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

[KRenn]

Gang,

Thanks for the clarification, Rich. I had misunderstood you. I thought you were talking about my relationship with LADWP. You were actually explaining my relationship with Sungevity. I also thought the guarantee would apply to production during each billing cycle or at least annually. If they compute the production averaged over the life of the lease, and set the bar low, that's clearly a gimmick. I'll look into that, as they have no incentive to keep the system working after year five or so (as required by law for rebates) except that guarantee. Well, and integrity, but I am not counting much on that.

Their language on the website is:

Sungevity Solar Lease Performance Guarantee
Sungevity will guarantee, in writing, that your system will generate the designated amount of electricity. In the unlikely event that your system under-performs, we will either increase your system size or pay you the difference every year. Best of all, you get to keep any over-production that your system may generate.

The other issues with Sungevity are no-buyout option and a really weird prepaid-lease transfer process. While other companies have improved their offerings, Sungevity still seems to be perpetually stuck in late 2009/early 2010.

The "designated amount of electricity" must surely be 6014kWh/year, as that's the only amount they refer to. But perhaps in the contract it will be a percentage of that.

As for escalating lease costs, I agree they're not so great as they eat up much of the escalating electricity costs. In fact, the lease escalation is guaranteed while the electricity rate escalation is not. In my case, I'd prepay the lease, so this wouldn't affect me.

I'll see if SunPower does leases in my area and, if so, get a bid. Perhaps their system is one that (maybe with micro-inverter) I'd be more inclined to buy after 20 years (or six).

Thanks again, everyone. In all my googling in search of good PV information, I have found nothing even remotely as helpful as this website and its forums.

Franz

The other issues with Sungevity are no-buyout option and a really weird prepaid-lease transfer process. While other companies have improved their offerings, Sungevity still seems to be perpetually stuck in late 2009/early 2010.

[Franz]

Gang,

Thanks for the clarification, Rich. I had misunderstood you. I thought you were talking about my relationship with LADWP. You were actually explaining my relationship with Sungevity. I also thought the guarantee would apply to production during each billing cycle or at least annually. If they compute the production averaged over the life of the lease, and set the bar low, that's clearly a gimmick. I'll look into that, as they have no incentive to keep the system working after year five or so (as required by law for rebates) except that guarantee. Well, and integrity, but I am not counting much on that.

Their language on the website is:

Sungevity Solar Lease Performance Guarantee
Sungevity will guarantee, in writing, that your system will generate the designated amount of electricity. In the unlikely event that your system under-performs, we will either increase your system size or pay you the difference every year. Best of all, you get to keep any over-production that your system may generate.

The "designated amount of electricity" must surely be 6014kWh/year, as that's the only amount they refer to. But perhaps in the contract it will be a percentage of that.

As for escalating lease costs, I agree they're not so great as they eat up much of the escalating electricity costs. In fact, the lease escalation is guaranteed while the electricity rate escalation is not. In my case, I'd prepay the lease, so this wouldn't affect me.

I'll see if SunPower does leases in my area and, if so, get a bid. Perhaps their system is one that (maybe with micro-inverter) I'd be more inclined to buy after 20 years (or six).

Thanks again, everyone. In all my googling in search of good PV information, I have found nothing even remotely as helpful as this website and its forums.

Franz

[KRenn]

Naptown is correct and is referring to the performance guarantee from the lessor like Sungevity. They keep track of your over-production compared to the minimum guaranteed amount and use it to offset any under-production. It makes the performance guarantee little more than a marketing gimmick but one that's pretty commonly used.

The performance guarantee is a marketing gimmick. The numbers are set so low that your system would have to be severely malfunctioning to ever reach levels that low which the leasing companies are clearly counting on. The average person can't look at a 5kW system and reasonably predict production based on equipment, climate and orientation. Don't let the "production guarantee" factor into your decision one way or another.

[KRenn]

Rule of Leasing #1-Never, EVER sign up for a lease with an escalator. The leasing company is already making money on the deal, the escalator is just there to screw you. Find a SunCap, SunEdison or SunPower dealer in your area to get a better deal. You will generally pay slightly more for a monthly lease with no escalator but that will only last until year 2 or 3, and then you're saving substantially more down the road. Adding an escalator to a monthly lease can mean an additional $5000-12000 over 20 years.


In anycase, I'd still get a quote from a dealer with one of the previously mentioned companies as pricewise they're going to be extremely competitive and generally offer better quality equipment. As far as prepaid's go, I haven't seen anyone yet that can match what SunPower currently has going.

[Ian S]

One question: Naptown writes, "The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong) Any excess production will credit toward too low production first."

I'm not sure exactly what you're getting at, but I've been told by Sungevity and the local guy that LADWP credits my production monthly by simply subtracting my total production in kWh from my usage in kWh. What this means is that I'll never pay second or third tier electricity rates. This is good for me and is the same deal I'd get whether leasing or buying. LADWP does not do PPAs and does not make selling to the grid at all attractive for residential customers.Franz

Naptown is correct and is referring to the performance guarantee from the lessor like Sungevity. They keep track of your over-production compared to the minimum guaranteed amount and use it to offset any under-production. It makes the performance guarantee little more than a marketing gimmick but one that's pretty commonly used.

[Naptown]

One question: Naptown writes, "The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong) Any excess production will credit toward too low production first."

I'm not sure exactly what you're getting at, but I've been told by Sungevity and the local guy that LADWP credits my production monthly by simply subtracting my total production in kWh from my usage in kWh. What this means is that I'll never pay second or third tier electricity rates. This is good for me and is the same deal I'd get whether leasing or buying. LADWP does not do PPAs and does not make selling to the grid at all attractive for residential customers.

Naptown asks, "Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

I believe the answer is, yes, in California. But, luckily for me, this is not a factor in my case.

Thanks again, everyone. I'll report back with my local bid.

Franz

To address the two issues I raised here. They will give you a performance warranty that says the system will produce x # of KWH per month or year usually declining over the life of the system. Here first year I would expect that system to produce about 5000KWH hours a year first year. Their performance warranty is say for 4000KWH per year. So say a module goes out in year three and the system has produced 15,000KWH for the first three years and only produces 9000KWH in the fourth year. So they pay you for lost production? No because the over production of the first three years will offset the loss in year 4. They generally set the bar very low on this point to avoid a warranty issue.

Access laws are good just check that they are indeed there and enforceable.

[Franz]

Thanks to everyone who's replied already (the usual suspects!).

I clearly need to do several things:

1) Examine the Sungevity lease. (I've only seen the basic info on the website.) For example, they might include a buy option as Sunpower does. I don't know. I need to make sure the LADWP version of the Sungevity lease doesn't contain any obvious gotchas.

2) I need to see what the local installer's bid comes in at. I understand that Sungevity's purchase option is over-priced. They just don't want to sell you stuff and will only do it if they get seriously paid for it. I hope my local guy will come in below Sungevity's price and above Sungevity's quality. (I am aware from previous threads and from my local guy's website, that the lessor companies inflate their per watt prices to get larger incentives, rebates, and depreciation.)

BTW: My local guy is Jim Jenal at Run on Sun. His very informative blog is <http://runonsun.com/html/founderBlog.html>

3) I need more quotes. I have a conversation scheduled with SolarCity and with another local installer who's been doing it for years.

If a local installer an even approximate Naptown's estimate of $7112, then buying makes much more sense that Sungevity would lead one to believe (imagine that!). It makes sense even knowing I'd have to monitor and maintain the system myself, for three reasons. 1) I live in LA where the danger of snow, ice, lightning, animals, etc., is very low, 2) the purchased system would be, as Naptown is suggesting, a higher quality and longer-lasting one, probably giving me service beyond the 25 years enPhase guarantees its inverter, and 3) the purchased system could be altered, added to, etc.

One question: Naptown writes, "The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong) Any excess production will credit toward too low production first."

I'm not sure exactly what you're getting at, but I've been told by Sungevity and the local guy that LADWP credits my production monthly by simply subtracting my total production in kWh from my usage in kWh. What this means is that I'll never pay second or third tier electricity rates. This is good for me and is the same deal I'd get whether leasing or buying. LADWP does not do PPAs and does not make selling to the grid at all attractive for residential customers.

Naptown asks, "Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

I believe the answer is, yes, in California. But, luckily for me, this is not a factor in my case.

Thanks again, everyone. I'll report back with my local bid.

Franz

[vinniethePVtech]

The purchase price before rebates is 7.23 per watt STC DC
You can do much better than that price with a local installer.
You are getting small low power modules. Now bear with me.
When companies are estimating they generally use unit pricing.
So you are paying for installation for each module. Wattage of a module
doesn't affect the labor to install
So you install 22 185W modules or 16 255w modules. Now the 255's will likely
be larger so there may be a fit on the roof issue.
I can't say anything about your local market but I would be a very rich man if I could
get $7.32 a watt in my market. About $4.95 including enphase inverters is about all I can get
and still be competitive.
That would work out to $20146 before rebates
$14102 after federal and $7112 after local.
The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong)
Any excess production will credit toward too low production first.
Here is a kicker and I am not sure about access laws. But many leases require you to keep trees etc trimmed
so as not to shade the array or you are in default on the lease. So say in 12 years your neighbors trees grow to wherr
they are shading the array. It is your responsibility to keep the array shade free but you don't control the trees.
Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

You are the man!! Said it how it is. How ever consumers also aren't realizing the draw backs of depreciation. Most manufacturers/contractors assume depreciation. Consumers however don't. while the consumer/leasee enters into an agreement to buy a system at sn already inflated price per watt. Panels and system within the next 10 years can depreciate/degrade upto 15% in power since first energized. 15% of assumed power loss from install become larger numbers to pay out on a lease.

Previous thread I was expressing that the contractor will do work under a lease for roughly 30% more than what the cost per watt is.
Cebury gets lease at 21%
system depreciation avg. 1.5% per year adjusted cost in CEC AC.
Lease price in intrest and inflated per watt for Cebury is a total of 51% more in cost than upfront purchase.
Depreciated power year to year increase the initial cost paid out on lease.
Consumers on leases do not take into account daily power production, depreciation, environmental impacts that severly adjust lease estimate pricing.lease consumers just look at a gross estimate instead Net estimate.

[Naptown]

The purchase price before rebates is 7.23 per watt STC DC
You can do much better than that price with a local installer.
You are getting small low power modules. Now bear with me.
When companies are estimating they generally use unit pricing.
So you are paying for installation for each module. Wattage of a module
doesn't affect the labor to install
So you install 22 185W modules or 16 255w modules. Now the 255's will likely
be larger so there may be a fit on the roof issue.
I can't say anything about your local market but I would be a very rich man if I could
get $7.32 a watt in my market. About $4.95 including enphase inverters is about all I can get
and still be competitive.
That would work out to $20146 before rebates
$14102 after federal and $7112 after local.
The performance guarantee is worthless as the bar is set so low and generally (Tell me if I am wrong)
Any excess production will credit toward too low production first.
Here is a kicker and I am not sure about access laws. But many leases require you to keep trees etc trimmed
so as not to shade the array or you are in default on the lease. So say in 12 years your neighbors trees grow to wherr
they are shading the array. It is your responsibility to keep the array shade free but you don't control the trees.
Can you force your neighbor to cut or trim the trees or prevent them from say adding on to their structure that shades your array?

[Ian S]

Franz, I think it comes down to the fact that the lessor can depreciate the full price of the system quickly and most individuals can't. A chunk of that benefit trickles down to the lessee making the lease very attractive compared to purchasing. As Chris indicates there are some potential issues with leasing. In part that's why I've opted for the prepaid Sunpower lease through a local Sunpower installer here in Arizona. I can buy the system after year 6 if I so choose. The Sunpower lease was a better deal for me than what was offered by RecSolar, SolarCity and Sungevity. You might wish to see who in your area is an elite Sunpower dealer and ask them for a quote.

[cebury]

Hi Franz,

I read through the entire Sunpower lease and was in the process of writing a long post for people like you and me who are looking to buy, then get proposed a pre-paid lease, looking for the "what's the catch".

I'll assume you've correctly added up all those monthly payments of 63$ with your escalation for 20yrs.

The 20yr does offer you advantages since you won't have to pay for inverter replacement or any other problems. There is the big IF: if the company stays in business and does fix things in a timely manner. Don't count on a "free system" if they go under. Bankruptcy trustees step in and continuing collecting your fees for many cases. Although at that point, they'd be required to honor their requirements under the lease (warrantied support & insurance) you don't know how long that could take before enough people complain to bring a halt to the required payments. If that happens, there may be lease terms that allow them (or whomever purchases the assets of the bk company) to come remove the panels & allow you out of the lease. But imagine how that would go. Anyway, that's all speculation & my own imagination. Just giving you a red flag if you're thinking it'd be free if they go under.

For that reason alone, I'm not favorable on 20yr leases. But that's me.

The other factor: What happens at the end? Simple if you own it. If you lease: what will the FMV price be? IMO should be low and you'll have a buyout option at a reasonable price. OR, if technology changes so much that you'll want newer panels anyway at the end of the lease.

If those two factors work out and everything else goes perfectly in the lease, you win the prize. You got a lower overall price point by quite a bit.

If there is a major snag, you'd find it in the lease agreement. Make sure there are no Power Purchase Agreements. There is a production guarantee. There is a roof leak warranty.

With the lease, you do give up control: can't touch those panels yourself, can't modify your home w/out their permission, if you replace your roof you have to pay THEM to remove the panels and put them back on -- at what rate?, if you have financial trouble and need to file bankruptcy the lease can get messy as you normally agree to protect THEIR property and take (pay for) any legal steps to ensure their property is protected, etc. There are more, but I don't have notes in front of me. These are the terms I've been reading in leases, so yours may/may not have them. I've not read all that many either, people like KRenn, Russ, or Naptown may be able to help further. Just look out for those crazy clauses and ask questions.

About price point: Be sure the monthly lease includes monitoring and insurance. I've seen some that try to make you pay extra and that affects price point.


There are reasons to avoid leasing, but the pre-paid lease from Sunpower is probably the fairest of all (SO FAR). If other manufacturers can hurry up and secure funding, you may be able to get a better deal when that happens b/c of the premium price of Sunpower. But if it doesn't happen fast, it might not happen at all (if;/when another piece of legislation comes).

For the most part, I'm just ignoring Vinnie at this point. As much as someone says "I'm trying to help you" we all have personalities (emotions) and time availability (to really read someone's post before blathering a response) that can interfere with how much help we really are. My personality/time combination isn't compatible with with his. Your choice.

I would think hard about attempting depreciation of that asset b/c you have a home based business. Did you read the other post where I commented on that? If you search for my posts you should find it. But your business may be one of those exceptions I mentioned. If not (and likely not), this shouldn't be a consideration. Now, having the business pay the % (based on floor space) of your $62 monthly lease payment for electrical is a different story; that'd be ok.

Chris

[Franz]

Hello all,

I'm posting for the first time, but I've read literally hundreds of posts here on this exceptionally helpful forum. Thank you all!

I have particularly been following the pseudo-dialogue between Cebury and Vinnie in another thread. As Vinnie has said, in that thread, that he's giving up, I thought I'd start a new thread, but my issues parallel Cebury's issues in many respects.

I am a total buy-not-lease guy and I would love to buy my PV system. So far, though, I can't rationalize the added expense. My situation is similar to Cebury's. Here's the quick breakdown:

Los Angeles DWP customer
Average kWh/month: 1400
Currently on green power option adding $8-12/month to bill
Average electric bill: $105/month
Net metering mandated, but grid charges and yearly zero balancing mean I will never zero out my bills.

My daughter's school is in a referral program with Sungevity, so I have a Sungevity bid targeted to cover about 75% of my bill.

System:
STC-DC 4.07kW
CEC0DC 3.51kW
22 x Schuco 185W
Kaco bluplanet 5002xi (240V)
Annual production estimate: 6014kWh

Cost options:

Lease at $0 up front then $62/month increasing at 3.9%/year for 20 years
Cost: $19,924 minus $1000 referral bonus (and an iPad2)
Total cost: $18,924

Lease at $6593 up front then $0/month for 20 years
Cost: $6593 minus $1000 referral bonus
Total cost: $5593

Purchase at $29,459
Less state and LADWP rebates of $6158
Less federal tax credit of $6990
Less $1000 referral bonus
Net cost $15,311

As I read these figures, I can pay $5500 now to have an insured and guaranteed system for 20 years with an option to buy at the end of the lease. Or I can pay $10,000 extra dollars up front to own that system. Suppose that system is worth $15,000 FMV at after 20 years (which sounds reasonable to me, given inflation ought to have roughly tripled dollar values by then). My choice, if I lease, is this:

1) Buy that system with $10,000 of 2011 dollars
or
2) Buy that system with $15,000 of 2031 dollars
or
3) Buy or lease a 2031 system with an unknown quantity of 2031 dollars

If I were to put those $10,000 in an investment increasing in value at the same rate as the inflation I calculated, those $10,000 ought to be worth $30,000 in 2031. So I could buy the system and still have $15,000 left over! Or have $30,000 to buy a presumably better/smaller/more efficient and NEW 2031 system.

If all this is correct, buying is simply financially crazy. And before someone mentions the added value to my home, let me repeat that, after 20 years of insured and guaranteed performance of my leased system, my $10,000 2011 investment ought to have yielded $30,000 to buy a new system. I can add my equity *then*. And if investments and inflation don't prove so high, I won't *need* $30,000.

The only thing I think I might be missing here is the possible partial depreciation I could take on a purchased system, because I do have a home office. But that's just $3000 even at 100%, and I could only take maybe 20%, since my office is only 20% the entire house at most. So that's $600. Not $10,000.

I realize that, when my local installer's bid comes in, he'll offer my a better system than Sungevity. He suggests Sanyo panels and an enPhase inverter. That system will last longer and potentially be upgradable. But is that worth $10,000 more? And will he even be able to offer that system at the same cost as Sungevity's Schuco/Kaco system? I eagerly await his bid and his sale talk, and I eagerly await someone showing me exactly where I'm lost and wrong in this matter.

I'm not sure I expressed all this entirely clearly and I'm happy to try again to clarify things. Thanks for bearing with all this detail.

Cheers to all,

Franz