State offers homeowner tips for solar panel leases, PPAs

DOVER — Over the past three years, the number of Delaware homeowners installing solar panels through a lease or power purchase agreement has increased significantly. The financing options help homeowners who are interested in installing clean energy solar panels without paying significant upfront costs or claiming ownership of the system.

In 2015, more than 70 percent of residential solar projects installed in Delaware used solar lease or PPA agreements. The Department of Natural Resources and Environmental Control’s Division of Energy & Climate offers guidelines for homeowners to consider prior to signing a lease or PPA contract.

In both a solar lease and PPA agreement, the solar installer usually pays to install and maintain the system, and has ownership of the system equipment. In return, the homeowner pays for use of the system in one of two ways: a monthly lease payment, or a power purchase agreement in which the homeowner pays a specific rate for the electricity that is generated each month.

State officials suggest:

• Thoroughly familiarize yourself with terms of the contract. Most contracts are for a 20-year period, so don’t sign anything until you understand and are comfortable with all of the terms and conditions. Make sure the contract is not missing something that you expected or that the solar company discussed with you — get all terms and agreements in writing. Get a second opinion on any elements of the contract with which you aren’t comfortable.

• Understand the system maintenance requirements and your responsibilities during the contract period. Clarify whether maintenance costs will fall on you, or will be the responsibility of the company.

• Understand the full cost of your lease or PPA over the life of the contract, including fees or price increases that may occur during the contract period and annual escalators. Lease contracts should clearly list the monthly payment that will be due each month during your contract. A PPA agreement should include the rate per kilowatt hour for your entire contract. Many contracts include an annual escalator which increases your monthly payment or price per kWh by a set percent each year of the contract. If the annual escalator is set at a rate that increases faster than the price of electricity from your power company, the power from your solar panels could become more expensive than traditional electricity during your contract period.

• Know the current price per kWh that you pay for electricity. You can gather this information by looking at your energy bill or by contacting your electricity provider.

• Make sure your proposed solar contract and estimated savings are calculated using your actual cost of electricity, and not a statewide average or estimated electric rate. Electric rates vary significantly by utility company in Delaware. Be wary of high annual electric cost increase estimates that may be used in contracts to make the lease or PPA agreement seem more attractive.

• Ask your prospective contractor to explain what incentives it will be claiming and how these incentives were factored into the proposed lease or PPA cost. Consider all of the tax credits, state grants and other incentives available for solar installations. Under most lease and PPA contracts, these incentives are awarded to the solar company, not the homeowner.

• Shop around — get quotes from two or three Delaware solar installers and compare costs before committing.

• Consider the pros and cons of owning a system versus leasing or entering into a PPA. While owning a system requires upfront investment, the system will likely pay for itself in a matter of years. Currently, customer-owned residential solar projects in Delaware have an average payback period of only seven years. Homeowners who own their solar system only pay for the difference of the energy they use and the energy they produce, meaning the homeowner will pay significantly less for each energy bill, and may even gather credits to cover other months if their system produces more than the home needs. Over time, the homeowner will save more money in energy costs than they spent on purchasing and installing the system. Most solar panels have a standard 20-year manufacturer’s warranty.

Evaluate whether your finances, coupled with current tax credits and incentives, could make purchasing a system a more attractive option. Low-interest loans may also be available for renewable energy projects, including solar, which could enable you to pay for a system without a lease or PPA contract.

The Delaware Green Energy Program maintains a list of solar installers that offer both customer-owned and lease/PPA systems. Visit www.de.gov/greenenergy for more information.

Reach the Delaware State News newsroom at newsroom@newszap.com

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