BEFORE YOU SIGN A LEASE FOR A RESIDENTIAL PV SYSTEM, take a moment to consider the following:

 Did you know that the IRS considers Fair Market Value of a PV System leased for 20 years (under an operating lease) to be a minimum of 20% of the original system value, and may be considerably higher yet? Most lease agreements are vague about what happens at the end of the lease term. Homeowners should not assume that system ownership will revert to them at the end of the term without additional expense. It is recommended that homeowners only enter into lease agreements in which the end-of-term details are clearly dictated.

 Did you know that a PV System owned by a homeowner will increase the property value of the residence by $10-24 per annual 1$ in utility savings?i Even if this value can’t be fully realized at the point of sale, ownership of a PV system accelerates the sale of the home.

 A home with a leased PV System may be more difficult to sell. While it’s assumed that the buyer can adopt the lease, it should not be assumed that the buyer would want to adopt the lease, especially given lack of clarity regarding end-of-lease terms for ownership.

 Did you know that nationally, from 2009 and projected through 2013, the aggregate increase in electricity costs is 1.5%? That’s roughly .375% (less than 1%) per year.ii Often leases are sold on the assumption that utility rates will increase much more quickly than the historical average (4.5% annual increase is commonly used in lease documents), which makes the cash flow look better. While it is very likely utility costs will continue to increase, we do not want to rely on a high rate of increase to prove the cost-effectiveness of PV Systems. An owned system will pay for itself, ultimately, regardless of the rate of increase in utility costs.

 Did you know it is considered “likely” by industry insiders that residential PV leases will be bundled and sold on the secondary market? The buyer of these bundled lease agreements will be relying on the “buy-out” clause to realize its profit targets. In addition, can the buyer of bundled leases be relied on to address ongoing warranty and maintenance issues?

Leasing is sometimes the best way to benefit from a PV System, but in most cases ownership provides greater advantages over the life of the system. Make sure you understand how the lease will end, and consider system life-cycle expenses, as well as positive impact on your balance sheet resulting from ownership, in your analysis.