A Good Look At Solar Leases
Solar leasing isn't simple. This article in Renew Economy does a good job of explaining why and pointing out potential pitfalls. The author is definitely right speaking about opportunity costs and the way we can overlook value. I'd add though that given that it's estimated that 80% of solar systems in Australia are not generating at full capacity, the "set and forget" idea, while largely true, also needs a solid monitoring component to ensure that any problems in generation are detected quickly and fixed. It's also worth noting that this is where PayG works so well: opportunity cost doesn't really apply because there is no CAPEX and no lease payments; while simultaneously it's incumbent on the provider to make sure that the system is generating at full capacity (if it isn't, the provider not the customer loses out).
Here's an excerpt:
On the surface, the solar lease is bright and shiny, guaranteed to make you smile and soften those pesky energy bills and emissions. But buyer beware, every time we have looked under the hood, all is not as it seems. Here are the 4 Big Things to look out for when they give you the sales pitch:
Cost of capital
We often see solar lease and/or PPA providers comparing their offering with purchasing solar outright. They tell you that if you keep cash in your pocket, it will get 8-10%, so why spend it on solar? It’s the right question to ask, but the wrong number to use. You might get 8-10% in the long run on the share market or property market, but these investments are up and down all the time, and getting it right isn’t easy.
Investing in solar is closer to a term deposit or bond – low risk, and steady returns. Investments like these typically pay 4%, and even less after tax. So putting your money in solar to receive tax free investment returns makes for an attractive risk-weighted investment, if you get it right. Even for larger businesses that might be paying 14-15c/kWh for daytime energy, tax free returns of 6-8% are possible with solar.