How The Solar Leasing Companies Make Money Off Of You
Solar leasing seems to be a great financial no brainer right? Simple, no out of pocket expense and my bill was lowered, great! Right? Well, not really. Looking around the world, America is leasing more prominently than purchase. Why? Well because Americans love their debt it seems. Simply ask an American how much their car costs or new flat-screen costs. They will likely tell you "It's only $136 a month" This has come to be the society Americans live in. This is also why the average American household has over $15,000.00 of high interest credit card debt. That being said although we possess a great deal of wealth, it's common working family is not the group to take financial advice from. Let's look at Europe and Australia. More than two thirds of these people own their solar. This demographic also has less debt and more evenly distributed wealth on average per household. Why is that Americans work so hard to purchase their home only to turn over their roof to someone else? Interestingly enough when accountants were asked if they would purchase or lease solar the answer is a hands down purchase. They factor the incentives and rebates as a "can't lose".Ted "The Wolf" Strzelecki
Why? Let's look deeper into it how a solar leasing company makes money from you and the taxpayers.
1) ITC-They keep the huge rebates: When you sign up to install solar there are a respectable amount of programs and rebates available today through our government as an effort to be more green and environmentally friendly. Mainly the largest rebate is called the "ITC" This is an acronym for the Income Tax Credit. This is essentially an immediate 30% return on investment or ROI. If one was to install a $30,000 solar array on their property they would receive $9,000 the following spring as a tax rebate. Since the lease company keeps this, the homeowner never sees this. The leasing companies actually need this money to pay for the materials, labor, and permitting to place the panels on your roof. *More on that later
2) Other rebates: Some parts of the country have bigger rebates and or larger incentives $ wise. Case in point the SREC program. This is but just one of the many (I cannot possibly divulge all of them). In short this is a guaranteed auction of sorts to pay the homeowner for every 1K the homeowner's system produces. Example-if the auction that year is approx $280 and they have a German engineered 6K system, they will more than likely receive around 8-9K from it for the year. This means the owner will receive between $2240-$2520 in real money. Even better this fund is guaranteed once locked into for ten years. The average homeowner can look at saving approx $20,000 from this (enough to almost pay off the entire system) when coupled with the ITC they would have already completely paid for their system in full. However this will not go to someone if they leased. You guessed it, the leasing company will receive this. Not you. Other states have lump sum rebates similar to the Federal ITC. Again, these go to the leasing companies.
3) The spread: Did your solar lease quote tell you that they would reduce your watt usage charge from .21 to .16 cents? That is great right? Once you calculate this sum the savings for the year this is peanuts. (But it was zero down right?) See this is where the leasing company really makes money off of you. They will quote and lock you into a lower pricing. Sounds great, then you see what they do to quote you that. Here's how it works. The leasing company will fit a ton of panels on your roof. This will almost eliminate your bill if not completely eliminate it entirely. So that .16 cents you are paying? That's right guess where it goes. Say it with me now "To the leasing company" Wow, they were doing you a great service though right? Wrong. That right there, that alone tells you that if they can make an entire business model off your roof by installing solar arrays onto it, then why wouldn't you?! This is the lion's share of the revenue for the solar company by the way. Because along with helping you save that immense amount off of your bill (doesn't look like a lot now does it) they made you sign a 10-15-20 year lease! What a great business! A guaranteed structured payment to make you pay them monthly only a mere 240 times! Oh by the way check out Google on what happens when you try to sell or refinance your home. Some of these companies place liens on them or UCC filings which mirror liens. You have to ask for permission form them to sell your own home! the next buyer has to "qualify" to take over the lease, (that is of course if they want it) Or even worse. they make you buyout the lease! The same company that told you purchasing the system wasn't a great idea is now making you buy it! That sure is ironic. Bottom line that $150-$300 a year you wanted to save may cost you tens of thousands in the end.
4) Lease Payments - Some companies offer lower monthly wattage charges but charge you to lease the panels, I have no idea who signs (falls) for this. This is just simply atrocious.
5) Fine Print: After now being enlightened about the pitfalls of leasing you must be thinking "This is too much, it must be all there is because if there was more who the hell would lease?" But there is! Read the fine print. Some of these solar leasing companies have it written in their fine print that they will raise their rates when the utility company does. You know, the power company that has the ugly electrical line still attached to your house for some reason. See, if the panels don't consume all of the electrical power you use, you may still draw off the grid some, So when the leasing company gets a bill (and forwards it to you) you pay that. But when the power company increases their rate what happens? (Don't worry the power company never increases their rates right?) I will give you ten guess who pays the increase. I bet you only need one though. YOU DO! That's right, they are your friend to get you to sign that dotted line and "take care of you" when you were in the consult stage. Perhaps you saw them at Home Depot or Best Buy and they offered you a gift card? Yea, that young man / woman that made you warm and fuzzy didn't discuss that with you (unless you specifically asked). Starting to ask yourself why anyone does this? The rest of the world is wondering why too because they don't lease, they purchase.
6) Net Metering: Ah yes the look of a well laid out set of new black shiny solar modules on your roof. Actually blend in with the black roof quite nice nowadays. Look at all that sun they are taking in. All day while you are at work.....and most of your lights are off....and appliances...in fact where is all that power going? You don't have a battery to store it, so what happens to it? Well, if the solar arrays system produces too much power and it is not being used, it is being sold back to the power company. They are getting paid to sell it back to them. Who gets that money? You know who. NOT YOU! Man, between the federal ITC, the state and local utility programs and incentives, the SRECs, net metering, and the spread they are making tons of money off of you! Asking yourself why you didn't just purchase the system yourself? You should. The rest of the world knows this. Accountants know this. The nice man / woman from the solar leasing company knew this too.
Some other interests of note.
Some of these companies are being investigated by the US Treasury Department. Why? Because they are "fluffing" or over-inflating the numbers that it costs to actually install the system. Huh? See when a solar leasing company has their own employees install the system they figure the payroll and overhead as well as the materials and permitting to install the system. Since you leased the system you do not know the costs of the system. Only the companies book keepers do. So if they were to state that they paid their employees X and the materials were Y on the overall cost analysis for that companies taxes at the end of the year everyone has to believe them right? What if they were padding the numbers, lying if you will? Who would know? There inlays the problem. In fact it was such a problem that some US Senators thought it was obvious and are currently investigating these solar leasing companies. Why does this matter? Because that ITC federal credit comes from you the tax payer! If someone is gouging that they are literally ripping you off!
Finally, what about what would happen if these solar companies were to file bankruptcy. What then? Interesting and great question. See an interesting fact is that even though they leasing companies keep and take these massive amounts of rebates and revenues stemming from the spread you pay each month they lose money on an operating basis. You can verify this by checking their financials because they are publicly traded companies. Literally their finances are an open book. Amazing how mismanaged these companies are considering how much money they make. Some of them have been in business for almost a decade, not making a profit in almost 40 quarters. Burning though money that is borrowed at non favorable interest rates all the while each year adding more debt on top of the cash burn rate. Didn't you sign a 20 year lease? Seems like a silly thing to do doesn't it? Signing an agreement with a company that cannot afford to keep the doors open on their own two feet year after year. I mean, you wouldn't buy a seat on the Titanic if it was financially sinking would you?
Your last question should be as simple as this. "If a company started out and is making hundreds of millions off of residential rooftops from their minuscule power they consume / generate on an individual basis, why don't I just do it myself.....and purchase it?"
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