Going Solar: What Homebuyers, Sellers Need to Know
Should I lease or buy a solar photovoltaic (PV) system?
When you own, you buy the system outright with cash or a loan and are responsible for maintenance and repairs. You still receive a bill from the electric company, but the bill is much lower because you are generating most, if not all, of your own electricity.
When you lease, the leasing company owns the system and is responsible for maintenance and repairs. “It’s essentially a utility company on top of your roof,” says Elena Panigada REALTOR-ASSOCIATE with Prudential Locations, Maui.
Leasing avoids the upfront costs of ownership, which range from $15,000-$25,000 after rebates and incentives. A popular leasing option is no money down and a typical lease period lasts 10 to 20 years, depending on the contract.’At the conclusion of the lease, options include renewing, purchasing the system or having it removed.
Leasing is also known as “Power Purchase Agreement,” “Solar Lease” or “power share agreements.” Different lease options include:
* Paying for the use of a solar photovoltaic system.
* Paying a fixed rate for the electricity generated each month.
* Paying a rate for electricity that may rise or vary on an annual basis.
Whether buying or leasing, be sure to read the details of the agreement. Leasing terms can vary widely.
Are there tax benefits?
If you own the system, yes! Hawaii offers a solar tax credit of 35 percent of the system’s cost, or $5,000, whichever is lower. You also receive a Federal Investment Tax Credit (ITC), allowing you to deduct 30 percent of the cost of a solar PV system from individual federal income taxes. (Check with your tax adviser for your personal tax impact.)
If you lease the system, there are no tax credits.
What about solar water heaters?
Installing solar water heating in a home can save up to 40 percent on your annual electric bill. Hawaii Energy — the energy conservation and efficiency program for Hawaii, Honolulu and Maui counties — offers a $1,000 rebate. If you buy a home that has a solar heating system already installed, however, you aren’t eligible for this rebate.
One benefit to solar water heating systems is that you don’t need authorization from the utility company to install one, as you do with solar PV systems. Leslie Cole-Brooks, executive director of the Hawaii Solar Energy Association, explains, “You don’t need written permission from the utility … because these systems don’t produce electricity and therefore aren’t connected to the electrical grid.” This makes solar water heating a great option for people to lower monthly bills and become more energy efficient.
Another short-term benefit of solar hot water is the time constraints.'”Residents are facing challenges getting PV installed due to required interconnectivity studies and circuit upgrades, so we would like to encourage that they consider solar water heating as a first step towards big energy savings,” says Maile Alsup from Hawaii Energy.
I want to buy a home with a solar PV system that is owned.
When you buy a home with an owned PV system, that ownership is transferable. To avoid inheriting any risks, make sure you ask the seller for proof of ownership and permits. Ask the seller for the building permit package and a copy of the photovoltaic installer’s contract.’
If you are installing a PV system in your home, insist that your contractor gets a permit. “Your life and property are not worth the minor cost savings,” says Brian Benton, BROKER-in-CHARGE (BIC) with Prudential Locations’ Diamond Head office.
I want to buy a home with a solar PV system that is leased.
Ask for documentation from the leasing company with the exact terms of the lease. If you don’t understand the terms, call the company directly with your questions. While an agent should be able to get information for you, they are not experts on these documents. According to Benton, “disclosure is critical,” as you want to know exactly what you’re getting when you buy a home with a leased PV system.
For real estate agents with solar experience, call 377-4646.