SolarCity 20-year lease too good to be true?

[Jason]

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[djrobx]

I don't disagree at all. I guess I'll find out in 20 years because up until then it will all be speculation. I would be surprised if the renewal lease they offered at the conclusion was not competitive at the then current market rates (SunRun appears to have this in the contract, SolarCity is not specified).

In SunRun's case, the renewal rate is guaranteed to be very competitive to what my utility will be providing at the time. But if you are to believe the 3-5% rate hike schedule, "competitive" in 20 years is a lot of money, possibly thousands per year that you would otherwise not be paying if you still owned the system. Thousands that I'm afraid the leasing company won't be eager to leave on the table.

Another concern I have is with taxation. The fact that the panels are owned by a third party "selling" me electricity seems like a taxation opportunity, and SunRun's contract has clauses in it to accommodate this. I would hope with a pre-pay that the energy purchased up front would not be subject to later taxation though.

I did come to the conclusion that they're both very good options. What's in the contract is fair. I'm just concerned that salespeople are spinning stories of $0 ownership to customers, when the contract says nothing of the sort.

It's hard to say how "dated" these panels will be in 20 years. On the one hand, it's tech. On the other, it's infrastructure. My home is 15 years old, and most of it is holding up pretty well. My AC isn't the most efficient thing but it's out of warranty and still keeping the house cool. I imagine panels will get smaller or more decorative, but I don't think I'll care too much if it's working and providing the energy I need. TV technology is improving rapidly too, but my 8 year old plasma TV is way out of warranty, and still wonderful. I guess I'm just a "drive it till the wheels fall off" kind of guy!

[trimOC]

This is all really interesting and informative. I'd love to take a look at a lease to get a better understanding of this. Thanks! gwhat789@hotmail.com

[OCJeff]

The leasing companies will most likely just contract to some 3rd party - they can have all the old systems for some value per watt.

A contractor that specialized in this activity could be quite efficient at it.

For the leasing company to them away makes no sense at all - leaving money on the table.

I don't disagree at all. I guess I'll find out in 20 years because up until then it will all be speculation. I would be surprised if the renewal lease they offered at the conclusion was not competitive at the then current market rates (SunRun appears to have this in the contract, SolarCity is not specified).

[russ]

The leasing companies will most likely just contract to some 3rd party - they can have all the old systems for some value per watt.

A contractor that specialized in this activity could be quite efficient at it.

For the leasing company to them away makes no sense at all - leaving money on the table.

[OCJeff]

I do agree the used panels will have some value, but when I drive around and see some 1990 installed solar systems they scare me, technology has evolved a lot in the last 20 years. I'm not sure what the value will be for 20 year old used technology (which produces maybe 80-90% of what they did when they were new). Add to that the cost of taking them down and repairing the roof tiles (materials to be provided by owner) and it really isn't so black and white.

I actually think it'll be a cat and mouse game where the first to flinch will lose. If people opt for option #3 then the leasing company will make money. If people opt for #1, then the leasing company (or whoever they outsource the decommission to) has to evaluate the value of the equipment versus the cost of retrieval. The reality is it will cost them some good money to remove the equipment and repair the roof just to take back equipment that has little to no warranty left and is 20 year old technology. Maybe the inverters will have value, but they too will be out dated I'm sure.

I agree that buying ultimately will give you peace of mind of ownership, but that comes at a cost both up front and down the road for inverter replacement and possibly panel replacement (even under warranty this will be a cost to do for the labor). If you take those "costs" and bookmark it for a future investment then you could own a system that is modern for 2030 and last you another 20-30 years from that point going forward.

[djrobx]

Nobody has a crystal ball, but it seems very unlikely that a leasing company will gift you the panels at the end of the lease. It's not in their best interests to do so. For example, SunRun's contract offered me the following choices at the end of the 20 year term: 1) Cancel - they will remove the panels. 2) Buy the panels at Fair Market Value or 3) Continue the lease, I pay the greater of .15 per kwh or a 10% less than my utility's lowest tier.

If SunRun turned over the panels to everyone who chose option 1, who would choose option 3? They'd be shooting themselves in the foot. Leasing companies, like the utilities, are in this to make money. If utility bills climb as high as they'd like you to believe, the panels on your roof will likely still have a lot of value. In fact, the panels will still be warranted by the manufacturer for another 5 years! By most accounts, they should have already replaced your inverter.

So, the terms spelled out by the contract makes perfect sense. Salespeople who suggest that you will be able to take ownership for $0 does not. I predict in 20 years there will be a lot of people very pissed at salesmen that are long gone. Option 3 is designed to be a better deal than option 1: no panels, go back to your utllity!

That's not to say that these leases are bad deals. At least in CA-edison territory, you're saving a boatload of money over that 20 years either way. And, you're getting some nice perks like insurance, maintenance, and production guarantee. If technology improves significantly, you're in a good position to let them take the old away, so you can re-invest in newer tech. But, take a look at your expected savings at year 20 on the money flow charts that they calculate for you. Now continue those curves to year 25 and 30. Those last few years are the most lucrative!

FMV of $0 or FMV is "so low its not worth taking them down"? - I don't think so!

[66tbird]

My biggest gripe is why would you get into an operational lease and then have to pay to insure equipment you're not
receiving tax credits on or getting to depreciate? And insurance is required with every leased system yet just about
every other company provides it in the package for the full 20 years, along with a full 20 year warranty and not just 10
years on the inverter. That's a joke, now after year 10, you'll have to pay to replace an inverter you don't own? Why
bother leasing at all then.

Great points on all of the above questions/statements within the thread. I've reviewed the lease with a lawyer and its fine as for as the buy out in this state. She understood the concerns but in AZ the compensary(sp?) laws work like this- blah-blah-blah- I understood it at the time but I'm a numbers guy not a legal precedent total recall guy so it was quickly reduced to a concept that worked and we moved on.

I'll recheck the monitoring issue.

Oh, to answer the question on operational lease. It's a tax thing for one and a time/involvement thing for another. the additional insurance is minimal in my overall picture. For me it works. If I was younger and scraping by I'd do it different I'm sure.

I did question the inverter and they are going to go with an 8K. The explanation about tilt angle, panel temp, duty cycle all made sense and agreed 5K left a lot on the table.

Thanks for the input. It helps me and others getting their feet wet on the subject.

[KRenn]

Just be careful. A lot of people are trying to make easy money right now. If the deal is too good to be true, walk away.

My biggest gripe is why would you get into an operational lease and then have to pay to insure equipment you're not
receiving tax credits on or getting to depreciate? And insurance is required with every leased system yet just about
every other company provides it in the package for the full 20 years, along with a full 20 year warranty and not just 10
years on the inverter. That's a joke, now after year 10, you'll have to pay to replace an inverter you don't own? Why
bother leasing at all then.

[maestroX2]

I will ask about that info. We did sign off all rights to incentives. Not a big deal for me because of my tax situation. 20 years is a ways away and it states clearly the three options at that time. I pay, or I don't, or that take it if I don't and if they what it back. That's a long ways away. if I have to pay FMV I'll make sure its not much.

What's the $1000 for monitoring? You mean an internet connection? I couldn't live without it so it's not an issue.
10,000 over 20 years? In my case it was all profit to start with. Even if this system only cuts my $3k/yr power bill in half its doing more than most low risk investments. Our utility has been approved to hike rates 7%/yr for the next 7 yrs. They've never passed that up in the 50 yrs I've been here.

I think the company could be around a while. Their projects are on and have been on most major public type places around here since the late 70's.


But I am worried about the inverter issue. That was the only question he dodged nicely. (Roughly what size should I have?) I'll email him and get a technical answer that fits or I'll back out. In my hobby world I'd never put a speed controller rated at 100A in with a motor, battery combo that can do 150A.

Just be careful. A lot of people are trying to make easy money right now. If the deal is too good to be true, walk away.

[KRenn]

[QUOTE=66tbird;28935]I will ask about that info. We did sign off all rights to incentives. Not a big deal for me because of my tax situation. 20 years is a ways away and it states clearly the three options at that time. I pay, or I don't, or that take it if I don't and if they what it back. That's a long ways away. if I have to pay FMV I'll make sure its not much.

What's the $1000 for monitoring? You mean an internet connection? I couldn't live without it so it's not an issue.

You're not receiving monitoring for 20 years are you? If so, then you have to pay for the monitoring service out of your own pocket if they only offer it for 5-10 years like
most of these companies pushing this goofy in-house lease are. Limited monitoring and no insurance means you're going to pay more for less product.

I think the company could be around a while. Their projects are on and have been on most major public type places around here since the late 70's.

Their BBB file opened in 2001 and their ROC license was issued in 2010 with 1 open complaint against their record. According to the AZCC, their business was started in 2003.

When it comes to the solar industry, don't believe everything you hear, these companies claim everything under the sun, 20...30 year histories and most of it is imaginable. Most companies didn't have jack crap for business until 2009 and the tax credits got uncapped, then the business started rolling in.

Name/ Address/ Phone
PerfectPower Inc
20601 N 19th Ave Ste 150
Phoenix, AZ 85027-2662 Phone: (623) 581-1700
Status/ Action
CURRENT

Class | Type | Entity
K-11 | DUAL | CORPORATION
Recovery Fund Participant
Yes
Issued/Renewal
First Issued: 06/08/2010

http://starpas.azcc.gov/scripts/cgiip.exe/WService=wsbroker1/names-detail.p?name-id=10840482&type=CORPORATION

As an example, American Solar Electric claims to have been around since 2001 and they can legitimately prove it.

Status/ Action
CURRENT

Class | Type | Entity
K-11 | DUAL | CORPORATION
Recovery Fund Participant
Yes
Issued/Renewal
First Issued: 09/10/2001
Renewed Thru: 09/30/2011
License Class & Description K-11 ELECTRICAL

But I am worried about the inverter issue. That was the only question he dodged nicely. (Roughly what size should I have?) I'll email him and get a technical answer that fits or I'll back out. In my hobby world I'd never put a speed controller rated at 100A in with a motor, battery combo that can do 150A.

The biggest issue is that if they're giving you a 5000 watt inverter, you're going to lose an absurd amount of power. For a 9000 watt system, ideally you want a
9000 watt inverter, less than that and you're getting short-changed. Many companies will offer you a smaller inverter but a 1-1 ratio is ideal to truly maximize power harvest,
especially in the winter when temperatures drop-off.

[66tbird]

I will ask about that info. We did sign off all rights to incentives. Not a big deal for me because of my tax situation. 20 years is a ways away and it states clearly the three options at that time. I pay, or I don't, or that take it if I don't and if they what it back. That's a long ways away. if I have to pay FMV I'll make sure its not much.

What's the $1000 for monitoring? You mean an internet connection? I couldn't live without it so it's not an issue.
10,000 over 20 years? In my case it was all profit to start with. Even if this system only cuts my $3k/yr power bill in half its doing more than most low risk investments. Our utility has been approved to hike rates 7%/yr for the next 7 yrs. They've never passed that up in the 50 yrs I've been here.

I think the company could be around a while. Their projects are on and have been on most major public type places around here since the late 70's.


But I am worried about the inverter issue. That was the only question he dodged nicely. (Roughly what size should I have?) I'll email him and get a technical answer that fits or I'll back out. In my hobby world I'd never put a speed controller rated at 100A in with a motor, battery combo that can do 150A.

[KRenn]

In one regard, I would not worry. If the company has been around for a while they probably aren't going to start scamming people and try to rob them blind. I do agree about the money upfront portion however, with SolarCity you don't pay anything until the entire system is installed (so they have put up all of the initial capital), but pending inspections.

At the same time, cover your bases. I'm assuming you checked the BBB rating, and also searched for any complaints on review sites. Until they really give you a reason to be concerned I would just ride it out (at this point, I'm not sure you have any other options).

What I did read on their site was that they accept the rebates and incentives as a portion of your payment. So it could quite possibly be that he maintains the rights to non-power benefits. Without seeing the contract its hard to say.

-OCJeff

The issue is this, by the virtue of offering a $1 dollar buyout on an operational lease, they're already scamming the customer.


SolarCity won't offer a buyout, neither will Sungevity, SunCap, BrightGrid or any of the others and these are all big money
players, if they could do it, they would but they have those pesky laws and rules to abide by.


Also keep in mind that the post I was responding to wasn't referring to SolarCity.

[OCJeff]

Your system is probably going to take a long-time to install because
the financing is in-house, no legit company will ever promise a specific buydown price on a solar system, so that means you basically got
taken in that regard. You also gave them all your money up-front, so if they go out of business between now and then, you're screwed.

In one regard, I would not worry. If the company has been around for a while they probably aren't going to start scamming people and try to rob them blind. I do agree about the money upfront portion however, with SolarCity you don't pay anything until the entire system is installed (so they have put up all of the initial capital), but pending inspections.

At the same time, cover your bases. I'm assuming you checked the BBB rating, and also searched for any complaints on review sites. Until they really give you a reason to be concerned I would just ride it out (at this point, I'm not sure you have any other options).

What I did read on their site was that they accept the rebates and incentives as a portion of your payment. So it could quite possibly be that he maintains the rights to non-power benefits. Without seeing the contract its hard to say.

-OCJeff

[KRenn]

[Edit: As noted above]
There must be some crazy incentives in AZ. That system is 50% lrager than mine, and at a lower cost! Can you give some details of your system (if you have them)? Types of panels/inverters/etc... ?

$1 buy out is common practices on computer/hardware leases, but I've never seen anything other FMV on Solar leases where they do allow a buy out.

-OCJeff

Its illegal, the IRS hasn't been taking notes, when they do, all these people who think they're getting a $1 buyout are actually
going to have to pay FMV for those systems. There's a few outfits in Arizona and New Mexico who are pulling this nonsense.