Path-Q Solar
How should I evaluate a lease with a payment escalator when electricity prices may remain stable?
Answer
Compare the lease payment, including every escalator, with the value of the electricity the system is expected to offset under flat-price and low-price-growth scenarios. If the lease payment rises while electricity prices remain stable, the savings advantage can shrink or disappear.
Key points
- Model the lease payment by year, including escalators, fixed charges, and any end-of-term obligations.
- Value production using realistic self-consumption and export assumptions.
- Compare the lease with buying or financing the system over the same period.
- Review performance guarantees, maintenance responsibility, insurance, and transfer terms.
What it depends on
- Starting lease payment and escalator formula
- Expected production and degradation
- Electricity rates, bill structure, and export compensation
- Contract term, purchase option, and transfer requirements
Risks and trade-offs
- An escalator transfers electricity-price risk to the customer if utility prices stay flat.
- A lease may reduce maintenance responsibility but limit ownership benefits and flexibility.
- Underproduction may reduce avoided utility costs without automatically reducing lease payments unless the contract provides a remedy.
Information you may need
- Full lease payment schedule
- Production estimate and performance-guarantee terms
- Utility bill and export rules
- Comparable cash and loan proposals
Your next step
What to do next
Create a year-by-year comparison using flat electricity prices, the lease escalator, and alternative purchase or financing options.
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Some details may depend on your location, installer, utility, incentives, regulations, or specific property.
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