Sunpower system in San Diego - Good deal?

[sduser]

Hi all,

I have read through a lot of the posts on this forum and I am impressed by how much knowledge people are sharing about solar PV systems.

I am considering a Sunpower lease or buy in the San Diego area:

28 Sunpower E20/327 solar panels
2 SPR-6000m 6kW inverters
This will generate approximately 14,872 kWH per year.

Financing options I am considering:
Buy for $33,000 (this is after federal tax credit and state rebates)
Prepaid 20-year lease for $16,500

Our current electricity usage is approximately 18,000 kWH per year, so we pay a lot of high tier rates. This works out to us currently paying about $0.27 per kWH during the summer and $0.32 per kWH during the winter. It is about $5,000 per year in electricity from SDGE.

Based on my usage and the cost of the lease, I could see a full return on my investment in as little as 4-5 years. This really seems too good to be true. I understand that Sunpower can depreciate the full retail value of the system under a lease which is why they can offer it at a discount compared to the purchase price even though they must maintain and insure the system under the lease. I would prefer to not have a 20 year lease, but it wouldn't make any sense to pay the additional $16,500 to buy the system and then be on the hook for maintenance.

On a pre-paid lease, I would have the option to buy it out for FMV in 7 years, or keep the lease to the end. I'm not sure why I would want to buy it out though since I'd have to maintain it and replace the inverters when they inevitably fail during the 20 years of original lease. With the prepaid lease, they even guarantee my production every year.

So, my questions for the experts:
- Am I missing something big here? Is this deal really as good as it looks?
- Is there any way to estimate the FMV at the 7 year mark? Has anyone gone through the process of buying out their lease for FMV? I don't think these deals have been around for 7 years yet...

Thanks for any insight you can provide.

[KRenn]

Hi all,

I have read through a lot of the posts on this forum and I am impressed by how much knowledge people are sharing about solar PV systems.

I am considering a Sunpower lease or buy in the San Diego area:

28 Sunpower E20/327 solar panels
2 SPR-6000m 6kW inverters
This will generate approximately 14,872 kWH per year.

Financing options I am considering:
Buy for $33,000 (this is after federal tax credit and state rebates)
Prepaid 20-year lease for $16,500

Our current electricity usage is approximately 18,000 kWH per year, so we pay a lot of high tier rates. This works out to us currently paying about $0.27 per kWH during the summer and $0.32 per kWH during the winter. It is about $5,000 per year in electricity from SDGE.

Based on my usage and the cost of the lease, I could see a full return on my investment in as little as 4-5 years. This really seems too good to be true. I understand that Sunpower can depreciate the full retail value of the system under a lease which is why they can offer it at a discount compared to the purchase price even though they must maintain and insure the system under the lease. I would prefer to not have a 20 year lease, but it wouldn't make any sense to pay the additional $16,500 to buy the system and then be on the hook for maintenance.

On a pre-paid lease, I would have the option to buy it out for FMV in 7 years, or keep the lease to the end. I'm not sure why I would want to buy it out though since I'd have to maintain it and replace the inverters when they inevitably fail during the 20 years of original lease. With the prepaid lease, they even guarantee my production every year.

So, my questions for the experts:
- Am I missing something big here? Is this deal really as good as it looks?
- Is there any way to estimate the FMV at the 7 year mark? Has anyone gone through the process of buying out their lease for FMV? I don't think these deals have been around for 7 years yet...

Thanks for any insight you can provide.

Sun power lease is absolutely legitimate and seems to be the best-priced lease out there, offering the best quality equipment, the only downside I've seen is that due to the popularity, a lot of people are reporting install delays because Sun power isn't coming up with the panels fast enough and no, there's really no way to estimate fair market value 7 years ahead of time.

[Ian S]

Hi all, So, my questions for the experts:
- Am I missing something big here? Is this deal really as good as it looks?
- Is there any way to estimate the FMV at the 7 year mark? Has anyone gone through the process of buying out their lease for FMV? I don't think these deals have been around for 7 years yet...

Thanks for any insight you can provide.

I don't consider myself an expert but I did sign a Sunpower lease last fall here in Phoenix and they've only now begun installation. The panels and inverter are installed but they have still have to hook it all up. The Sunpower lease was the best of five that I considered last year and in spite of the snails pace of installation, I'm optimistic that I have a good product that will pay off handsomely for me. That said, the Sunpower lease IIRC has only been around for less than a year. What happens at year 7 is anyone's guess but there will be plenty of lessees before you hitting that point in time and we'll all get a chance to see what FMV is and whether those of us who got a set buyout price will actually be able to exercise it without having the IRS intervene. It's really hard to see a downside to the prepaid lease whether or not the purchase option at year 7 pans out.

If you look back last fall at some of the posts here, there was a lot of detailed discussion of prepaid lease vs purchase. The key to the prepaid advantage is as you have noticed is the MACRS available to the lessor that is NOT available to an individual homeowner who purchases the system.

[sduser]

Thanks for your feedback.

My findings are pretty consistent when what both of you are saying. The pre-paid lease looks like a good deal to the consumer. Whether it's a good deal for the country given the 30% tax credit from the federal gov't plus the corporate write-off that the lessor gets is a separate discussion... Given that those incentives are in place now and they reduce the price so significantly over straight out purchase, the pre-paid lease is very attractive though. I don't know why more people aren't taking advantage of it.

I am still going through some back and forth with a couple of vendors over final price and some of the terms and conditions of the contract. I am rather anxious about anyone walking around on my roof, much less punching holes in it to install racks for solar panels, so I am scrutinizing the contract warranties and installer credentials closely. The math doesn't work out nearly as well if you end up with a leaky roof or shoddy installation. My questions and concerns are getting addressed so far though, so I will mostly likely move forward with a pre-paid Sunpower lease.

[Ian S]

I am rather anxious about anyone walking around on my roof, much less punching holes in it to install racks for solar panels, so I am scrutinizing the contract warranties and installer credentials closely. The math doesn't work out nearly as well if you end up with a leaky roof or shoddy installation. My questions and concerns are getting addressed so far though, so I will mostly likely move forward with a pre-paid Sunpower lease.

What kind of roof? My flat foam roof was in need of a recoat of the elastomeric top layer so I coordinated that work with the solar installer essentially getting the solar panel mounts/standoffs put in first then having the roofers foam and seal the mounts then coat with the elastomer. When the coating had set after a few days, the solar installers returned to put the panels on. My Sunpower lease only warrants the roof penetrations against leakage for a year; with the way I did it, the roofers warrant it for 10. Not sure if you could do a similar coordination with a pitched roof.

[russ]

Another thread points out the importance of having a signed document in hand with the guaranteed final costs including all taxes, permits etc - some people will try to wiggle out if they can.

Any monitoring should be explicitly spelled out including any costs

[sduser]

What kind of roof? My flat foam roof was in need of a recoat of the elastomeric top layer so I coordinated that work with the solar installer essentially getting the solar panel mounts/standoffs put in first then having the roofers foam and seal the mounts then coat with the elastomer. When the coating had set after a few days, the solar installers returned to put the panels on. My Sunpower lease only warrants the roof penetrations against leakage for a year; with the way I did it, the roofers warrant it for 10. Not sure if you could do a similar coordination with a pitched roof.

My roof is concrete tile, sloped, about 4 years old.

From the Sunpower lease agreement:

Lessor hereby assigns a warranty provided by the Dealer/Installer whereby the Dealer/Installer warrants that, if in the course of the
installation work, Dealer/Installer is required to penetrate the roof of the Premises and thereby causes damage to areas of the roof that
are within a three (3) inch radius of roof penetrations, Dealer/Installer will repair such damage for your benefit, at any time during the
period from the date Dealer/Installer begins installation of the System at the Premises through the longer of (i) one (1) year following the
Lease Term Start Date and (ii) the length of any existing warranty on the roof of the Premises up to but not exceeding five (5) years.

So, it's covered for up to five years if you have an existing roof warranty. Only one year if you don't. The warranty from Sunpower itself is weak because it is limited to 1 or 5 years, and only to areas within 3 inches of a roof penetration. Well, that's something I guess, but I'm worried about the other tiles that the workers walk on during the installation process and any leak damage done inside the house. Seems like with the Sunpower warranty, they could cause all kinds of roof damage and then come out and apply some 3 inch radius patches around the posts. I'm exaggerating a bit here, but that's not really good enough.

It's a very good reason to get a secondary warranty on all roof damage directly from the installer. Also, need to check the credentials and references of the installer since they will be the one in a position to damage your roof. Still, there is always going to be some risk.

[sduser]

Another thread points out the importance of having a signed document in hand with the guaranteed final costs including all taxes, permits etc - some people will try to wiggle out if they can.

Any monitoring should be explicitly spelled out including any costs

I agree completely. In the end, it's all about saving money and that means limiting the upfront costs. I am prejudiced against leases because it is so easy to hide costs in there and a lot can happen in 20 years... In this instance here though, the lease is SO much less expensive because of the tax write-offs that the lessor gets that it seems worthwhile.

[russ]

I agree completely. In the end, it's all about saving money and that means limiting the upfront costs. I am prejudiced against leases because it is so easy to hide costs in there and a lot can happen in 20 years... In this instance here though, the lease is SO much less expensive because of the tax write-offs that the lessor gets that it seems worthwhile.

Too bad the loony politicians can't see fit to give the breaks to the end user rather than money men!

[Mattsd]

And it is likely that they artificially inflate the cost they report to the IRS to get a higher tax credit.

[KRenn]

And it is likely that they artificially inflate the cost they report to the IRS to get a higher tax credit.

Treasury started cracking down on that as too many companies were over-inflating the price based on FMV, now they scrutinize it far more closely.

[KRenn]

My roof is concrete tile, sloped, about 4 years old.

From the Sunpower lease agreement:

Lessor hereby assigns a warranty provided by the Dealer/Installer whereby the Dealer/Installer warrants that, if in the course of the
installation work, Dealer/Installer is required to penetrate the roof of the Premises and thereby causes damage to areas of the roof that
are within a three (3) inch radius of roof penetrations, Dealer/Installer will repair such damage for your benefit, at any time during the
period from the date Dealer/Installer begins installation of the System at the Premises through the longer of (i) one (1) year following the
Lease Term Start Date and (ii) the length of any existing warranty on the roof of the Premises up to but not exceeding five (5) years.

So, it's covered for up to five years if you have an existing roof warranty. Only one year if you don't. The warranty from Sunpower itself is weak because it is limited to 1 or 5 years, and only to areas within 3 inches of a roof penetration. Well, that's something I guess, but I'm worried about the other tiles that the workers walk on during the installation process and any leak damage done inside the house. Seems like with the Sunpower warranty, they could cause all kinds of roof damage and then come out and apply some 3 inch radius patches around the posts. I'm exaggerating a bit here, but that's not really good enough.

It's a very good reason to get a secondary warranty on all roof damage directly from the installer. Also, need to check the credentials and references of the installer since they will be the one in a position to damage your roof. Still, there is always going to be some risk.

The roofing should be a fairly straightforward and easy process if the company is following the correct procedures. They should be able to justify their approach to mounting the panels and sealing off the roof based on existing roofing code which requires flashing and more.

[kimo]

I am not getting a system anytime soon. But will note some good points you guys made if I decide to do the lease route. A secondary roof warranty from the installer is a great idea.

[Peak Power]

"and then be on the hook for maintenance."

Hi all,

I have read through a lot of the posts on this forum and I am impressed by how much knowledge people are sharing about solar PV systems.

I am considering a Sunpower lease or buy in the San Diego area:

28 Sunpower E20/327 solar panels
2 SPR-6000m 6kW inverters
This will generate approximately 14,872 kWH per year.

Financing options I am considering:
Buy for $33,000 (this is after federal tax credit and state rebates)
Prepaid 20-year lease for $16,500

Our current electricity usage is approximately 18,000 kWH per year, so we pay a lot of high tier rates. This works out to us currently paying about $0.27 per kWH during the summer and $0.32 per kWH during the winter. It is about $5,000 per year in electricity from SDGE.

Based on my usage and the cost of the lease, I could see a full return on my investment in as little as 4-5 years. This really seems too good to be true. I understand that Sunpower can depreciate the full retail value of the system under a lease which is why they can offer it at a discount compared to the purchase price even though they must maintain and insure the system under the lease. I would prefer to not have a 20 year lease, but it wouldn't make any sense to pay the additional $16,500 to buy the system and then be on the hook for maintenance.

On a pre-paid lease, I would have the option to buy it out for FMV in 7 years, or keep the lease to the end. I'm not sure why I would want to buy it out though since I'd have to maintain it and replace the inverters when they inevitably fail during the 20 years of original lease. With the prepaid lease, they even guarantee my production every year.

So, my questions for the experts:
- Am I missing something big here? Is this deal really as good as it looks?
- Is there any way to estimate the FMV at the 7 year mark? Has anyone gone through the process of buying out their lease for FMV? I don't think these deals have been around for 7 years yet...

Thanks for any insight you can provide.

Other than an occasional rinsing with a garden hose, a properly installed solar system requires no maintenance. And inverter prices are dropping so rapidly that in 12 to 13 years when the inverter fails, its price will be a non issue when compared to the return on investment when buying instead of leasing. Solar system maintenance is simply a myth that was created by the leasing companies for the purpose of scaring consumers into signing their nonsense leasing contracts that are filled with misinformation such as "guaranteed early buyout amounts". The IRS man shall cometh.

[KRenn]

Other than an occasional rinsing with a garden hose, a properly installed solar system requires no maintenance. And inverter prices are dropping so rapidly that in 12 to 13 years when the inverter fails, its price will be a non issue when compared to the return on investment when buying instead of leasing. Solar system maintenance is simply a myth that was created by the leasing companies for the purpose of scaring consumers into signing their nonsense leasing contracts that are filled with misinformation such as "guaranteed early buyout amounts". The IRS man shall cometh.

I don't think anyone is offering any "guaranteed buyout's" anymore. The main allure of leasing is that A. It costs less than purchasing, whether prepaid or monthly and B. The system is insured and given a warranty by the same party, as long as both of those are no longer true, leasing will die out.

Leasing will continue to dominate the market share in the residential sector as long as the IRS continues with their current "fair market" pricing policies. Those hold-out dealer's who think they are standing on principle by not offering leases are simply being penny-wise and pound-foolish, making themselves less competitive in a highly competitive market.