Federal tax incentives for purchasing solar panels have ended, prompting a significant shift in the residential solar industry towards leasing models. Historically, many companies, including Solar States, had avoided third-party ownership arrangements, also known as subscriptions or power purchase agreements (PPAs), where another company owns the panels and leases them to the homeowner.
However, legislation signed last year eliminated federal tax incentives that offered at least a 30% reduction on the price of purchased panels. Incentives for leased panels remain available, leading solar companies nationwide to now embrace leasing to sustain their businesses.
The Industry's Pivot to Leasing
Zoë Gaston, a solar analyst with Wood Mackenzie, noted a change in perspective among installers, with many who previously opposed third-party ownership now considering it.
This change highlights a broader recalibration within the sector as companies adapt to the new economic landscape for residential solar.
Snapshot of the U.S. Solar Market
Approximately 5.8 million homes in the U.S. have solar installations, representing 8.2% of homes suitable for solar, according to Wood Mackenzie. This indicates a growing, yet still nascent, market.
Significantly, more than half of new installations in the first three quarters of last year involved third-party ownership, foreshadowing the current trend.
Navigating Concerns with Leased Solar Panels
The residential solar industry has recently faced increased consumer complaints, often related to high-pressure sales tactics. Leasing arrangements have also presented challenges, including potential reductions in home value and service delays when leasing companies encounter financial difficulties. These issues underscore the importance of careful consideration for homeowners.
Shifting Perspectives: Solar States' Experience
Micah Gold-Markel of Solar States expressed previous reservations about leasing, believing that homeowners should own their energy generation. However, he acknowledges that customers can still achieve savings on their power bills through leases, as the leasing company benefits from the available federal tax incentives.
Pete Wilson, a homeowner installing leased panels, cited cost reduction and the absence of upfront payment as reasons for his decision. Gold-Markel's comfort with leasing has grown due to improved deals for homeowners, such as lower "escalators" or price increases over the typical 20-year lease term.
An Alternative Standpoint: Ownership Over Leasing
Some solar company owners, such as Joy Seitz, CEO of American Solar and Roofing, decline to offer leasing options. Seitz views leases and similar arrangements as complex financial products that many customers do not fully understand.
She highlights potential difficulties in transferring leases during home sales, which could create future problems for homeowners.
Seitz emphasizes offering solutions that prevent long-term issues for her customers, despite acknowledging that her approach diverges from the industry trend. Gaston indicated that solar companies are expanding their lease offerings, including prepaid leases. These options can help customers access remaining federal tax credits without incurring lease financing costs, assuming the savings are passed on.
Consumer Guidance for Solar Panel Installation
Individuals considering rooftop solar for their homes can take several steps to navigate options and protect themselves:
- Be Skeptical of Sales Tactics: Be cautious of high-pressure sales, particularly from unsolicited door-to-door or big-box store salespeople. Consumer advocates advise against companies referred to as "solar bros" who sell but do not install systems.
- Work with Trusted Installers: Experts recommend partnering with reputable local installers.
- Utilize Resources: Energy marketplaces like EnergySage, ratings sites such as Solar Reviews, and organizations like the Amicus Solar Cooperative can provide guidance and help find qualified installers.
- Take Your Time: Avoid making hasty decisions, as creating urgency is a common sales tactic.
- Thoroughly Review Contracts: If considering a lease, read the entire agreement carefully and ensure all terms are fully understood. Do not sign if explanations are unclear.
- Compare Costs: Closely compare current electricity bills with the solar installer's proposed costs. Inquire about any contract escalators (price increases over time), removal costs, and buyout provisions if the home is sold and the lease is not assumed by the new owner.
Gold-Markel, while still having reservations about leasing, stated that his company offers it to maintain employment for his 70 employees. He expressed that the solar business should be less complicated, motivated by the potential of solar energy.