Recently, I had a conversation with neighbor who had just had solar put on his roof. He had signed a Power Purchase Agreement (PPA). Over the course of a fairly short conversation it became apparent that whoever he had dealt with had given him misinformation and he had based his decision to obtain solar under the PPA based on this information.
A PPA is contract which says that a solar company will place solar on your roof at no charge and for a period of time (most commonly 20 years) you will buy the energy produced by the system at a certain rate. Most commonly, the starting rate is 15 cents per kilowatt hour (kwh) with an escalating rate increase of 3% a year.
The first thing my neighbor told me is that the sales person had told him is that the PPA was his best option because he was likely to be selling his house soon. The rationale being that because he had a potentially short time in the house ahead of him, he would never “save back” the money that purchase of solar would cost him. The first piece of misinformation was rather bold-faced. He was told that the system on his roof would cost an amount that was roughly 1/3 more than what it truly would have cost.
This exaggeration of cost was made even more egregious by the omission of the fact that the cost of solar is substantially reduced by the 30% federal tax credit that goes to the equipment owner. In a lease or PPA, the 30% tax credit goes to the solar company who owns the system. In a purchase, the home owner owns the solar so they apply the credit to their own taxes.
When I showed him what his true cost for the solar would have been after netting out both the NY State 25% tax credit (capped at $5,000) which goes to the homeowner regardless of how the solar is obtained and the 30% federal tax credit, he said he would have preferred to buy the system and he would still not want to lay that amount of money out. I let him know that there a many very good financing options available which would allow him to get solar with $0 down and monthly payments which would be comparable to his current utility cost and quite frequently they would be less. And of course at some point they would drop to $0 once the system is paid for.
Unfortunately this was not the first time that I have heard people say that they have been misled like this. For working Long Islanders, we find that passing up the 30% tax credit available on a purchase of solar by opting for a lease or a PPA will mean that their solar will cost them substantially more money over time. You should speak to your tax advisor regarding your ability to use the tax credit. For people who cannot use the tax credit (most commonly retirees), we offer leases. But more often than not, a purchase is the best option for working Long Islanders.
Lastly, the representative had told my neighbor that under the PPA his cost of energy would be cut in half.
Like many people, my neighbor had no idea what the utility charges per kilowatt hour. It doesn’t appear anywhere on the monthly bill. When you look at your bill, you see a lot of numbers all contributing your total cost. Most people are only concerned with the bottom line number and if someone is implying that the per KWH cost is 30 cents what reason would he have to not believe it?
But it is not true. The current rate charged by PSEG is about 19 cents per kilowatt hour. You can verify this by looking at your last utility bill. Find where the total number of KWHs consumed during the period is shown. Now divide the total amount you owe the utility for that energy into the number of KWHs consumed to arrive at a per KWH cost. To get the most accurate number, subtract out the Basic Service charge which is not based on your consumption. You will owe it regardless of how much you electric power you buy off the utility. Use the resulting number as your denominator.
How paying 15 cents for anything that would normally costs 19 cents saves a person 50% is complete mystery.
If you meet with someone to discuss solar for your home or business, you owe it to yourself to explore the various ways to get it. If they can only offer you one pathway you would be well advised to take what they say about the other options with a grain of salt.