Looking at pre-paid lease for solar energy system

[Sakamochi]

My first posting here - I've read most so far and it's been pretty helpful. Thanks!

I want to decide if going with a pre-paid deal is the right best path for us.

Simply:

First quote, local company, in biz 20+ years
13.2 kw system
56 PV
PPD lease $15667
Buy $50177

solar lease cost $15,667.00 Power cost APS average 4.5% increases by year
APS 2011 cost $2,460.00
5 years with increases $16,523.55
about 4.5 years breakeven

All the rest looks typical in the lease contract.

We are on a fixed income, so we CAN prepay the lease but we CANNOT purchase the system outright as we DO NOT make time payments (on anything except mtg!).

This looks like a good deal to us, however I would really like some more pro - cons from others. I can't see why we should not "pre-pay our APS power bill" for 4-5 years and then have "free" power thereafter.

We do not plan to sell or move, having lived in the house a quarter century. Our roof is shingle and 5 years old. No HOA.

So, learned people - is this good or not, and why?


Thanks!

PS:

Please do me a favor and not go on about China, the price of solar in Bangladesh, arcane matters measuring watts per fortnite, or other stuff that doesn't answer my simple question -

[Ian S]

So, learned people - is this good or not, and why?


Thanks!

PS:

Please do me a favor and not go on about China, the price of solar in Bangladesh, arcane matters measuring watts per fortnite, or other stuff that doesn't answer my simple question -

I too am on APS in Phoenix and have gone with a pre-paid lease instead of an outright purchase. A couple of things to consider: first, who is the lessor? There are leases put forward by national players and some put forward by local installers. The former is probably better. You should not have to put up any money until your system is installed. Any lease which states you own the system at the end of the lease or can buy it for $1 may be questioned by the IRS at some point as it may run afoul of rules regarding capital vs operating leases. Most leases have several options at lease end including purchase at fair market value (FMV), or removal at no cost to you. There's been a lot of discussion about what might actually happen at lease end, what FMV would be, how much it would cost the lessor to remove the system and whether the lessor might simply abandon it as the profits would have long been realized. If the lessor removes and resells the system, they would be subject to depreciation recapture tax costs. I'm of the opinion that any uncertainty at lease end is far offset by the bird-in-the-hand of much lower upfront cost vs purchase. YMMV. The purchase price you were quoted sounds like pre-rebate and tax incentives. The net cost to you would therefore be much less but depending on your income and tax situation, you may not be able to take the tax credit all in one year. I assume the APS current rebate of $1 per watt would apply to the whole system and not be limited so that's worth $13.2K. Federal tax credit of about $15K and state tax credit of $1K. IIRC, APS will issue you a 1099 for that rebate so I suspect it's taxable to you.

While all leases have a means of dealing with the sale of your home, typically they either require the buyer to take over the lease obligations or have you purchase the system at FMV during closing. AFAIAA, there is no iron-clad guarantee that the lessor will agree to the lease assumption by just any buyer. Not all leases will actually insure your system against loss so you might have to deal with an added homeowner's insurance cost for it to be covered.

I went with the Sunpower lease through a local firm. Sunpower panels are well-regarded and the company is backed up by Total Petroleum. It has the added advantage of a special one-time buyout option in year 7 of the lease. Plus, the FMV amounts when you sell your home are spelled out. BTW, APS is just catching up to the explosion in leasing arrangements - they have a new agreement related to leasing that the lessee must sign so read it carefully.

[Apachelm]

BTW, APS is just catching up to the explosion in leasing arrangements - they have a new agreement related to leasing that the lessee must sign so read it carefully.

This may be what you are getting at:


"9. OPERATING RESPONSIBILITY; SYSTEM SHUTDOWN OR REMOVAL; SALE OF THE PROPERTY; ASSIGNMENT OF THIS AGREEMENT
Your participation in the APS Program assumes that your PV System will operate continuously for a period of twenty (20) years after the PV System begins interconnected operation with the APS electric distribution system. You are required to notify us within five (5) business days after the PV System is either removed from your Property or is no longer operational (the

[Ian S]

This may be what you are getting at:snip

Yes. But I think a similar agreement is signed when you purchase the system. APS wants your system to run for 20 years otherwise they want some portion of the rebate back.

[russ]

In a buyers market (for homes) that means the owner eats the investment in the solar system very likely.

The utility is correct to insure it is getting what it paid for.

[Ian S]

In a buyers market (for homes) that means the owner eats the investment in the solar system very likely.

The utility is correct to insure it is getting what it paid for.

Definitely, the utility is entitled to get what it contracted for. If a homeowner thinks there's a whiff of a chance they'll be moving within 7 or 8 years, they should think long and hard about investing in solar. But at least with solar, you get an immediate return on your investment unlike many other home improvements where you're only apt to get a portion of your investment back when you actually sell and even that amount probably declines with time. The effect of a buyer's market is hard to judge. I'm in a position where I control where I live and work so I expect to outlast this Phoenix housing collapse just like I outlasted the last one. But I think it could be argued that a home with solar PV here in Phoenix would at minimum sell faster than one without. I'm seeing a lot more new installations on homes and folks seem to be more aware of the advantages of grid-tied solar. That's only going to increase in the coming years IMHO.

[Ian S]

First quote, local company, in biz 20+ years
13.2 kw system
56 PV
PPD lease $15667
Buy $50177

solar lease cost $15,667.00 Power cost APS average 4.5% increases by year
APS 2011 cost $2,460.00
5 years with increases $16,523.55
about 4.5 years breakeven

Some additional thoughts. Your current annual cost is only about 15% higher than mine yet your PV system is nearly twice my size. That looks to me that you're trying to produce significantly more than than you use. Just be aware that when APS settles up with you each December, it won't be paying you the retail rate for the kWh of excess you supplied them. Furthermore, my understanding is that they give you a bill credit so if your bill is always virtually nil, I'm not sure when you'd get your money out. You will also have to check out carefully which plan you select to see which is the best deal. My situation is that I expect to switch from the the combined advantage 7PM til Noon to the time advantage 7 PM til Noon i.e. eliminating the demand component. I'm guessing that WON'T be optimal for you.

[Naptown]

Definitely, the utility is entitled to get what it contracted for. If a homeowner thinks there's a whiff of a chance they'll be moving within 7 or 8 years, they should think long and hard about investing in solar. But at least with solar, you get an immediate return on your investment unlike many other home improvements where you're only apt to get a portion of your investment back when you actually sell and even that amount probably declines with time. The effect of a buyer's market is hard to judge. I'm in a position where I control where I live and work so I expect to outlast this Phoenix housing collapse just like I outlasted the last one. But I think it could be argued that a home with solar PV here in Phoenix would at minimum sell faster than one without. I'm seeing a lot more new installations on homes and folks seem to be more aware of the advantages of grid-tied solar. That's only going to increase in the coming years IMHO.

A rational conclusion thank you

[KRenn]

My first posting here - I've read most so far and it's been pretty helpful. Thanks!

I want to decide if going with a pre-paid deal is the right best path for us.

Simply:

First quote, local company, in biz 20+ years
13.2 kw system
56 PV
PPD lease $15667
Buy $50177

solar lease cost $15,667.00 Power cost APS average 4.5% increases by year
APS 2011 cost $2,460.00
5 years with increases $16,523.55
about 4.5 years breakeven

All the rest looks typical in the lease contract.

We are on a fixed income, so we CAN prepay the lease but we CANNOT purchase the system outright as we DO NOT make time payments (on anything except mtg!).

This looks like a good deal to us, however I would really like some more pro - cons from others. I can't see why we should not "pre-pay our APS power bill" for 4-5 years and then have "free" power thereafter.

We do not plan to sell or move, having lived in the house a quarter century. Our roof is shingle and 5 years old. No HOA.

So, learned people - is this good or not, and why?


Thanks!

PS:

Please do me a favor and not go on about China, the price of solar in Bangladesh, arcane matters measuring watts per fortnite, or other stuff that doesn't answer my simple question -

Can get a much better price on a prepaid. I've seen 13kw systems going for under $14,000 in your area. Also a 4.5% projected increase is pushing it a bit, in Arizona its been more like 3% for APS customers although I guess its not as bad as the 7-8% increase some companies push. Also as others have stated, never pay any money up-front, doing so is putting yourself in a very PRECARIOUS position considering the state of flux that the solar industry is in. Any legit leasing outfit should have no problem with you paying for the prepaid option after installation.

[Ian S]

Can get a much better price on a prepaid. I've seen 13kw systems going for under $14,000 in your area.

I agree. The O.P. needs to get other bids. I was quite surprised at the spread in prepaid lease prices per installed watt.

[KRenn]

I agree. The O.P. needs to get other bids. I was quite surprised at the spread in prepaid lease prices per installed watt.

The price can vary greatly. You can go with a national company such as SolarCity which will give you a price somewhere in the middle, or go with a local dealer who can give you the best price.....or the absolute worst one depending on how they're pricing, how much profit they're trying to make off each deal, what their overhead looks like and so on. You can have vastly different prices for a single lease such as the SunPower, SunEdison or SunCap lease depending on what installer you choose. Ultimately the leasing company is purchasing the system from the installer, leaving the installer as the one who determines what the lease pricepoint would be.

There can also be vastly different installation times between installers too. Most will say 3-4 months, and some will actually do it in 3-4 months, others will take 6 months or longer and then blame it on the utility company, the city, the economy, the president, Jesus, Allah, Krishna, the Boogeyman, whatever else they think will stick. One good thing about a local dealer using a nationwide lease such as SunPower is that the leasing company often has the right to inspect the system installation at their request to make sure that quality work is being done, that alone makes it more worthwhile than having to depend on a local installer trying to play solar installer and financial company all at the same time by offering their own lease.

[Sakamochi]

Some additional thoughts. Your current annual cost is only about 15% higher than mine yet your PV system is nearly twice my size. That looks to me that you're trying to produce significantly more than than you use. Just be aware that when APS settles up with you each December, it won't be paying you the retail rate for the kWh of excess you supplied them. Furthermore, my understanding is that they give you a bill credit so if your bill is always virtually nil, I'm not sure when you'd get your money out. You will also have to check out carefully which plan you select to see which is the best deal. My situation is that I expect to switch from the the combined advantage 7PM til Noon to the time advantage 7 PM til Noon i.e. eliminating the demand component. I'm guessing that WON'T be optimal for you.

My billing is currently set to T2, or 9pm to 9am weekdays and 9pm fri til 9am monday for off peak rate. We run all optional power (pool, washer, dryer, etc) in the off peak time zone. Our total kwh last year was 22191. I used the APS solar calculator and it came up with 14 KW PV needed for 100% power. The 1st quotation from local company X came up with 13.2 kw PV. They supplied me with a sample contract (close to what the real one will be) and it is with SUNCAP. I have two more quotes scheduled. I'm fairly confident that 13 kw to 14 kw will be a good fit. The time of use program will likely need to be reviewed as you suggested....

[KRenn]

My billing is currently set to T2, or 9pm to 9am weekdays and 9pm fri til 9am monday for off peak rate. We run all optional power (pool, washer, dryer, etc) in the off peak time zone. Our total kwh last year was 22191. I used the APS solar calculator and it came up with 14 KW PV needed for 100% power. The 1st quotation from local company X came up with 13.2 kw PV. They supplied me with a sample contract (close to what the real one will be) and it is with SUNCAP. I have two more quotes scheduled. I'm fairly confident that 13 kw to 14 kw will be a good fit. The time of use program will likely need to be reviewed as you suggested....

SunCap's good, although it depends on the dealers pricing and service overall. Do you have your APS rebate already reserved? If not, I'd get cracking on that before worrying about anything else.

[Sakamochi]

SunCap's good, although it depends on the dealers pricing and service overall. Do you have your APS rebate already reserved? If not, I'd get cracking on that before worrying about anything else.

From what I see on the APS website you must have a done deal to make the reservation for rebate:

To fill out this form you will need :

► Proposal from your Installer or Dealer which includes the following information :
► Model and Manufacturer of solar panels and total watts DC-STC
► Model and Manufacturer of inverter and total kW-AC
► Tilt angle and azimuth for panel installation
► Shading Percentage (Less than 25%, 26%-40%, Above 40%)
► Cost for equipment and installation components of your PV system
► You will be asked to choose a Renewable Energy rate plan designed for customers who have interconnected renewable systems. Once your reservation has been confirmed, we will contact you to ensure that the rate you have selected meets your needs.

X

[Ian S]

My billing is currently set to T2, or 9pm to 9am weekdays and 9pm fri til 9am monday for off peak rate. We run all optional power (pool, washer, dryer, etc) in the off peak time zone. Our total kwh last year was 22191. I used the APS solar calculator and it came up with 14 KW PV needed for 100% power. The 1st quotation from local company X came up with 13.2 kw PV. They supplied me with a sample contract (close to what the real one will be) and it is with SUNCAP. I have two more quotes scheduled. I'm fairly confident that 13 kw to 14 kw will be a good fit. The time of use program will likely need to be reviewed as you suggested....

Everyone I spoke to provided a contract to study. If you're aiming for 100% power production, then you'll probably want to consider the standard rate plan. The problem with the TOU plans is that APS tracks on and off-peak use separately and settles up separately. You may overproduce on one and underproduce on the other and you can't transfer credit from one to the other. In contrast, the PV production on the standard rate is completely fungible.