Solar Lease / PPA Impact on Home Sale

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Submitted by CarlsbadCub on June 21, 2017 - 3:47pm

I just cancelled a contract for the purchase of a home in La Costa because of a Solar PPA (Power Purchase Agreement) the current owner had that wasn't clearly disclosed in the MLS listing. I understood it to be owned by them (it's a case of he said, she said between the agents) prior to making the offer.

After asking for the Solar agreement for 6 days, I finally received it. They were in year 1 of a 20 year agreement to purchase power at $.19 per KwH (no annual increase), but they're required to purchase ALL of the power generated by the panels regardless of how much power they consume.

I became very skiddish of assuming the sellers long term agreement for a number of reasons. He seemed to be surprised that it was even an issue and didn't seem educated on the agreement itself.

He had 3 options, transfer the lease to me, buy it out himself, or prepay the expected production over the life of the contract (panels stay owned by solar company). He wasn't willing to do anything other then transfer the agreement he signed over to me.

Do you think I made a mistake passing on this property because of this?

Submitted by ucodegen on June 21, 2017 - 5:18pm.

humm.. new time poster, just signed up to post this.

One of the big problems is the lack of transparency / honesty on this transaction. There are too many missing pieces of information to answer the question.

  • What is the average monthly power generation that the array will generate per month, for each month of the year? This will be the required bundle of money you will have to come up with should you purchase.
  • Who is the manufacturer of the equipment - goes to quality, reliability, actual power generation and lifetime of the equipment.
  • What has been their historical power consumption monthly - for a full year. This will tell you whether the solar array is offsetting SDG&E costs, or adding to them because you are 'donating' power to the grid at your cost.
  • How is the generation of the power by the solar array checked? or is it a guess that the lease company charges to.
  • What is the cost to 'buy out' the lease? Check if the 'lease' is attached to the property or just his name. There are several legal grey areas here that have not been tested.

    Another note to consider is that SDG&E Tier 1 rate is below $0.19KwH currently, though not likely to stay that way forever.

    Personally, I feel that entering into a lease agreement is a rip-off. That is because you still have to pay for the equipment (amortized over the lease), add in their profit AND they (the lease company) gets to keep the solar rebate and tax offsets.

  • Submitted by moneymaker on June 21, 2017 - 8:30pm.

    When I looked into it one could save $15-$20 a month with a lease, so I would not say it is a negative. However it is far better to purchase in the long run which is what I did. I didn't even know rates had gone up so much in the last 3-4 years,like 30%, until someone told me. Buying a house then adding solar,getting Lasic for my eyes and getting married are the best decisions I've ever made, though not necessarily in that order.

    Submitted by CarlsbadCub on June 21, 2017 - 9:52pm.

    Full buyout was quoted at $88k. Prepay was quoted at $51k. I'm told that the home generates about 18k kWh annually or 1,500 kWh per month. I didn't get the consumption numbers from them. They did tell me that they don't usually pay SDG&E anything. The manufacturer of the panels isn't in their agreement with the solar provider, but they are insured and maintained by the solar company.

    The owner put a lot of panels up generating a lot of power that the next family (i.e. Mine) might not consume, and therefore the risk exists of overpaying for the next 19 years as you're required to buy what is produced, not what is consumed.

    Submitted by FlyerInHi on June 22, 2017 - 1:23am.

    I guess it would depend how much the house is compared to the comps.

    I'm really bad at doing the buy/lease comparison, but a detail oriented friend went through it and said lease is a ripoff.

    I wonder how legally the solar company can hold you, the new buyer responsible if you don't sign anything. Do you have to sign anything at close of escrow?

    Submitted by CarlsbadCub on June 22, 2017 - 5:58am.

    The seller has to agree or get me to agree to one of the 3 options they offer when selling the home. They can't sell the house without doing that or they're in default of their agreement with the solar company and it wouldn't show as clear title.

    Submitted by FlyerInHi on June 22, 2017 - 8:31am.

    CarlsbadCub wrote:
    The seller has to agree or get me to agree to one of the 3 options they offer when selling the home. They can't sell the house without doing that or they're in default of their agreement with the solar company and it wouldn't show as clear title.

    Yes, they solar company has some kind of recorded lien. which would mean that if you agree to take over the lease, you would sign something before close of escrow otherwise the title company would not issue not insurance.

    Submitted by ucodegen on June 22, 2017 - 7:54pm.

    CarlsbadCub wrote:
    Full buyout was quoted at $88k. Prepay was quoted at $51k. I'm told that the home generates about 18k kWh annually or 1,500 kWh per month.

    Looking at quoted production 1,500kWh per month, roughly 31 days in a month and 4 hours of peak production per day would give about 48 solar panels (4 panels by 12)? That is a fairly large system. How big is the house?

    Is there any way to verify the production? They may be inflating the amount. 1,500kWh is a fairly large system.

    Submitted by ocrenter on June 23, 2017 - 2:17pm.

    CarlsbadCub wrote:
    Full buyout was quoted at $88k. Prepay was quoted at $51k. I'm told that the home generates about 18k kWh annually or 1,500 kWh per month. I didn't get the consumption numbers from them. They did tell me that they don't usually pay SDG&E anything. The manufacturer of the panels isn't in their agreement with the solar provider, but they are insured and maintained by the solar company.

    The owner put a lot of panels up generating a lot of power that the next family (i.e. Mine) might not consume, and therefore the risk exists of overpaying for the next 19 years as you're required to buy what is produced, not what is consumed.

    My 5000 watt system generated 8600 kWh last year. So you are likely looking at a 11,000 watt system up on the roof.

    Average pre tax credit cost per watt is $3.5. Which means before tax rebate the system should have cost $40k or less.

    Buyout is more than twice the cost PRIOR to tax incentives.

    WOW!!!

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