Pros and cons of Sunpower's EBO (early buyout option)

[brucerpeterson]

In January, 2012, we got 10 320 watt Sunpower solar panels installed with a prepaid lease for around $6500. I'm now getting emails from Sunpower leasing about taking the EBO. It would cost me $413 which is not a lot but I don't understand how it is in my best interests to do it. If I do the buyout, I'm pretty sure I will be responsible for any maintenance costs which could end up costing me money. If I choose not to exercise the buyout, at the end of the 20 year lease there are 3 options:

1. I buy out at that time for $2766(!).
2. I can extend the lease term for some (at this point) unspecified terms.
3. I can have Sunpower remove the panels at their cost.

It seems highly unlikely that Sunpower would want to do #3 since that costs them money so I would think that would leave options 1 or 2. Option 1 seems crazy to me and definitely would not be in my best interest. It's hard to say what the deal with option 2 would be since they don't specify what the terms of the lease extension would be. So unless option 2 is essentially zero cost to me it would not seem to me to be in my best interests to choose any option other than option 3.

Can someone who understands this better explain to me whether I am missing something? My gut feel at this point is that my best plan would be to continue on as is and see what happens at year 20 and if option 2 is not favorable to me then go with option 3.

Thanks for any advice.

Bruce

[J.P.M.]

1.) Figure/guesstimate the NPV of $2766 about 15 years from now using what are hopefully reasonable and realistic assumptions about the future of rates and such things that you are also comfortable with and understand, but with no maint. costs. If that NPV is > $413, then it may be a good deal to take the $413 buyout if maint. costs == zero.

2.) Do the same thing as above but add some annual maint. cost and figure the NPV of that annual maint. to the figure found in #1 above.

Moron method: if you were to invest $413 today at, say 5% return, tax free, at the end of 15 years you'd have ~ $854. Working the other way with the same simplifying assumptions and noncomplications, $2766, 15 years from now, discounted to present value at 5% has a compounded value of ~ $1,330.

The 5% rate is a SWAG. Plug in your own rates and other assumptions.

If the NPV of the maint. cost, however you figure it, is > $1,330 - $413 = $917, you may be better off waiting.

No promises on the above mental spoor, just one example of a toe in the water of process economics.

FWIW, for $413, I'd read the offer very carefully, making sure I understood all the terms, paying careful attention to what it has to say about existing product warranties, particularly the inverter.

If I didn't see any financial landmines, I'd jump on the early buyout with both feet, and plan on a new inverter in about 5 years, but I happen to have $413 to invest in my energy future just now and I'd probably like the odds of the system still being functional in 15 years, but probably with a new inverter.

Anecdotally, there are several ~ 10 yr. old arrays in my HOA and they appear to be about as functional now as they were at PTO. Of the 100 + arrays in my HOA, 1 string inverter failure (infant mortality), but a bunch of microinverter failures, mostly M190's as best as I can keep track.

[ImInPhxAZ]

They want to walk away from the duration left, 14 years, in exchange for effectively discounting the buyout $900 if the maths above are correct.

I'd keep the 14 year hands off warranty personally.

Don't count on keeping it free after 20 yrs. The installer themselves may have no desire to remove it but that just means they'll sell it to an asset recovery company for a something small, say $200, and they'll come rip it off and export it to Mexico or send it to recycle or whatever bulk asset recovery for solar looks like.

If they let you keep it and word gets out... Bad news for lease companies.

[Judy]

I have EBO Selena. What is cost of new inverter n labor if I own system?

[Sunris]

I would like to give you some advice, I sold and leased sunpower systems from 2011 till 2015 i can tell you that somewhere in the middle they changed the early buyout option it it became really expensive. For homeowners like yourself that got is system when the cheap EBO was available I would pay it off without even thinking twice.
remember that as long as you have a lease there is a lean on your property, if you choose to sell your home you run in to their diffrent requirements and at the end of the day it doesn't increase the value of your home because let's be honest you dont own it its leased. The worst thing that can happen is your inverter going bad at that time just purchase one that is much more efficient.
the modules still have the same 25 years warranty, if a panel goes bad on a lease sunpower can choose to just pay you the prorated cost of electricity that the panel was supposed to produce without even replacing it.
the bottom line is own your system!.
I hope this helps good luck