Solar: leasing versus buying

Solar panels, is there any better way to harness the power of the sun to free up money for retirement?  Well, yes, there’s geothermal / ground source heat pumps; installing one of those will put a lot more green back into your pocket.  Still, a ground source heat pump just doesn’t have the futuristic appeal that solar does.  Nor, unfortunately, does it have the marketing dollars or incentives that solar does.

When it comes to solar, there are two varieties you can install.  The first is not very common in the United States is for generating hot water.  The second is the most common type, for generating electricity.  Both have their advantages.

One of the difficulties of pricing out solar is that the free market doesn’t really get to decide what’s best for everyone, since there is a patchwork of incentives available to everyone.  DSIRE is probably the best site for learning what is available for you, assuming you live in the United States.

If you are interested in installing solar to generate hot water, you have two different types of systems available to you, evacuated tube collectors and flat plate (there is a third type, but they’re not very common since they don’t work well where the temperature goes below freezing).

Flat Plate
Flat Plate
Evacuated Tube

There are pros and cons to both types, but for the record I installed a flat plate system.  A solar hot water system doesn’t eliminate the need for a separate water heater, but it does reduce the amount of time that separate water heater runs each day.

The real pro though for either system is the amount of energy you can harvest from the sun compared to the amount of space taken up on your roof.  If you had infinite roof space, you may be better off not installing a solar water heater, and only installing a solar photo-voltaic / electric (PV) system.

There are a couple of reasons for this.  The first is that most states offer more generous rebates for systems generating electricity than they do for systems generating hot water.  The second reason is with a PV system, if you don’t use the electricity it can be sent back to the grid, where you’ll typically earn a credit to use against future use.  Once the sun heats your hot water tank to 180 degrees, any additional rays from the sun are wasted; there’s no battery for hot water.  When you go away for vacation the solar PV system is spinning your meter backwards for the week, and your solar hot water system is sitting on your roof taking up space.home-699978_1280

As I mentioned earlier, most houses don’t have infinite roof space, so they may not have space to add enough PV panels to grab the same amount of energy that a solar water heater will.  But if you have the room, you’re much better off installing solar PV with a heat pump water heater.

So now that you’ve decided to install solar PV, you decision is done, right?  Of course, nothing is ever that easy!  Central inverter of string inverters?  Monocrystalline or polycrystalline?  Buying or leasing?

We’ll answer the easy two first!  There is a lot of information about solar online, but in general if you have any type of shading (trees, snow, chimney, vent pipe), you’ll want to go with string inverters.  The reduction in output from shadows is a killer.  As to the specific panel to buy, I’d recommend going with whatever is the least expensive.  Part of this decision is driven by the amount of space you have on your roof.  If you’re trying to decide between 250 watt panels and 180 watt panels, and want a 6500 watt system, the decision should come down to whether or not you have room for 36 panels or the more expensive system with 26 panels.

To lease, or not to lease, that is the question…

I live in Connecticut, and the state does something unheard of to benefit consumers.  They have a spreadsheet available online listing what everyone in the state paid for their system: (under the “Incentives” tab, scroll down to “Your Connecticut Neighbors Are Going Solar.”  It’s a good way to see what companies charge for similarly sized systems.

What is really interesting about this spreadsheet is you can see that among similarly sized systems, “power purchase agreement” systems cost more than leased systems, which cost more than homeowner purchased systems.  Even if you as a consumer aren’t paying any more for one system than another, someone is.  In most cases, it’s probably you and taxpayers.

You should know the power of compound interest, and this is where power purchase agreement (PPA) systems show their weakness.  When SolarCity provided me with a quote for a system, it was twice the price of the price charged by a local installer.  Under the PPA, I would have paid nothing, but instead paid 12.1 cents per kWh instead of the 16.1 cents per kWh charged by my utility provider.

Not too shabby so far.  I pay nothing, and save 24.8% on my electric generation and delivery costs (though I still have the customer service fee from my utility).  The giant red flag is that the solar company increases the rate by 2.9% a year.  Your $143 a month bill your first year is a $233 a month bill in 20 years.

While past performance is no guarantee of future results, electrical rates are actually lower now than they were 20 years ago!  A PPA doesn’t seem like a good bet to take.  Part of this is because we have many sources for generating electricity, so when natural gas is scarce, we can rely on coal.  And everyday we can rely more and more on solar and wind.


Make sure you read the fine print carefully, and like all investments, think about what you expect your long-term return to be.  Even if all the numbers work out, you wouldn’t want to have to spend $20,000 – $30,000 when you want to sell your house because you signed the wrong type of contract.

A solar system can be a great asset in retirement, as it reduces or eliminates a monthly bill, while helping the environment at the same time.  What ideas do you have to eliminate monthly expenses in retirement?

If you have any questions or comments, you can reach out below or continue the discussion in the forum.  If you are interested in receiving a notification of new posts, you can subscribe here.

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