THE HIDDEN COST OF FREE SOLAR.  

 

The U.S. solar residential lease, like it or not, directly addresses switching costs by offering free installation and including maintenance for either a monthly lease payment or a continuation of paying for electricity by the kilowatt-hour.  The term “switching costs” refers to the effort or expense or inconvenience or all three required to switch from one product or service to another. The more expensive the cost of the switch in terms of money and inconvenience and the more habits and routines that must change to make the switch the higher the switching costs.

 

Solar leasing directly addresses the “cost” of switching to solar. The easy, “sign here” and you don’t have to do anything else is appealing to consumers but at a huge cost. Solar leases come with annual escalation clauses along with cost prohibitive “buy out” provisions should the homeowner want or need to get out of the lease.

 

The impact of the annual escalation charge on the total financial outlay overtime is overlooked because homeowners are used to utility rate increases and in general, leasing companies do not raise the point that the sun does not come with an annual rate increase.  System lessees poorly understand the fact that maintenance for a residential PV installation is very low and the components are covered by warranty.  The offer of included maintenance implies the necessity of maintenance which is deceiving.

 

The Downside of Free Solar

The real downside of Free Solar is that it is not truly free. Over time the annual escalation charge renders the PV installation more costly than is it had been installed with reasonable financing.

Base charges on utility bills (charges paid before one kilowatt hour is used) are increasing and many utilities are pushing for higher charges for customers with PV systems on their roofs whether or not the system is leased.

 

The Residential Solar Lease Model Remains Flawed

The solar lease has shown quite clearly that over time the escalation charge will more than make up for the low upfront installation costs. Deployment under this model is accelerating and the flaws in the model need to be addressed. Customer education needs to be part of the lease process because if customers have the means of electricity production on their roofs they should understand how it works and what it will and will not do. Monitoring needs to be visually appealing and easy to access and read.

 

The escalation charge needs to be addressed because a) the sun does not include an annual charge for shinning b) utility rates will continue to rise meaning that the customer will be paying for more than one increase, that is, the increase charged by the lease company and the increase charged by the utility and c) over time there will be further fees charged by utilities.

The value of a leased PV system when the house is sold should be made clearer, or, simply clear.  Most realtors do not view a leased PV system as an asset while an owned system is considered an asset

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