TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker or making a Paypal contribution here: paypal.me/SupportTMC

We're Going Solar: Lease or PPA?

Discussion in 'Energy, Environment, and Policy' started by Andrew, Jan 14, 2014.

?

What should I do?

Poll closed Jan 21, 2014.
  1. Go for the Sun Power lease!

    0 vote(s)
    0.0%
  2. Go for the Canadian Solar PPA!

    100.0%
  1. Andrew

    Andrew Model S #6151

    Joined:
    Mar 11, 2013
    Messages:
    344
    Location:
    Santa Monica, CA
    I'm hoping some of you smarter and more-experienced folks can help me out on this. We're going to install solar on our house, with the goal of covering 100% of our usage for the house and our Model S.

    I have narrowed it down to either a straight lease or a power purchase agreement, and am having trouble deciding which route to take.

    Option 1:
    Sun Power Lease - 5.2kW system with 16 Sun Power E20/326 Panels, and a Sun Power SPR-5000m Inverter.
    Leased/installed through Solar Unlimited, in Burbank.
    $106/month with an annual 2.0% escalation.

    Option 2:
    Real Goods Solar PPA - 5.25k system with 21 Canadian Solar CS6P-250P Panels, and a Power One PVI-5000-OUTD-US Inverter.
    $0.15/kWh with an annual 1.5% escalation. Their estimate puts the annual production at 8,024, which would average $100.30/month to start.

    Alternately:
    Solar World Lease or PPA...I think I could get competitive pricing on these panels, but haven't pushed on that yet. If any of you tell me that Solar World has the best panels, I might revisit this.

    I did look at Solar City first -- but they were more expensive ($113/month + 2.9% escalation) and I don't like the way they structure their performance guarantee.

    So... Sun Power would be fewer panels, though have a flat roof and won't really see the panels anyway (though it means fewer holes in our roof!). I also like that they're made in USA. However, I'm not a fan of their performance guarantee, which would allow the system to under-produce by ~10% before they would have to credit us back anything. More importantly, as the panels degrade, we'll actually be paying more for less output (~10-15% less at year 20). I feel like Sun Power is a little more of a gamble -- but then again, everything I've heard is that Sun Power panels are the best available.

    Curious to know what you all think! Thanks.
     
  2. GlennAlanBerry

    Joined:
    Dec 3, 2012
    Messages:
    438
    Location:
    Parker, CO
    Personally, I like Sun Power panels better, since they are more efficient than other brand panels. Having fewer panels, with essentially the same total output gives you more room on the roof to add additional panels in the future. A 5 kW system seems a little on the small side to cover your complete usage (including the Tesla). Of course that depends on your base electrical usage at your house and how many miles you put on the Tesla...

    I have a smaller 3.15 kW Sun Power system with their older 315 watt panels that I installed in 2011, from Namaste Solar. I paid cash for my system, but I wish I had put in a bigger system.
     
  3. nwdiver

    nwdiver Active Member

    Joined:
    Feb 17, 2013
    Messages:
    2,409
    Location:
    United States
    Why not buy?

    I'm not sure what the laws are in CA but I've installed my own panels on each of the 3 homes I've lived in the last 5 years. WA has the most stringent laws so I put the panels on the roof then paid an electrician $500 to do the final connections and inspection. Saved ~$20k :cool:
     
  4. Andrew

    Andrew Model S #6151

    Joined:
    Mar 11, 2013
    Messages:
    344
    Location:
    Santa Monica, CA
    Thanks Glenn for chiming in! I appreciate the help.

    Our use at home is fairly efficient, and we're driving ~1,000mi/month. I calculate our average use at about 8,300kWh/year. 5.25kW does undersize the system slightly, but then again, I'm hoping that our home power usage will trend downwards as we become even more efficient.

    Roof space isn't really an issue (though I do like the idea of fewer holes in the roof!), and unless we buy outright, we can't really modify the system anyway. So I'm not sure if the increased efficiency of the Sun Power panels really matters in our case?

    - - - Updated - - -

    I'd rather keep my cash on hand to buy a Model X...or more shares of TSLA!

    If we were to get a loan, the financing I've seen hasn't been all that attractive. I also am not sure after 10+ years of higher loan payments that I'll want to own an antiquated solar system outright. (And, in case of issues with a purchase, we're 100% dependent on warranty. With a lease or PPA, if the panels stop working and the company doesn't fix them, we will just stop paying!)

    (Yes, I realize that a Model X will increase our overall electrical usage - but we don't drive that much with our second car right now, so I don't expect it to be an issue.)

    I'm not that handy. ;)
     
  5. Merrill

    Merrill Active Member

    Joined:
    Jan 23, 2013
    Messages:
    2,098
    Location:
    Sonoma, California
    I went with Sun Power because at the time (2010) they were the best and most efficient. We did not have the room nor perfect exposure so could only do a 4.5kw system. We are all electric and on a well, so use around 14000kWh per year, and that is being very frugal with our usage. Led lights only use electricity during off peak hours, have replace all mechanicals and appliances with energy efficient units. We are on E7 TOU which is no longer available but work well with solar. So the system takes care of around 40% of the energy used but 70% of our total bill. How ever you decide to pay for it you will be happy you minimize you cost to the power company.
     
  6. simplesolar

    simplesolar Member

    Joined:
    Jun 30, 2013
    Messages:
    250
    Location:
    SoCal
    I think those two option are almost the same. Leasing has benefits and PPA has benefits. I would say if you have some money look into pre-paid lease or owning it outright because it pencils out to $0.07-$0.09 in the long run and you save much more money. My typical system has 20-25% ROI. Not much on the market out there besides tesla stock last year and today can generate that kind of return risk free. As far as maintenance goes there are minimal because there are no moving parts. Also sun power is not made in the USA like most people think, they are made in the Philippines.
     
  7. Andrew

    Andrew Model S #6151

    Joined:
    Mar 11, 2013
    Messages:
    344
    Location:
    Santa Monica, CA
    Yeah, if I had lots of extra cash lying around, I'd probably just buy a system outright. Unfortunately that's not the best move for us right now, so I'm going with the lease or PPA. Having said that, I talked Real Goods down to 14.5 cents/kWh (with the same 1.5% annual escalation) - which is the best pricing I've been able to get anywhere. Over 20 years, that translates to a difference of about $4,000 between these two systems (actually, probably more if I factor in degradation) -- so I think I have my answer!

    Woah, good to know. I think I was told by more than installer that Sun Power is made in the US. That makes the decision to go with the Real Goods/Canadian Solar Panels option easier as well. Thanks!
     
  8. Robert.Boston

    Robert.Boston Model S VIN P01536

    Joined:
    Oct 7, 2011
    Messages:
    7,842
    Location:
    Portland, Maine, USA
    I would lean towards the PPA approach just from general principles. This new offer from Real Goods seems like a winner (although I can't speak to the quality of their hardware, one way or the other).
     
  9. aronth5

    aronth5 Long Time Follower

    Joined:
    May 8, 2010
    Messages:
    1,436
    Location:
    Boston Suburb
    Andrew what are the terms of the lease? Without knowing the length of the lease it is difficult to comment.
    Alsp. what are your options for an early buy out? I was fortunate to be able to negotiate a fixed monthly rate.
     
  10. derekt75

    derekt75 Member

    Joined:
    Jul 16, 2012
    Messages:
    592
    Location:
    San Jose, CA
    Is the 8024 kWh the annual production in the first year, or the average annual production over their lifetime? If that's the year one production, then RealGoods is noticeably better than SunPower.

    For what it's worth, my panels are actually producing about 7% more power than SolarCity estimated (and about 19% more than they guaranteed). That makes the SunPower panels a bit better in year 1, but I think RealGoods is going to wind up noticeably cheaper after you factor in the escalation [and reduced production in later years, if applicable].

    I went prepaid. While my total Solar rate of return was over 25%, the difference between prepaid and zero down was a single digit percentage. Getting solar makes a big financial difference to me. Choosing prepaid over zero down wasn't terribly important.
     
  11. Theshadows

    Theshadows Active Member

    Joined:
    Apr 20, 2013
    Messages:
    1,896
    Location:
    PA
    I'm a SunPower dealer, most of their panels are made in the Philippines. Some are made in the USA, but there is a premium on them and they have to be requested. SunPower's big advantage, which should have been explained to you, is that they are a US owned company that is publicly traded, which means they have an escrow account to cover their warranties. Non US owned companies do not have this requirement, so in that sense the warranty is stronger because it is backed by cash.

    Also their higher efficiency means you can get more power out of your roof.

    ---

    Now for my approach to a situation like yours. I always try to put our customers in the best product for their needs. This approach will have a better return for you in the long run (10+ years). The big unknown in my analysis below is how much it costs to install a cash system in your area, I've inflated the cost in my area a bit for labor and higher permit costs.

    I always recommend to buy if you can. If you have a tax burden and access to a home equity line, that is usually the best way to go. There is extremely little maintenance on a solar energy system and the folks selling leases usually try to scare you into the lease/ppa with this.

    Over 10 years with out future value your proposed system will make about $26k in electricity if you are paying .30/kWh (you said flat roof this is assuming an off the shelf 5 deg rack). In our area that system would cost roughly $18k minus $5.4k tax credit for a total out of pocket cost of $12.6 or less than 5 years to get your money back. Then the next 20-35 years is free electricity.

    Finance it through a HELOC at 4% pay it off in 10 years and you have $127/month payments. And the interest is tax deductible.

    On top of that it's your system so if you decide to sell your house you will likely get a higher price for it because the solar system is part of the property and the buyer will not have to jump through all the hoops to assume the lease.

    I encourage you to calculate the total cost of each system over the next 10 years to see which options would be the best for you. I'm pretty confident that with the escalators the option I described would be a better deal with roughly the same monthly payments, which is less than you are paying for your electricity now.
     
  12. killer_model_s

    Joined:
    Oct 16, 2013
    Messages:
    28
    Location:
    Newport Beach, CA
    Guys glad I found this thread and hopefully someone can help me out... I've got a quote from SolarCity yesterday for SolarPPA and they quoted me $0.23 / kWh. That seemed very high to me. Am I getting ripped off? I should add that it's a 6.75kw DC panel with 0% escalation. What do you guys think?
     
  13. Andrew

    Andrew Model S #6151

    Joined:
    Mar 11, 2013
    Messages:
    344
    Location:
    Santa Monica, CA
    20-year lease. It has an early buy-out option after year 6, which would be the higher of the systems "fair market value" or the remaining value amount (which I think would be $20,7857.74 if I read the table in "Exhibit B" correctly). Meh.

    Thanks Derek. The 8,024kWh is estimated production for the first year. I've run the same system through a couple of calculators and they estimate slightly higher (about 8,200). The warranty on Sun Power is roughly 90% for 20 years, so by year 20 they'd be generating ~7,250/year. The kicker is that in year 20, I'd be paying $154.29/month for 90% of the original output. To compare apples-to-apples (more or less, if everything performs as advertised), I'd be paying about 21.8 cents/kWh with the Sun Power lease ($154.29*12/7,250kWh) vs. 19.90 cents/kWh with the Real Goods/Canadian Solar Panels.

    - - - Updated - - -

    Thanks for the help, Shadows! Good point about the warranty - though Real Goods is also publicly traded (RSOL), as is Canadian Solar (CSIQ). So the only company not publicly traded would be the Sun Power installer (Solar Unlimited), but I'm not too worried about that.

    Roof space isn't a limiting factor for us, otherwise that would definitely be a compelling argument in favor of Sun Power.

    Hmm. I'll find out what the cash price would be for the Canadian Solar system - not sure I can make it work, but you make a good case. Thanks! :)
     
  14. Theshadows

    Theshadows Active Member

    Joined:
    Apr 20, 2013
    Messages:
    1,896
    Location:
    PA
    Sunpower has different warranty requirements because they are a US owned company. CSIQ is not US owned so they do not need to keep an escrow account. Real Goods Solar is not a panel manufacture so they don't need to keep an escrow account for the panel warranties either.
     
  15. Andrew

    Andrew Model S #6151

    Joined:
    Mar 11, 2013
    Messages:
    344
    Location:
    Santa Monica, CA
    That does sound high. In Santa Monica (with Southern California Edison), Solar City quoted me 16.4 cents/kWh with a 2.9% escalator, and he was crystal clear that it was the lowest possible price he could give me. Real Goods originally quoted me 14 cents/kWh with a 2.9% escalator, or 15.9 cents/kWh with no escalation.

    I've put together a spreadsheet that I think you might really helpful. Plug in a couple of numbers and you'll see how much of a difference things make. It's amazing how just a dollar or two a month (or a fraction of a percent) can make a difference over 20 years! There are two tabs in the spreadsheet, one for calculating leases (fixed monthly payments) and one for Power Purchase Agreements. Take a look and let me know what you think!

    (Note: My spreadsheet doesn't factor in expected panel degradation - that'll have to be v2.0!)

    http://andrewwilder.com/solar_cost_calculator.xls
     
  16. Theshadows

    Theshadows Active Member

    Joined:
    Apr 20, 2013
    Messages:
    1,896
    Location:
    PA
    I didn't look at your sheet yet but this is what I use.

    Panel degradation formula for total production in n years. FV(-.005,n_years,first_year_production_kwh)
     
  17. Lloyd

    Lloyd Active Member

    Joined:
    Jan 12, 2011
    Messages:
    4,886
    Location:
    San Luis Obispo, CA
    Look carefully at owning your system. The solar installers make 3X the $$$ (their words) with lease contracts! You are better off with that money in your pocket, and it becomes an asset that adds value to your home/business should you decide to sell it.
     
  18. JPP

    JPP Active Member

    Joined:
    Feb 4, 2013
    Messages:
    1,845
    Location:
    SF Bay area, CA
    I got 17 cents/kw with 4% rate increase on a PPA from SC in No CA on a 16kW system. I chose PPA to not tie up $$ and to have SC handle all support/repairs/maintenance/monitoring. My system uses Canadian Solar panels and SolarEdge inverters and modules. Yes, there is better hardware (e.g. SunPower panels if you have a small roof). But since SC has to do the math and figure out performance, uptime, cost of repairs, cost of money, ROI etc., it is their nickel and I am not too concerned about the hardware they chose.

    I know that over 20 years I would save $$ if I bought outright. I also know that some solar installers unfortunately 'oversell' hardware so that you over produce/overgenerate. PG&E here only pays back at a poor rate and it is not worth buying expensive hardware to generate low tier (like Tier 1) electricity. I wanted none of the headache--just let SC be one of my utilities from which I buy energy.

    Works for me. YMMV.
     
  19. Tesla 940

    Tesla 940 Member

    Joined:
    Nov 2, 2011
    Messages:
    254
    Location:
    Long Beach, CA & Taos, NM
    PURCHASE ! Why let someone else earn the money?

    As for all this BS about repairs, etc. - it's BS! I've had my solar system 10 years and the only thing that has gone wrong was a fuse blew. It took me 2-3 days to figure it out, needed a screwdriver, and a trip to Home Depot for the $3 item.
     
  20. Owner

    Owner Active Member

    Joined:
    Dec 20, 2012
    Messages:
    1,232
    Location:
    San Francisco Bay Area
    I agree. I'd make a way to purchase. After a number of years, it will have paid for itself. I'm almost there, but only a little slow as I overbuilt before my first Tesla arrived almost five years ago. I think in one more year - all will be free, forever.

    I also agree with Tesla940. These things don't break much. I did have my panels "professionally" washed twice for like $100 times each. If they were easier to get to, i'd do them myself. But only every 2-3 years. My first inverter did broke, but it was under warranty. The panels themselves are warrantied for 25 years.

     

Share This Page