With interest rates up from their pandemic lows, getting a loan to go solar is more expensive than it used to be. That doesn’t need to stop your plans to go solar, though. A solar lease lets you get solar panels and save on your electricity bill while avoiding the high upfront installation costs.
You get to skip the cost of ownership, because you don’t own the panels. Instead, you pay a monthly fee for them while the electricity they generate lowers your utility bills. For example, if you get solar panels through a LightReach Energy Plan directly from Palmetto, we design the system to save you money in the first year of your agreement, while we own, monitor, and maintain the panels.
But what happens to those panels when that agreement is up? It depends. Below, we’ll explore your options at the end of a solar lease. For more on the ins and outs of solar leases in general, read our solar leasing guide.
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Post-Lease Solar Panel Removal
What happens at the end of a solar lease might vary contract to contract. Before you make a decision about a new or existing lease, make sure you confirm your options in your contract.
While you are making monthly payments for the solar panel system and benefiting from the power it produces, the panels’ owner typically is responsible for keeping them up and running.
When it’s time to call it quits and remove or replace your solar panels, that company is responsible for removing the panels. (Panel removal is just one option open to you at the end of a lease. More on the others below.) At the end of a LightReach Energy Plan agreement from Palmetto, Palmetto will remove the panels for free.
It is unlikely that a crew will be there to uninstall your solar on the very day your lease has expired, so there may be a delay between the end of your lease and the physical removal of your photovoltaic system components. But when it happens, it won’t cost you anything.
Extending a Solar Lease
Solar panels slowly become less efficient as they age, but they can still produce electricity after 25 years. (Quality solar panels manufactured today commonly have 25 year warranties that guarantee the panels will still be 80-90% as efficient as when they were new.)
When you reach the end of your lease, you may have the option to extend your lease at a new rate that reflects the age of your solar panels. That could mean a few more years of energy savings with the same panels. As solar panels can generate electricity for three decades or more, renewing your lease for another few years can allow you to “squeeze all of the juice” out of your existing equipment.
It might also be possible to start a new lease from scratch with new equipment. That would get you newer, and likely more efficient solar equipment, but might cost more.
Buying Out a Solar Lease
Some solar companies will allow you to “buy out” a solar lease agreement before or after the end of the total contract period. (LightReach offers buyouts starting in year five.)
As the new owner of the system, you can then eliminate your monthly lease payments while the panels continue to produce solar power and earn credits on your electric bill. It might be an attractive option if you want to buy solar panels, but need a few years to save up the money.
Detailed in the agreement’s “solar lease buyout clause,” the price you’d pay to buy your system is determined by the solar system’s fair market value at the time. Buying out an existing solar lease is one of your options when you sell your home.
Owning your system can be a valuable investment, but you might lose some of the perks of a lease. Once you buy your system, it’s likely that you’ll be on the hook for maintenance, and responsible for removing the solar panel system when the time comes. Owning solar panels can boost your property value, which can increase your property taxes, if you’re not in a state that exempts solar panels from property taxes.
Early Termination of a Solar Lease
A solar lease is a long term agreement, up to 25 years. The benefit of this is that you can set yourself up for long term, predictable energy costs. The downside is that canceling one can cost you something.
If you end your lease before your contract ends, you may be charged an early termination fee. Even if your lease doesn’t include an early termination fee, you may need to pay for the cost of removing the panels. At the end of your lease, panel removal may be free.
Transferring a Lease’s Ownership
Some leases, LightReach included, say that ownership of the panels can be transferred to you at the end of your lease if you don’t opt for one of the options listed above. That’s not necessarily a bad thing, but you will be responsible for any ongoing maintenance and the panels’ eventual removal.
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The End of Solar Leases vs. Power Purchase Agreements
Solar leases and solar power purchase agreements (PPAs) are nearly identical solar lease contracts with a few minor structural differences. The main difference is that in a solar lease you pay for the panels, while in a PPA you pay for the power those panels produce.
Both PPAs and solar leases let you install panels with little to no money upfront, indirectly receive the benefits of the solar tax credit to reduce your payments, and can reduce your energy payments for years to come.
In general, the end of a lease and the end of a PPA should look similar, whether your leaving the agreement early or as scheduled.
End of Solar Lease Options
When your solar lease is up, you may be able to choose from one of several contractual options to maximize the value of your renewable energy agreement.
| Option | Description |
|---|---|
| Panel removal | Your solar panels will be removed by the installer without any damage to your roof or extra costs added. |
| Renew a solar lease (short term) | Your lease will be extended for the usable life of your solar panels in small increments of time, typically one to five years. |
| Total lease renewal and panel replacement | Your lease will be renewed for another full term of 20 or 25 years after a new set of solar panels is installed. |
| Buyout a solar lease | You purchase your solar equipment system outright to gain ownership of the system and its power production. |
Even though the end of your solar lease may be decades from today, it is always best to know what options you will have at the conclusion of your contract before you sign an agreement.
When you work with Palmetto, you can speak directly to a solar expert to explore your leasing options, estimate your energy savings, and develop a plan for long-term success. Get started today with a free solar design and estimate tool to preview how a solar power system can save you money.
Frequently Asked Questions
What happens at the end of a solar lease? At the end of a solar lease one of a few things can happen. You can end the lease and have the panels removed, extend the lease, or buy the system from the leasing company. Different leases may have different stipulations, so be sure to read and understand your contract fully.
Can I buy my leased solar panels? Some leases include the option to buy your leased solar panels after a certain time. LightReach plans let you purchase the panels from year five through the end of the contract.
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Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.
Cory O'BrienSenior Director - Growth MarketingCory brings over 8 years of solar expertise to Palmetto, and enjoys sharing that knowledge with others looking to improve their carbon footprint. A dog lover residing in Asheville, NC with his wife, Cory graduated from UCSB. If you run into him, ask him about the company he founded to rate and review beer!
