Rent Solar Panels? Leases and PPAs Explained

The pitch is appealing: panels on your roof, little or nothing paid up front, a lower bill. Behind that is a contract that can last longer than many mortgages. Whether it suits you depends on the fine print, so here is how leases and power purchase agreements work and where they tend to go wrong.

Two structures, one big difference from buying

When you buy, you own the system. Your savings are yours, any incentive goes to you, and the equipment is part of the house.

With a lease or a power purchase agreement (PPA), a company owns the panels. You host them. The company is responsible for the system in the way the contract spells out, and in return you pay.

Lease. You pay a fixed monthly amount for the use of the equipment, whatever it produces. If a year is cloudier than expected, the payment stays the same.

PPA. You pay a rate per kilowatt-hour for the power the system generates, often lower than your utility rate at the start, with a built-in annual increase. If production falls, your payments fall too, but so do your savings.

Why people consider them

The attraction is a low or zero upfront cost. For someone who cannot or would rather not pay $15,000 to $28,000 (CAD, a typical range for a 6 to 8 kW purchase before incentives), that matters. Some agreements also include maintenance and monitoring. If you dislike the idea of managing a system, that can look like a relief.

What you give up

Ownership is where the real economics sit. A third party that takes on the capital cost wants a return, so over 20 years you will usually pay more than an owner would, and you do not keep the equipment at the end unless the contract offers a buyout. Any rebate may go to the company rather than to you. Net metering credits, where they apply, may also be set up in a way that leaves you with a smaller share of the benefit.

Compare the total of all payments across the full term with the net cost of buying, using the steps in our payback guide. The comparison is often sobering.

The resale problem

This is the part to read twice. Many agreements run 15 to 25 years and can be registered against the property or require the buyer to accept them. When you sell, one of three things usually happens:

1. The buyer takes over the agreement, which means they must qualify and agree.
2. You buy out the system at a price set by the contract.
3. You pay to end the agreement early.

Any of these can slow a sale or cost money. Buyers’ lenders and agents may be wary of an unfamiliar obligation. Our page on whether solar raises home value discusses what buyers ask, and an owned system is typically the simpler story to tell.

Other risks to weigh

• Annual escalators. A rate that rises two or three percent a year can eat into savings over decades.
• Roof work. If you need to replace the roof, who removes and reinstalls the panels, and who pays?
• Insurance. Who insures the panels, and does your home insurer need to be told?
• Company failure. If the provider goes out of business, who takes over the contract and the maintenance?
• Tax questions. How property tax and sales tax are treated can differ for rented equipment. See solar taxes and GST in Canada, and confirm details with an accountant.

Do these products exist everywhere?

Not necessarily. Whether leases or PPAs are offered depends on the province, utility rules and what companies choose to sell. Some provinces have had few such offers at all. Do not assume that what you read about in another country applies here. Ask any company which rules it operates under and request a copy of the full contract before you decide anything.

Questions to ask before signing

• What are my total payments over the whole term, including increases?
• What is the buyout price in year 5, 10 and 15?
• What happens if I sell, and what does the buyer need to do?
• Who handles repairs, and how fast?
• Is production guaranteed, and what is the remedy if it falls short?
• Does the contract register anything on my property title?
• What happens at the end of the term?

If any answer is vague, treat that as information.

A fair way to decide

Put three options side by side: buying with cash, buying with financing, and the lease or PPA. Use the same system size and the same production estimate. Our guide to solar financing options in Canada covers the buying side. Have the contract reviewed by a lawyer if the term is long.

Renting can be reasonable for someone who truly cannot buy, who expects to stay in the home for the full term and who has read every page. For most households that can borrow sensibly, owning leaves more flexibility. You may also want to read about choosing an installer, because the questions to ask apply here as well, and the wider incentives and financing hub lists the other routes.