What is Solar Leasing?
Solar leasing is essentially a month-to-month payment plan offered to both residential and commercial customers around Australia. Although it’s a less popular form of solar consumption, the prevalence of solar leasing plans is increasing as the renewable energy sector expands in Australia.
The way a solar leasing plan works is that a solar PV system is installed on your home by a solar supplier, and you make monthly repayments on the system over a period of five to 10 years. During this period, the solar company is usually responsible for the maintenance of the system, however interest is charged to the customer over the period of repayments – making the system eventually slightly more expensive than if it were paid up front.
The difference between a solar lease and solar finance is essentially that it is leased directly from the solar company as opposed to receiving finance from a third party provider.
What is a Power Purchase Agreement?
A power purchase agreement is a form of financing within the solar industry whereby a company, for example Australian Solar Quotes, is the owner and maintainer of a solar system installed on a homeowner’s residential property. The homeowner then simply buys the energy generated from the system.
PPAs are becoming a popular choice for alternative energy usage due to their structural breakdown. This essentially means the client receives a very low upfront cost, meaning a low pre-determined rate will be paid according to the amount of solar energy generated on a property.
When you sign up for a PPA as a homeowner, then the company would own the system while you as a client pay a monthly rate for the solar power you use. PPA rates are normally a flat rate whereby at times it may worked out to rise marginally over the years, though unlike other types of rates, a PPA is basically pre-negotiated with Australian Solar Quotes for a lifetime of the agreements i.e. around 15-20 years.
What’s The Difference Between Solar Leasing, a PPA, Purchasing A System And Financing A System?
The major difference between the three options above is the fact that a PPA is often associated with much lower costs in the short and the long run. When purchasing a system on your own, you will have to make a big upfront payment as installation costs are expensive (they have fallen drastically over the years, but it can be costly to pay the amount up front).
When using financed solar system options there is no down payment required and you are locked into the contract by 15 years or more, which may be transferable to a new owner or home. Solar leasing allows for the client to use the solar power generated without paying for them.
Instead, clients pay the lease payment as well as any added power they need to purchase from the utility. The panels may free but the client has to pay these lease payment with a 3%-4% rise per annum. Some companies do offer a flat rate which doesn’t include yearly increases.
With a PPA, the rate paid is pre-determined and ownership falls into the hands of Australian Solar Quotes. So, if for example, the panels stop working or something else happens mechanically to the system, then the onus is on Australian Solar Quotes to fix the problem, as we are the owners of the solar system after all.
How Much Can A Client Save With A PPA or Solar Lease?
When it comes to a PPA, the client saves quite a bit, the biggest being that the normal monthly rate determined with Australian Solar Quotes is often times a lot less than an electric bill at the end of the month from a utility. Thus, a PPA makes a lot of economic sense for a lot of people.
Many clients see a 10%-15% savings component over their regular electricity bill when taking into mind the PPA payments coupled with the no-to-low upfront investment costs. A client’s savings will grow exponentially as the PPA rates are fixed or rising by 2.5% for the duration of the contract.
What Else Comes With A PPA?
One of the biggest concerns clients have is the fact as to how they will know the system is working?
As Australian Solar Quotes maintain and repair the overall system as part of the package offered, they provide monitors in order to ensure the system is functioning at an optimal level. Monitoring the system creates transparency between Australian Solar Quotes and their clients when it comes to ensuring that the panels are performing the correct way which enable us to be pro-active when it comes to repairs.
The PPA depreciates over time, as such, the client may always have the option of purchasing the system at any point in time, and whereby within a few years the system may be worth a few hundred dollars which means the client may select to purchase it from Australian Solar Quotes.
There are two potions regarding the PPA when moving homes:
- If the client moves home leaving behind their old home installed with solar and the PPA agreement, then they may purchase the system and add it into the selling price of the old home or,
- They may pass the PPA over to the new owners who will then make use of the system.
With solar becoming the way of the future when meeting energy needs, there are an abundance of opportunities for PPA and solar lease clients through the analysis of energy usage data which may be compared to the clients utility bill will indicate directly how much a home-owner is saving at the end of the day.
Such data will allow for better technological advances when working on accessories to aid the system in the future as well as developing energy efficient tools and battery storage techniques which would increase savings even more.