Solar Lease or Solar Purchase or Power Purchase

February 4, 2020

Solar Lease or Solar Purchase or Power Purchase
I recently had a client ask me about “going solar”.  I’ve had a few people ask me my thoughts as it pertains to resale and home value over the last few years.  I figured I would share my take with everyone.
The main benefit of “going solar” is the control you gain from having it.  Offsetting those increasing SDGE rates so that you end up not having to pay SDGE is a money saver!  Don’t get me started on SDGE allowing us to conserve energy between the hours of 2 PM and 9 PM…. that’s impossible!
If you own a solar system free and clear, then you’re in the driver’s seat.  That being said, solar systems cost money, so you’ll need to weigh the costs of the system v. the savings it provides.  Any reputable solar company will be able to show you charts, graphs, and more to illustrate your savings.  How big is your current bill?  Solar doesn’t create a great return today unless your bill is really high.
In the past few years the government has been offering tax credits for those that purchase a solar system.  These tax credits make the systems much more affordable.   Many tax professionals tell their clients that cost of a new roof can count towards the overall cost of the solar system, which will increase your tax credit.  Consult your tax professional for their guidance on this matter.  If you need a referral to tax professional let me know.
A free and clear solar system does add value to a home when it’s sold.  However, it’s not a dollar for dollar return.  If you paid $20,000 for the system, that doesn’t make your home worth $20,000 more.  Appraisers will give you about $10,000 worth of value when it comes to their valuations.  Buyers will love the fact that they’re getting free power.  As time goes on, buyers will start expecting homes to come with solar.  A/C systems used to be a luxury, but now they’re expected.  This will end up being similar.  That being said, we’re a ways away from that day.
There are companies out there that offer Power Purchase Plans.  They basically become your utility company (your SDGE).  Typically, there are no upfront costs, and you’re not responsible for the system.  With Power Purchase Plans the fine print is always the issue.  These rates from the companies offering solar companies increase annually.  It’s written into their contracts.  You’ll always be below SDGE, but you’ll never own the system free and clear.
When it comes to selling your home, these solar leases are problematic.  Every home buyer seems to want the option of buying their own system, and taking the aforementioned tax credit.  These power purchase contracts get transferred to new owner.  The new owner pretty much has no choice but to take the system.  This can deter a buyer from buying your home.  If you plan to sell your home during the life of your power purchase contract I would recommend looking at alternative options.
Before ever considering going solar I would look at upgrading the power using components of your home.  Change to LED lighting.  LED Can lights that used to cost $20 a piece a few years ago, now are less than $3.00 when on sale.  You can Purchase more efficient appliances, and update your pool pump to a variable speed motor.  MY PERSONAL FAVORITE is MAKING YOUR KIDS TURN OFF THE LIGHTS when they’re no longer in a room.

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