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PPA End of Year 5 Buyout Option: worth it? or prepay? or keep the lease?

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  • PPA End of Year 5 Buyout Option: worth it? or prepay? or keep the lease?

    Long time listener, first time caller. I recently bought a great house, and was willing to deal with the Sunrun lease that the previous owner put on the roof (we would have put solar on it anyway). It's at the buyout option point at the beginning of year 6. If it were me, I would have bought it out initially, but oh well.

    Basic facts: Walnut Creek, CA; 6.89kW
    Buyout cost: 26,271.06 + tax = 28,438.42
    Current PG&E electric rates: E-1 at $0.24/kWh; under NEM1 rules.
    Current use basically equals generation -- will be home less after COVID but will drive the electric car more.
    +2.9% per year increases.
    SolarEdge inverter just got replaced in August under the lease and warranty.
    10 year warranty that has 5 years remaining for both panels and inverter.
    Roof inspector said I can get another 15 years out of these "Presidential shingles".
    I plan to be in the house for the duration, and no additional loans required.

    Bottom line is whether it's $28.5k out of pocket now and hope the system and roof holds up; prepay the PPA for $22.9k; or just keep the PPA with monthly payments until year 20. Either PPA lease scenarios, I'll probably get them to remove the panels after (since they're going to gouge me with a non-zero buyout at year 20 too, right?). Thanks in advance for any guidance.


  • #2
    Need more info.

    1.) Current annual usage in kWh.
    2.) PVWatts est. of annual system production.

    Looks like the accumulated kWh column #'s are based on some modeled number from Sunrun, but if I were you, I'd run my own estimate using PVWatts and also consider an estimate for any shading (which PVWatts does not consider) if for no other reason than to gain a bit of knowledge about PV. Use 10 % for a system loss parameter and read all the help screens a couple of time to help avoid GIGO problems.

    Also, and after that, I'd negotiate w/Sunrun. They have no interest in removing the system and the contract may have you by the short and curlies as most such solar PPA's and leases do, but you have little to lose beyond the time it takes to take a shot and negotiate a bit.

    In doing that, I'd also remember that at this time, it's probably possible to get something like a 7 STC kW system for something like ~ $3.00 - 3.25/STC W less tax credit making that buyout a pretty steep #. Check around for prices in your area.

    On the other hand, if you did manage to get out of the PPA altogether, a new system would probably flop you out of NEM 1.0 - which is probably not in your best interest - and into NEM 2.0 with T.O.U rates that are higher, and all the B.S. that comes with them, so it may make sense to keep what you have.

    My guess is, depending on your baseline territory, whether or not you're all electric or not, and monthly gross use before PV offset, if the current system generation offsets most of your use, you probably burn through ~ ~ 10,000 - 12,000 kWh/yr. or so, and probably the monthly/annual tier one allotment for each month and so wind up with most month's usage in tier two which improves the current system's cost effectiveness for you.

    I'd run PVWatts and see what the model pukes out for each month's generation and then use the PG & E tariff sheets (see Cal. P.U.C. sheet # 47490 - E, et seq., effective 10/01/2020) to see what that generation is worth (what it costs you) with no PV. Then, compare that to the annual cost of the lease + the annual cost of the residual electricity that the system does not cover. Do that for each month of 12 months for a rough idea. Then, do that for each remaining year in the PPA including PPA cost escalation and estimated system annual degradation and a rough estimate of annual electricity cost escalation. Those results will probably teach you a bit about PG & E's rates and also give you a ballpark # that may be of some use in buyout negotiations if you choose to go that way.

    Put it all on a spreadsheet and, assuming you keep the present lease rather than negotiate it's buyout (or its outright removal), compare the cost of supplying electricity to your home for 2 scenarios: Keeping the PPA, or buying it out (at maybe a lower negotiated price).

    Part of that will involve SWAGing the time value of any buyout price (you negotiate ?) against the time value of $1,800.96/yr. through the remainder of the PPA contract or however long you decide.

    I'd consider taking a shot at negotiating a lower buyout and see what happens. I'd also keep in mind - and contrary to what real estate slugs, the green mafia and the PV conmen would have us all believe, homes with PPA's and leased PV systems seem to often be at a disadvantage when reselling.

    Welcome to the neighborhood.

    Comment


    • #3
      Were I in your situation, I would not buy it out. The $28.4K today is worth more than the total payments through the end of the lease.
      5.775 kW System: 21 SolarWorld SW275 x 1 SMA 5000

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      • #4
        If you tell them to get lost, do they rip out the hardware and leave you with nothing except supports bolted to the roof?

        Are you willing to buy new and install it yourself? If so, much of the hard work is already done and you may be able to take advantage of it. The roof mounts and electrical connection into the mains are a big part of the job.

        PLEASE DON'T HOLD ME TO THESE ESTIMATES! But buying new panels today is ~$0.60 per watt, so panels will be roughly $4200. A new inverter and optimizers will be roughly another $2500 and the racking will be roughly another $2500. So if you're willing to do it yourself, you can get the same performance for around $10K plus your labor. And that will be all new hardware. The panels you have today are already 5 years worn and degraded so not worth new money.

        DIY install will take two or more days of your labor plus someone to help you. Carrying panels up to a roof is not a one-person job, although some have tried. If I were there, I'd offer to help. I don't know if you will need additional permits or inspection to replace it yourself. I also don't know about requirements for a licensed electrician. Those are other important questions.

        In the least, we can give you free advice here. It's worth at least what it costs and comes with a 200% money back guarantee.
        7kW Roof PV, APsystems QS1 micros, Nissan Leaf EV

        Comment


        • #5
          I don't think telling Sunrun to pound sand is an option - the 20 year lease is enforceable.

          Comment


          • #6
            Originally posted by bsd43 View Post
            I don't think telling Sunrun to pound sand is an option - the 20 year lease is enforceable.
            Maybe not, but the buyout price is, like everything in life, negotiable.

            As I wrote, what do you have to lose by taking a shot, especially given how much less a new and probably better system would cost ?

            Comment


            • #7
              "I recently bought a great house, and was willing to deal with the Sunrun lease that the previous owner put on the roof "

              Sorry this was your first mistaken. Previous owners problem. I would of made them take care of thier problem by getting out the lease or paying it off or making the price lower. you are now SOL. PPA are total rip offs IMHO.

              Comment


              • #8
                I didn’t read entire thread, but can tell you that the “pay off” chart doesn’t mean much. I thought it did and during our refinancing of our home, found out otherwise. I’ve been wanting to add more panels, so thought about paying them off, then adding panels (using SMA 5000 that can handle more) to more suit our usage. Long story short, used the numbers of chart sun run provided and referring back to original notes regarding pay off during sign up, figured 10k would get Sunrun paid off. Refi under way with figures from chart (11 years in, paid 13k up from, all factored in) provided by sunrun. Well, after they failed to discourage us from pay off path, they said, “we'll get you a fair market value pay off quote from our 3rd party expert”. So the figures provided during sales pitch and more recent ones from chart that factored in the 11 years we’ve been paying sun run, didn’t mean squat! Their expert “3rd party” came up with 16k+ ”fair market value”. W/o going on and on how I feel deceived, ripped off, used, and so on, I feel I should give others fair warning. I have always steered clear of leases and the one time I thought it would be ok, I got burned. Some will say, “ignorant, didn’t do his homework, you signed the agreement”, I say, bull****! They changed their tune from sales day to sale day. Regardless, I have no faith, trust, or anything near respect for Sunrun after this crap. Getting them to even get us the “payoff” chart that really didn’t mean anything was like pulling teeth. Obviously wanting to keep the dough rolling in and keep the greasy bastards in suits giddy. Might as well throw the slimy lawyers in the pot of **** soup. So much for the “long story short”. I’m just frustrated and hoping to prevent this happening to someone else. Run, run, run, from the leasing lies of sunrun! Fair warning. Now then- Good luck and happy thoughts for the honest, working, normal folks out there- Vented!!

                Comment


                • #9
                  Perfect example of what a ripoff leases can be. The buyout price with half the warranty is more than what a new system would cost. The only way to get around the lease is the original owner could have been forced to eat the bad deal in order to sell the house. "sorry, I don't want to buy the house with a leased solar system on it - either you buy out the lease or reduce the house price to make it worth my while". Of course, in this seller's market for homes these days, you probably couldn't get much traction with that.

                  BTW, another instance of an early failure on SolarEdge....
                  BSEE, R11, NABCEP, Chevy BoltEV, >2500kW installed

                  Comment


                  • #10
                    Originally posted by solarix View Post
                    Perfect example of what a ripoff leases can be. The buyout price with half the warranty is more than what a new system would cost. The only way to get around the lease is the original owner could have been forced to eat the bad deal in order to sell the house. "sorry, I don't want to buy the house with a leased solar system on it - either you buy out the lease or reduce the house price to make it worth my while". Of course, in this seller's market for homes these days, you probably couldn't get much traction with that.

                    BTW, another instance of an early failure on SolarEdge....
                    Hearty agreement, but using the words bad deal when referring to a solar lease is redundant.
                    Last edited by J.P.M.; 01-07-2021, 11:34 PM.

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                    • #11
                      do time value of money calculations and bring the monthly payments forward (to today), make the interest rate a variable so you can play with it. typical solar interest rates are 2-3%.

                      i think under leases you are covered under a warranty for the duration of the lease, what would the warranty be on a buyout?

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                      • #12
                        Unless you plan on defaulting on the contract and having nothing to come after its unlikely they would have any reason to negotiate. I would keep the lease rather than buy it out so they would still be on the hook for maintenance and power guarentee and dont see much value in paying the extra ~5k to own a system with only 5 years of warranty. Making payments has about 4% annual cost included and I could borrow if needed for less than that so I would opt to prepay the lease but that decision depends on your value of money\ cost of borrowing. At the end of the lease they could either give me the system or do me the service of removing it so I could get a new\better one installed in ~15 years.

                        Comment


                        • #13
                          well original poster is MIA< but this video is a good reason to avoid any ppa, lease, or loan,

                          I'm Stuck In A Solar Panel Contract! - YouTube

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