SolarCity 20-year lease too good to be true?

[russ]

Looking forward to gearing from you after you have the lease!

Like you say, unless there are some hidden 'kickers' that you haven't seen it is too good to be true.

Russ

[sacsolarquest]

I now do have a copy of the lease and will be looking through it today for gotchas. But I was specifically asked (even though I hadn't mentioned a word about this forum) to not distribute it in any form, so I won't be posting excerpts.

One thing I didn't like was they have the right to transfer (sell) the lease/equipment to another party without our consent. If this were a mortgage loan, that wouldn't be a concern. But the 20-year maintenance provisions are one of the things that make leasing attractive. While the lease requires the transferred party to also be responsible for the maintenance, it just doesn't give a good feeling to know it could be sold to someone who doesn't know a thing about maintaining solar systems. My hope is there's little value in re-assigning the lease or equipment so they wouldn't do it, but who knows the strange ways that companies come up with to make money?!

Of course, bankruptcy is a danger in buying or leasing, and the concerns with that aren't too different from the lease being transferred. So many intangibles to think about!

[russ]

Happy studying!

When some party gets secretive I always wonder why.

Excerpts would be most interesting and useful to all.

Russ

[Mike90250]

But I was specifically asked (even though I hadn't mentioned a word about this forum) to not distribute it in any form, so I won't be posting excerpts.

Did they get that in writing from you ? otherwise it's BS. Any contract with fine print should be subject to any scrutiny from anywhere, especially if you are going to be on the hook.

[sacsolarquest]

No, he just asked that as a favor, please don't distribute the document. He spoke with my wife, so it's third-hand, but I believe he had said something about them having problems with other people trying to pass themselves off as SolarCity or using it as for their own leases. (I think he meant someone had gotten a copy of a lease and used it as their own, or something). Anyway, I can understand the desire to protect their work product -- they probably paid a large sum of money to several attorneys (or in-house legal staff) to come up with this document. Of course that wouldn't stop me from showing it to our own attorney (not that we have one at present).

[SolarSurfer]

The issues I have with the lease a 3 fold.

1.) You give up your 30% federal tax credit and your utility rebates.
2.) Your rates increase incrementally 2.9% per year, whereas electric is roughly 7.5% over the past 10 years, this is a lesser of the two evils.
3.) If your system over produces, you don't get credit for the extra energy sold back to the grid, solar city does.

Another thing that you need to look out for is the fact that they are selling you a 3.44 DC system. The number you need to pay attention to is the AC number. Finally, I know you are buying out dated equipment because you talked about a 10 year warranty of the central inverter. You really need to look into the Enphase micro-inverters, their 15 year warranty, their 100% uptime guarantee, and their ability to harvest 10-20% more energy.

Beware of companies that have gimmicks and tricks and its too good to be true. You have to pay someone. You either pay the energy company, or you pay yourself by going solar and investing in your home. Solar leasing is like sticking your toe in the pool and thinking its going to cool you off...jump on it, finance that structure, and start saving $$$.

[sacsolarquest]

Some good points, SolarSurfer, thanks.

1). Not an issue for me, since I'm comparing the lease vs a purchase net of the tax credit and utility rebate.
2). I don't understand this point. What rate increases 2.9%? We aren't buying electricity from them.
3). The only way the system is going to overproduce is if we're out of the house for several months in a year. I don't see that happening, but if it does, it's true, they will get the money from the excess production.

I'd hardly say a string inverter is outdated equipment. I do agree that micro-inverters have some very nice advantages, but a 15-year warranty doesn't mean they'll actually last that long. They use electrolytic caps just as (most?) string inverters do. If we were to use a micro-inverter, I think we'd go with Enecsys' new ones, which use thin film caps. I'm pretty wary of using something that is brand new with no track record, but it's the added cost that deters me the most.

They guarantee a minimum of 4.1k kWh in the first year, and it goes down a bit each year after that (as expected). That's the only number I think we really care about.

Thanks for your thoughts.

[SolarSurfer]

Leases, at least every lease I have ever encountered through SUn Run, Sunpower, Sungevity, Verengo, Blah BLah BLah...sign you up on a 15-20 year program. From there your rate is set to go up at 2.9% per year during that time frame. I don't have much solar city experience, but thats the lease hook.

A string inverter is outdated equipment, absolutely in regards to how much energy it can harvest and the fact that it doesn't consider cloud cover/shading and the fact that the panels can only operate as strong as its weakest link due to the system having to balance itself. But the real kicker is the fact that you can monitor all this online and see in real time your panel production. Finally, the costs is only about $100 more per panel, at least with us, and when you hedge your bets against say 1 in 20 micro-inverters failing vs. 1 in 1 with a central inverter your odds are heavily decreased. And if production were to fail, you don't care because you are getting $.20 per kwh in lost production through the uptime guarantee. The Enphase technology sends an email alert that an micro-inverter is down and its fixed before you even knew there was a problem.

New product, sure, thats a fair statement...so is gaining 17% market share last year. The stone age didn't end because we ran out of stones.

Its your money and it doesn't matter to me, just trying to help out and show you what the bottom line is. I hope you can appreciate that.

[sacsolarquest]

I still don't understand what rate you're referring to, but apparently it's a different kind of lease.

I didn't mean that the Enphase micro-inverter was too new, I was referring to the Enecsys one. That one just began selling in the US last month.

I do appreciate your comments, but I don't think they have changed the bottom line. The lease option still seems more beneficial than an outright purchase.

[Mike90250]

.... You really need to look into the Enphase micro-inverters, their 15 year warranty, their 100% uptime guarantee, and their ability to harvest 10-20% more energy. ...

1: 15 year warranty
I thought it was 30, and their info claims 300 years. ??

2: their 100% uptime guarantee
Never saw or heard that before, how do they pay off a claim ??

3: ability to harvest 10-20% more energy
Ability does NOT equal actual. In a clean, shadowless install, there is no advantage, with prime, binned (matched) panels.

[Mike90250]

..The Enphase technology sends an email alert that an micro-inverter is down and its fixed before you even knew there was a problem...

HA ! does the magical inverter fairy arrive and swap the PV and the inverter out while you sleep ??

I do appreciate your comments, but I don't think they have changed the bottom line. The lease option still seems more beneficial than an outright purchase.

beneficial to the lease company. At the end, you have nada, except for some lower electric bills which will jump right up

[Sunking]

I do appreciate your comments, but I don't think they have changed the bottom line. The lease option still seems more beneficial than an outright purchase.

You seem to be smart person, but this is not thought out. At the end of the lease you have no equity

My bet is if you purchase outright with cash and take advantage of all the incentives, th eintial cost would be about the same, maybe a little more, but in the end you will have equity.

[sacsolarquest]

My bet is if you purchase outright with cash and take advantage of all the incentives, th eintial cost would be about the same, maybe a little more, but in the end you will have equity.

Thanks, Derek, I certainly understand your thinking. Like I said, I've never before considered leasing anything.

But as I've also said, the lease option is $6000, the buy option is $10,000 -- that isn't anywhere close to "about the same". Plus, I have to factor in replacement of at least one inverter within the 20-year period for the buy option (I used $2K or $2.5K in year 11 or 12 -- I don't recall exactly which).

It's true that at the end of 20 years, the lease option's terminal value is $0, compared to what I used for the IRR calculation of buying ($10K, I think). But even so, the return on investment for the lease was 50% better.

So it looks like we've decided to go for it, pending further review of the fine print. I'd love to say how it all turns out in the end, but honestly I doubt I'll remember 20 years from now. (Though you can bet I'll be back complaining if there are problems before that!)

Thanks for the feedback.

[russ]

Strange thing is the 'no monthly payments' with this lease - only the upfront.

Meaning you have truly prepaid roughly 360 kWh/month of your power bill for 20 years at less than 7 cents per kWh.

I am still not big on leases and I believe the public would be better served if the government made the same financial options that companies have available to everyone.

But - hard to see a downside for Ken on this.

Still need to have a good lawyer check it out.

Russ

[SolarSurfer]

1: 15 year warranty
I thought it was 30, and their info claims 300 years. ??

2: their 100% uptime guarantee
Never saw or heard that before, how do they pay off a claim ??

3: ability to harvest 10-20% more energy
Ability does NOT equal actual. In a clean, shadowless install, there is no advantage, with prime, binned (matched) panels.

It is a 15 year warranty. The product has been tested at conditions that indicate it will last 300 years, I honestly don't know how they do this...I sell it, not manufacture it.

2. 100% uptime guarantee means that if the system fails, they pay you $.20 per kwh in lost production. If an inverter fails, due to their 3rd party monitoring system (enlighten on their website top right hand corner) they can tell how much production was lost. My gut tells me they run a sum total of what the inverters surrounding the bad inverter were producing, but again, I don't have the logistics...never had a problem with it.

3. The product can harvest 10-20% more energy than a central inverter because a central inverter has to balance itself. If 5% of your system is affected by shade then the entire system experiences a downshift in energy harvest. however, with the enphase, if 5% of your panel array is covered, then only the affected panel is effected. The rest of the panels are operating at the prevalent conditions. Again, the monitoring system allows you to see your full panel array online, panel by panel, and see what it is producing in real time. You can see your lifetime output, weekly, daily, all accompanied by easily understood graphs to demonstrate how much energy you produced that day.