity.
  • You win 10 ways and receive all the benefits of ownership of assets and not a liability contract.
  • You receive a 12 year install warranty
  • You can increase your savings by upgrading to a solar thermal air conditioner allowing for the thermal panel on your roof.

 

 

Cons

 

  • Potential issues with some leases if you were to sell the property.
  • You do not own your roof so make sure you call for permission before you do anything.
  • Lease Contracted Warranty  is generally only good for 85% of the power production up to 10 years, not the 20 usually stated in advertising.
  • Pre-paid Lease under a residential PPA still means you do not own the equipment.  You are loaning the lease company money and no longer earning 3% on CD’s or Bonds and not a write off.
  • You lose all the property value increase usually $21,000 to $41,000 on average because you do not own the equipment even on the pre-paid lease
  • You cannot add a solar thermal air conditioner to increase your savings because you do not own your roof allowing the thermal collector to be added.
  • You only receive a 2 year install warranty
  • MVA is usually the Lease company stated value to the treasury for $94,000.00 which you are responsible for paying at the end of the lease or pre-paid lease as stated in the contract.
  • Arizona Department of Revenue Considers Taxability of Leased Solar Systems because the customer does not own it.  Arizona Department of Revenue issued a memo which strongly suggests that leased residential and commercial solar systems may no longer be exempt from property tax assessment. The current exemption applies to those systems which produce electricity for onsite consumption, and the Department has raised the question of whether systems which are owned by a third-party fall under the necessary statutory definition for the state’s property tax exemption. The Department’s logic in this case is somewhat tortured, and there have already been multiple meetings and exchanges between solar industry representatives and Department staff on this matter. The Department’s memo is not a final ruling, and final guidance to county assessors and others is expected relatively soon.
  • Larger cash outlay  although most of it is just trading your electric bill and now it’s a write off.
  • Not Many  since there are no moving parts