On today’s show we’re examining a potential source of revenue for your income property that has the benefit of a little extra cash flow, plus being environmentally green.
The economics of solar power have been somewhat marginal over the past several decades. That’s why governments have stepped in and offered generous incentives to subsidize the cost of a solar installation. That subsidy usually came in the form of higher purchase prices for electricity contributed to the electrical grid from a solar farm. These projects would not have been economically viable without the subsidy.
But in recent years, the cost of electrical panels have come down to nearly $1.00 per watt of produced capacity. The total installed cost is about double that amount. Most of the subsidies have disappeared. The payback on a solar project is anywhere from 10 years to 20 years depending on the local cost of electricity and the number of effective daylight producing hours. The high capital cost of these projects have made them unattractive due to the long payback. Two alternatives are the solar lease or the power purchase agreement.
Solar Leases have been around for years now, but in recent years they mostly come with performance guarantees, which can make the difference between them and power purchase agreements pretty small. On today’s show I will explain the differences, but in practice, none of this should matter and whether it’s a lease or PPA probably won’t have a huge impact on your decision making.
You might be thinking, “Wait, you mean you can lease a solar system?”
The answer is yes.