I Can't See How Leasing Doesn't Beat Purchasing, Can You?

[Ian S]

I was wondering if I should try again with an explanation of my lease but realized that someone who thinks a five year depreciation writeoff equates to 5% a year is on a different planet from me. I will just reiterate what I said before: for his own good - and that of his business - Vinny needs to get up to speed on how these prepaid leases work.

[KRenn]

Utility incentives do not exist in all localities and in most localities where they do, the pay out is marginal, around 2% on average. I don't see how leasing companies/banks take on this risk. Typically the way it is done is that the contractor locks in a bank to do business with the customer. The leasing/bank company essentially owns the system, the contractor O&Ms the system. Contractor takes the 30% tax credit.
Depreciation is only a 5 year write off that receives no more than a 5% deduction for each year, solar systems typically depreciate no more than 2% a year so that is a hefty write off. Thats only 5 cents to every dollar. depreciation and utility incentives are not big pay outs.

Whats not clear to me is that no one has mentioned whether the lease is secured or unsecured, which I'm assuming that the pre paid you are all talking about is a secured lease that guarantee's a buy out after X years.

Petersen Dean offers a pre paid lease for a $1000 down in secured or unsecured, they flat out tell you they walk out with tax credit, then sun run O&M's and maintains the lease agreement with net metering and the customer still makes monthly payments to utility and leassor. That is as typical as the leases get from my understanding especially in california, until the time of buy out.

[cebury]

..... and the customer still makes monthly payments to utility and leassor. That is as typical as the leases get from my understanding especially in california, until the time of buy out.

And therein lies the problem.

Here and within all the other post you keep providing misinformation and confusion, all the while saying WE are doing so. Everyone around you is saying the color is Orange, yet you still call it Brown... just b/c you have a license, are a consultant, have X years exp, read legals contracts for a living, etc. means you must be correct and understand all the options available, does it not? We all must be lying and/or are too stupid to have read the fine print. And your arrogant posts (that you've started toning down) makes it look all the worse.

Kicking that : This is NOT a PPA lease. There are no monthly payments to the lessor. We own all the kwh produced, there is NO interest by the lessor in the kwh produced. At year 7 we own the system exactly as-if we purchased it with cash. That means: the lease is ended, their interest is ended, etc. Yes, there is a pre-determined buy-out price in the contract at any point in the lease term, but at Year 7 is when they want you buy it as the buy-out price is the lowest then.

You keep trying to fit our statements INTO your lease knowledge, rather than understanding it's a different type of lease. All those comments you keep making about 30% on top of purchase price, about "hiding" costs and moving them around inside the lease so "somewhere" you pay them, it's all rubbish. Those are YOUR leases or ones which you are familiar.

Face it, something new has come about and Ian's first sentence, in his last post, is good advice.

[vinniethePVtech]

Here's how it works.




5kw prepaid lease=$6000. -->

Customer pays $6000 after installation. ---->

Leasing company pays contractor for a 5kw system at $4 a watt. --->

Contractor receives $20,000 for providing the equipment, installing and permitting the system. ----->

Leasing company collects initial $6000, tax credits, utility incentives and depreciation. ----->

Contractor makes money, customer gets a good deal, leasing company makes money. -------->


The End.

Utility incentives do not exist in all localities and in most localities where they do, the pay out is marginal, around 2% on average. I don't see how leasing companies/banks take on this risk. Typically the way it is done is that the contractor locks in a bank to do business with the customer. The leasing/bank company essentially owns the system, the contractor O&Ms the system. Contractor takes the 30% tax credit.
Depreciation is only a 5 year write off that receives no more than a 5% deduction for each year, solar systems typically depreciate no more than 2% a year so that is a hefty write off. Thats only 5 cents to every dollar. depreciation and utility incentives are not big pay outs.

Whats not clear to me is that no one has mentioned whether the lease is secured or unsecured, which I'm assuming that the pre paid you are all talking about is a secured lease that guarantee's a buy out after X years.

Petersen Dean offers a pre paid lease for a $1000 down in secured or unsecured, they flat out tell you they walk out with tax credit, then sun run O&M's and maintains the lease agreement with net metering and the customer still makes monthly payments to utility and leassor. That is as typical as the leases get from my understanding especially in california, until the time of buy out.

[Ian S]

Here's how it works.




5kw prepaid lease=$6000. -->

Customer pays $6000 after installation. ---->

Leasing company pays contractor for a 5kw system at $4 a watt. --->

Contractor receives $20,000 for providing the equipment, installing and permitting the system. ----->

Leasing company collects initial $6000, tax credits, utility incentives and depreciation. ----->

Contractor makes money, customer gets a good deal, leasing company makes money. -------->


The End.

For his own good, Vinnie needs to get up to date on these leases. Otherwise he'll be pooh-poohing them to his potential customers who are apt to find out he doesn't know what he's talking about and take their business elsewhere. In your example here in Arizona, the tax credits are $7000 (including state) and the MINIMUM utility rebate is $5000. Depreciation is apt to be worth another $6000, leaving $2000 easily covered by what the customer puts in up front along and also providing a healthy profit. It's not rocket science and these leasing schemes may outlast the various incentives since equipment leasing companies can still be structured as tax shelter. Remember, the leasing company always has the advantage of depreciation that the individual can't use.

[KRenn]

I'm saying a buck per watt for an entire system is not physically possible. According to industry standards even after getting a return on tax credits the absolute lowest price that system will cost is roughly $3.50 per watt on average, and that's just to own.
You guys talking about leases are making no sense and causing more confusion because none of you are understanding the associated hidden cost in lease agreements and how money has been allocated and shifted to
other aspects of the lease package or project build.
I would like to see this apparent $1 per watt system in contract form. It's to good to be true. I as a contractor cant build a system at $1 per watt. Labor alone is roughly $2 per watt and that's not even including system parts.
You lost me the moment lease was mentioned.
When every one is reading I can get a system at $1 per watt that translation looks like I can get a 4.5 kwh system for $4500, which isn't physically possible. So what are you really paying for in the lease?

Here's how it works.




5kw prepaid lease=$6000. -->

Customer pays $6000 after installation. ---->

Leasing company pays contractor for a 5kw system at $4 a watt. --->

Contractor receives $20,000 for providing the equipment, installing and permitting the system. ----->

Leasing company collects initial $6000, tax credits, utility incentives and depreciation. ----->

Contractor makes money, customer gets a good deal, leasing company makes money. -------->


The End.

[Franz]

Here with CA incentives, the SP leases are going for around <$2.90/watt DC TOTAL installed, when you participate in the Early Buy Out option (for about $0.10/watt one-time payment) you own it outright at the 7th year -- having paid <$3/watt total.

As an example, here in Los Angeles I just got a proposal for a SunPower 4.8kW DC system for $11,270 up front to prepay the lease and $973 at year seven to buy it out and own the system. That's $2.35/watt DC to lease and $2.55/watt DC to buy (after seven years), if my math is right. Probably <$2.50/watt in 2011 dollars, since the $917 buy out is seven years away. Not too bad, I think. I'm seriously considering it over my Sungevity offer, even though it's twice as much up front. The buyout might be very tempting at year seven. No other costs to me but the lease prepay and the optional buyout. This would include seven years of maintenance and performance guarantee. If don't take the buyout, they presumably have to keep on maintaining the system for another 13 years--including replacing the inverter.

Vinnie, I have no idea how this could work; I just know that's the offer on the table. As long as these offers can continue, I don't know how small installers can stay in business other than becoming Sunpower/Sungevity/SolarCity installers in addition. The model is unsustainable, I believe, but it is unprecedentedly good, right now.

Cheers,

Franz

[cebury]

You lost me the moment lease was mentioned.

Just when I thought you finally understood what we were talking about.

I as a contractor cant build a system at $1 per watt.

Here with CA incentives, the SP leases are going for around <$2.90/watt DC TOTAL installed, when you participate in the Early Buy Out option (for about $0.10/watt one-time payment) you own it outright at the 7th year -- having paid <$3/watt total.

You as a contractor would be PAID your installation charges... .never mind. Contact Sunpower and ask them about their new pre-paid leases if you become their dealer. Perhaps they can talk at your level.

This makes no sense. You say "they" like the contractor actually wants to warranty for an additional 10 years.

In CA, his comment makes perfect sense if at the 11th year inverter goes bad.... they are no longer on the hook for it if one participates in the EBO. Maybe not so in other states.




It has taken my son 13 years to stop arguing that a color is Brown when EVERYONE around him is telling him the color is orange. For all those years he thought he knew he was right and argued ... despite knowing full well he has been color blind his entire life. He still argues now and again.

At what point will you stop and ask yourself "maybe I don't know everything there is to know; maybe something new has come along I haven't seen yet". Because for me, that point would've been 100 posts back on the subject.

[Ian S]

I'm saying a buck per watt for an entire system is not physically possible. According to industry standards even after getting a return on tax credits the absolute lowest price that system will cost is roughly $3.50 per watt on average, and that's just to own.
You guys talking about leases are making no sense and causing more confusion because none of you are understanding the associated hidden cost in lease agreements and how money has been allocated and shifted to
other aspects of the lease package or project build.
I would like to see this apparent $1 per watt system in contract form. It's to good to be true. I as a contractor cant build a system at $1 per watt. Labor alone is roughly $2 per watt and that's not even including system parts.
You lost me the moment lease was mentioned.
When every one is reading I can get a system at $1 per watt that translation looks like I can get a 4.5 kwh system for $4500, which isn't physically possible. So what are you really paying for in the lease?

It's not just federal tax credits in play here. Here in Arizona you have utility incentives of a buck a watt or more in cash rebates, Arizona tax credit of $1,000 and rapid federal and state depreciation of the entire system. Since you are a professional in the PV solar business, I think it's incumbent on you to get the nitty-gritty on leases for your location and not rely on anonymous amateurs like me in other states. Get quotes on leases and the actual contracts for your location. Then you'll see that the prepaid leases have one lump sum number payable once. There is no itemization on any of several leases I've seen.

[vinniethePVtech]

You make absolutely no sense. The pricing he is describing is a complete turn-key operation, meaning all labor, all system components, everything, 100% permitted and installed.

I'm saying a buck per watt for an entire system is not physically possible. According to industry standards even after getting a return on tax credits the absolute lowest price that system will cost is roughly $3.50 per watt on average, and that's just to own.
You guys talking about leases are making no sense and causing more confusion because none of you are understanding the associated hidden cost in lease agreements and how money has been allocated and shifted to
other aspects of the lease package or project build.
I would like to see this apparent $1 per watt system in contract form. It's to good to be true. I as a contractor cant build a system at $1 per watt. Labor alone is roughly $2 per watt and that's not even including system parts.
You lost me the moment lease was mentioned.
When every one is reading I can get a system at $1 per watt that translation looks like I can get a 4.5 kwh system for $4500, which isn't physically possible. So what are you really paying for in the lease?

[KRenn]

So you didn't read the article I attached then. Grid parity is not only the National average of cost per pv watt to wholesale electricity, it is international. On average PV is a $1.50 per watt.
Yes I have installed systems for much under $3.50 a watt. Have you seen how much helios PV cost. However it only comes with a 5 year craftsmanship/labor warranty, and a 20 year power. Not the best, but there is PV panels per watt going for as low as $1.30 with extremely limited warranty's.
I don't think you are reading the entire fine print on your lease. Yo may be getting what you think is a good deal at a buck per watt for your panels however the labor end is ridiculous for install. I would defenitely like to take a look at your lease agreement, and see all the itemizing that is taking place.

You make absolutely no sense. The pricing he is describing is a complete turn-key operation, meaning all labor, all system components, everything, 100% permitted and installed.

[Ian S]

So you didn't read the article I attached then. Grid parity is not only the National average of cost per pv watt to wholesale electricity, it is international. On average PV is a $1.50 per watt.
Yes I have installed systems for much under $3.50 a watt. Have you seen how much helios PV cost. However it only comes with a 5 year craftsmanship/labor warranty, and a 20 year power. Not the best, but there is PV panels per watt going for as low as $1.30 with extremely limited warranty's.
I don't think you are reading the entire fine print on your lease. Yo may be getting what you think is a good deal at a buck per watt for your panels however the labor end is ridiculous for install. I would defenitely like to take a look at your lease agreement, and see all the itemizing that is taking place.

OK there's some confusion here. The article refers to $1.50 per solar module, not installed cost. My lease cost at just under a buck a watt includes installation not just the panels.

[vinniethePVtech]

You got a source for these numbers? To be $1.50 a watt direct purchase here in Phoenix would mean the actual installed price before incentives would be around $3.50 a watt. Best I've been quoted is just over $4.00 a watt. In contrast, my Sunpower prepaid lease is under a buck a watt. And if I buy it out after year 6, it's still only an additional $0.11 a watt. And I own the system at that point.

So you didn't read the article I attached then. Grid parity is not only the National average of cost per pv watt to wholesale electricity, it is international. On average PV is a $1.50 per watt.
Yes I have installed systems for much under $3.50 a watt. Have you seen how much helios PV cost. However it only comes with a 5 year craftsmanship/labor warranty, and a 20 year power. Not the best, but there is PV panels per watt going for as low as $1.30 with extremely limited warranty's.
I don't think you are reading the entire fine print on your lease. Yo may be getting what you think is a good deal at a buck per watt for your panels however the labor end is ridiculous for install. I would defenitely like to take a look at your lease agreement, and see all the itemizing that is taking place.

[Ian S]

Right now under lease people are paying around $1.65 per watt when the average cost from direct purchase is $1.50. By 2013 the cost per watt for PV will meet $1. So all of you investing into leasing now are over paying.

You got a source for these numbers? To be $1.50 a watt direct purchase here in Phoenix would mean the actual installed price before incentives would be around $3.50 a watt. Best I've been quoted is just over $4.00 a watt. In contrast, my Sunpower prepaid lease is under a buck a watt. And if I buy it out after year 6, it's still only an additional $0.11 a watt. And I own the system at that point.

[russ]

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