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For nearly as long as solar panels have been gracing rooftops and barren land, creative people have been searching out additional surfaces that can be tiled with energy-generating photovoltaic (PV) panels. The idea has been pretty straightforward: if solar panels generate energy simply by facing the sun, then humans could collectively reduce our reliance on coal, oil, gas and other polluting fuels by maximizing our aggregate solar surface area.

So, what kind of unobstructed surfaces are built in every community and in between every major city across the globe? Highways and streets. With this in mind, the futuristic vision of laying thousands, or even millions, of solar panels on top of the asphalt of interstates and main streets was born.

While the concept art looked like a still from a sci-fi film, many inventors, businesses and investors saw these panels as a golden path toward clean energy and profit. Ultimately, though, the technology and economics ended up letting down those working behind each solar roadway project — from initial concepts in the early 2000s to the first solar roadway actually opened in France in 2016, they all flopped.

In the years since the concept of solar roadways went viral, solar PV has continued to improve in technology and drop in price. So, with a 2021 lens, is it time to re-run the numbers and see if a solar roadway could potentially deliver on that early promise? We dig in to find out.

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Solar power is among the most affordable renewable energy options, whether for businesses or homes. Companies that provide solar products are everywhere these days, but to take advantage of the benefits of solar energy, homeowners are faced with a major decision: solar leasing vs. buying panels outright.

A solar lease is a long-term contract between a customer and a solar panel provider. For homeowners seeking to fulfill their energy needs without high utility bills, but who don't have the upfront capital to buy a system, solar leasing can seem like a viable option. In this article, we'll take a look into whether a solar lease is actually a smart investment.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

What is Solar Leasing and How Does it Work?

Solar leasing is a financing option through which customers pay a monthly fee for the panels and get to use the power the system produces. They do not, however, own the panels. It is an arrangement similar to leasing a car — the idea is to provide a convenient option for those who want to go green and reduce their electricity bills without the overhead of buying a solar energy system.

There are a few benefits to solar leasing. First, it reduces a customer's upfront costs to install panels. Using a solar lease means the maintenance and liability to damaged panels rests on the solar company rather than the homeowner. However, because you do not own the panels, you miss out on incentives like local and federal tax credits.

Typical solar leases last for 20 years, and they include a solar lease escalator that increases the monthly installment once per year based on current market prices and the energy landscape. Many solar leases come with the option to buy the solar panels at a discounted rate at the end of the lease agreement (again, similar to a car).

Solar leasing was especially important in the early days of solar when systems were more expensive, but as the cost of solar panels has decreased, leasing doesn't make as much sense as it used to.

How Leasing Differs from a Solar Power Purchase Agreement (PPA)

In many ways, solar leasing presents a competitive option compared with a solar power purchase agreement (PPA). For solar leasing, customers pay monthly rent for the panels; with a PPA, customers instead pay per kilowatt-hour (kWh) of energy generated. In other words, the amount customers pay for a solar lease is determined based on the capacity of the panels, while solar PPAs are paid based on the actual generation. This difference means that those with solar leases will have a more fixed price, benefit more during the sunny summer months and save even more money in the long run from reduced energy bills.

While both solar leasing and solar PPAs are contracts by which the customer doesn't actually own the solar panels, the specifics of costs, reliability, savings and more differ and require consideration by the individual building owner.

Typical Terms of a Solar Lease

The terms of a solar lease are critical to understanding whether it's the right route for you. Based on individual requirements, solar leasing companies can provide various lease terms, ranging from short to long periods. Typically, though, solar leases last 20 to 25 years. Given that solar panels have an average lifespan in the range of 25 to 30 years, customers end up being able to utilize solar panels to their full lifetime potential.

Different solar leasing companies will also offer opportunities for advanced services, including monitoring, payment and observation through mobile and web apps. Included in these digital offerings are online portals through which customers can review their contract, make monthly payments and observe usage over time. As with the wider utility sector, solar customers are looking to choose companies with improved service and customizable solutions, all of which provide a better user experience.

Customers must also be aware that, typically, solar leases will require an annual payment escalator of 1 to 5% per month as a result of inflated electricity costs. These terms are spelled out clearly in the contract, though, so they should not come as a surprise.

Ending Your Solar Lease

Customers who choose to lease solar panels may find themselves in circumstances where they want to end their lease, such as if they are moving to a new home. Solar leasing companies try to make this process as easy as possible, providing the option to transfer the lease to the new owners of the home or break the contract and remove the panels.

Even if you don't break your lease early, it will come to an end eventually. When this happens, customers can either renew the same lease or cease the solar contract. In the latter instance, the solar company will dismount and remove the panels. A last option is that customers can purchase the solar panels at a discounted rate (a price that is sometimes outlined in the contract at the time of the original solar lease).

Is a Solar Lease Right for You?

The decision of whether to lease solar, buy solar panels outright, engage in a PPA or simply ignore solar as an option is a very personal and major decision. To help with such decisions, here are a few pros and cons of solar leasing to keep in mind:

Pros of Solar Leasing

Solar leasing comes with many natural benefits, including the following:

  • No need to pay high upfront costs of solar panel installation
  • Locks in energy prices for the future, when the market may be volatile
  • Avoid the headache of maintenance and monitoring of equipment
  • Significant utility bill savings
  • Reduced household carbon footprint
  • Power production guarantees in solar leases mean payments can decrease if the panel doesn't produce as anticipated, minimizing the risk

Cons of Solar Leasing

Solar leasing is certainly not for everyone, though, as these contracts can come with a certain level of risk and concern as well:

  • As utility rates increase, the leasing price also increases each year and could undercut expected cost benefits.
  • Since you do not own solar panels, you are not entitled to the federal solar tax credit or local benefits.
  • Although there isn't a high upfront cost, over the system's lifetime, you'll likely end up paying an equivalent or higher amount than what you would have if you bought the solar panels outright.
  • Leased solar panels don't add value to your property like panels you own do, because they are not a part of the property you own.
  • Breaking your lease may be a hassle if you wish to move.

Leasing Solar Panels Vs. Buying Solar Panels

Earlier generations of solar panels were expensive, so leasing them was a more obvious choice. But the past decade has seen the cost of solar panels plummet, shifting that calculus and making it more accessible and profitable to outright own your own solar system.

The main difference between solar leasing and buying solar panels comes down to ownership. If you buy a solar system, you own it, and that means you are liable for its maintenance and operation costs. If you lease a solar panel, however, the company providing you with this option is the true owner and must shoulder this load.

Buying a solar panel is the best option when you want to make the most of the potential financial benefits. These economic advantages include reduced state taxes through investment credits, government rebates (sometimes up to 30%), and added Solar Renewable Energy Credits. Additionally, owning solar panels increases the market value of a property. So while solar leasing can be profitable over the lifetime of the contract, customers who have the ability to buy the systems outright will receive more financial benefit.

Solar leasing, however, is the best option when you wish to just use the electricity produced by the solar panel as a source of clean energy. Although you do not own the panels and are not entitled to any tax benefits from the state, you can still enjoy the financial benefits of solar energy without the high installation costs, ever-present risk of needing to repair damage and more.

In case of buying solar panels, if you do not have the cash to pay upfront, top solar companies provide plenty of options to finance them rather than only leaving solar leasing as an option:

  • Financing through solar installer: Many installers partner with lenders to provide lower-interest solar financing to their customers.
  • Getting a PACE loan: Also known as an R-PACE loan, Residential Property-Assessed Clean Energy loans are long-term, low-cost options to fund your solar purchase. This type of loan attaches the cost of the panels to your property tax bill through a special tax assessment.
  • Getting a standard bank loan: Solar loans can be secured through credit unions, banks, utilities or state programs. In certain cases, you can choose an on-bill financing option, in which the loan is repaid through your monthly electric bill with your utility provider. With this option, part of your monthly utility savings can be put toward your loan payment.
If you're interested in seeing how much buying a solar panel system would be for your home, you can get a free, no-obligation quote from a top provider near you by filling out the form below.

Frequently Asked Questions: Solar Leasing

What is a solar lease?

A solar lease is a long-term (usually 20-year) contract that allows a company to install a solar system on your roof without you purchasing the system. You pay monthly installments and annual price surges in exchange for the energy produced by these panels.

Is a solar lease worth it?

A solar lease may be worth it for people who do not wish to take up the hassle of maintaining solar panels or who tend to move every five to 10 years. Solar leasing may also sound beneficial to customers who cannot pay a huge amount upfront. However, there are significant financial downsides, including not being eligible for the 26% federal solar tax credit.

Why is leasing solar a bad idea?

The monthly payments you make toward a solar lease will typically increase year over year due to a price escalator that accounts for inflation. Because of this, it's likely you will end up paying an equivalent or greater amount than you would have paid if you were buying solar panels outright. Leased solar panels don't add value to your property, and contract cancellations can be a hassle if you are trying to sell your house before your lease is up. Further, because you are not the owner of the panels, you are not entitled to any financial incentives or tax rebates.

What happens after a solar lease is up?

Solar leasing tends to extend up to 20 to 25 years, which is about the average lifespan of solar panels. Once your lease is up, you have the option to either renew it, discontinue the services and get the panels removed, or buy the panels from the solar vendor at a discounted market rate.

Photo by Zbynek Burival on Unsplash

If you live in an apartment without its own roof or if you're a business owner renting a commercial space, a community solar project may help you save on electric bills. Community solar power is a great option for individuals and businesses who can't install their own solar panels.

You can join a community solar project by purchasing a share or by paying a subscription. Then, the electricity production that corresponds to your ownership percentage or subscription will be measured and subtracted from your power bills. This is possible even if the community solar panel installation isn't located in your neighborhood — by investing in the project, your share of the solar generation is simply subtracted from your bill.

In this article, we'll outline the pros and cons of community solar subscriptions and help you decide whether to invest in your local program.

What is Community Solar?

Community solar is a term used to describe photovoltaic systems that are shared by many consumers, including homeowners, renters, businesses, nonprofit organizations and more. Electricity savings and other benefits from the solar project are split among its shareholders and subscribers at a rate based on the level of investment.

When starting a community solar project, developers will establish the geographic area from which consumers are eligible to join. Some programs have installed multiple solar power systems in the same area, allowing a larger number of shareholders and solar subscribers.

Community solar power is possible thanks to virtual net metering. Through this process, a percentage of the electricity produced by the community solar panels is subtracted from the total amount of power you use in your home even though the panels aren't located on your property. Here are a few key things to note:

  • The kilowatt-hours produced by a community solar project are measured for each billing period and are divided based on ownership shares.
  • If a community solar array produces 10,000 kWh of electricity and you own 5% of the project, you get 500 kWh for that billing period.
  • The value of those 500 kWh will be subtracted from your power bill, so if you use, for example, 750 kWh of electricity in your home, you'd only pay your utility company for 250 kWh.

Benefits of Community Solar

The main benefit of community solar is saving on power bills, especially in places with high electricity prices and abundant sunshine. However, the concept of sharing a solar array brings many other benefits, both technical and economic. These include:

  • Community solar can be used by homeowners or renters who can't install rooftop or ground-mounted solar panels. Some roof structures are not suitable for solar panels, and others are too shaded from surrounding buildings or objects to be effective. Community solar may also be an option if you live in an apartment without its own roof or if you simply don't like the appearance of rooftop solar panels.
  • You can easily take your solar savings to another home or apartment. If you install solar panels and decide to move in a few years, you must either sell them or take them with you. On the other hand, when joining a community solar project, you can simply assign the savings to your new address.
  • You can sometimes sell or donate your community solar share (depending on program conditions). This is useful if you move to a location that is not covered by the community solar program or if you decide to install your own solar panels in the future.
  • Community solar supports a more diverse customer base. To install your own solar panels, you must have the cash for an upfront payment or qualify for a loan. This financial barrier is eliminated with community solar — consumers can pay a monthly subscription or can purchase a small share according to their budget.
  • With community solar, you can forget about maintenance and part replacements. Solar panels need regular cleaning to stay productive, and components like inverters and solar batteries must usually be replaced after about 10 years. However, you don't have to worry about maintenance with community solar, as there is a project developer in charge.
  • Community solar shareholders are eligible for the federal solar tax credit. When purchasing a share of a community solar project, you can deduct 26% of your investment on your next tax declaration. Just keep in mind that this benefit is not available when joining as a subscriber, since technically you don't own a part of the community solar farm.

Community solar is an easier alternative to installing your own solar power system. The project developer is responsible for financing, installation, operation and maintenance, and you can reduce your electricity bills by simply buying a share of the project or subscribing.

However, installing your own solar power system also brings many benefits. You save the full economic value of the electricity generated, for example. Onsite solar power also increases the value of homes and commercial buildings, and many incentive programs are only available when you buy solar panels directly.

If you're weighing each option, it can be helpful to get a free quote for a home solar installation. Fill out the form below to get connected with a top solar company near you.

How Does Community Solar Work?

In a few words, community solar lets you save on power bills with a shared photovoltaic array, instead of having your own system. However, not all community solar projects are alike, and they can be classified into several types:

  • On-site vs. off-site
  • Ownership vs. subscription

Community solar should not be confused with group purchasing, which happens when many homeowners or businesses purchase individual solar systems at bulk prices. This does not count as community solar, since the project is split into many private installations.

On-Site Vs. Off-Site Community Solar

Many real estate developers use on-site community solar projects in their residential, commercial or mixed-use projects. The electricity generated by solar panels reaches consumers through a private power system, without depending on the local electric grid. On the other hand, off-site community solar is supplied via the grid.

Here are the main benefits and drawbacks of each type of community solar project:

On-Site Community Solar Off-Site Community Solar
Pros On-site community solar systems often achieve higher savings — because they don't use the local electric grid, they don't pay transmission and distribution fees to a utility company. Off-site community solar projects can serve a larger number of customers. You can also keep your ownership share or subscription when moving to another address, as long as you stay within the project's service area.
Cons On-site community solar is only available for local property owners and tenants of communities that have installed these energy projects. Depending on limitations with your local power grid, you may not yield as high of savings with off-site community solar.

Ownership Vs. Subscription Model

Community solar projects offer ownership shares and subscriptions. Some projects only have one option available, while others let you choose. You can save on power bills with both options, but understanding the differences between them is important:

  • When you purchase an ownership share in a community solar project, the corresponding percentage of power generation is yours for the entire service life of the project. Also, since you're a partial owner of the system, you can claim 26% of your investment as a federal tax deduction. However, owning part of a community solar project means you must have the capital to pay upfront.
  • When you subscribe to a community solar project, there is no upfront investment. Instead, you pay a monthly fee. This means there is an ongoing cost, but the corresponding power bill savings are higher than the subscription fee. Keep in mind that subscription costs may increase over time, while an ownership share represents a single upfront payment.

Each option has pros and cons — you will generally save more when you become a shareholder in a community solar project, but a subscription comes with zero upfront cost. Also, consider that you must sell your share if you move to a location not covered by a community solar project, while a subscription can be easily canceled.

Is Community Solar Available Near You?

Community solar offers many benefits, but it is not available nationwide. To scale these types of projects, state governments must first enable this business model by law. Also, developers are more likely to invest in community solar projects if market conditions are favorable. Generally, the best states for solar power are those with incentive programs, abundant sunshine and/or high electricity prices.

There are currently 40 states with at least one community solar project in operation, and the Solar Energy Industries Association (SEIA) reported that 3.1 GW of community solar were online and operational by the end of Q1 2021. There is an optimistic outlook for community solar, and the SEIA has forecast a growth of 4 GW over the next five years. Each gigawatt of solar power can cover the electricity needs of around 186,000 American homes.

If you're interested in community solar power, you can check local government and utility websites — there could be several projects available near you.

FAQs: Community Solar

Is community solar legit?

Like all power generation projects, community solar systems are subject to laws and regulations. If you look for a developer that uses high-quality solar components and qualified installers, community solar is a reliable option to save on power bills for many years.

Is community solar a good deal?

To join a community solar project, you must become a shareholder with an upfront investment or pay an ongoing subscription. The power bill savings achieved will be higher than your monthly utility payments in both cases, but depending on the pricing model of your community's program, one option may present a better deal than the other.

What is community solar, and how does it work?

Community solar is an alternative to installing your own solar panels: You participate in a shared solar project as a shareholder or subscriber, and you get part of the electricity produced. This is a great option for individuals or companies who can't install their own solar panel systems due to lack of space or other limitations.

How does community solar make money?

Based on your ownership share or subscription type, you get part of the electricity produced by a community solar array. The kilowatt-hours generated are subtracted from your power bill — just like when you own solar panels directly.

Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, fast food, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.

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As solar energy becomes increasingly popular for residential use, you've probably had a few neighbors install solar panels and may even be thinking of getting a system for your own home. But before adopting this technology, you may be wondering: What are solar panels made of, and how are they made?

Many people simply accept that solar panels work and that's all we need to know about them, but for the scientifically and technologically curious, each individual solar panel contains a world of interesting components and materials. Keep reading to learn more about what actually makes up a solar panel.

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Courtesy of Tesla, Inc.

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The COVID-19 pandemic and ensuing economic downturn of 2020 led to equipment shortages and other hardships for the solar industry. However, forecasts show the industry is primed for a resurgence in 2021 and beyond. In the first quarter of 2021 alone, solar installations are ramping up at a record pace and experienced a 46% year-over-year increase compared with the first quarter of 2020.

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