Residential Solar Leasing Pros & Cons

Residential Solar Leasing Pros and Cons by Ken Dupré - Energy Accounts Manager at BTU with a house with solar panels on the roof

The residential solar photovoltaic (pv) industry is expected to experience a major shift in 2026 due to changes in the federal tax policies adopted earlier this year.

Beginning January 1, 2026, homeowners will no longer be able to apply for the 30 percent non-refundable
federal solar tax credit, which was previously set to expire in 2023.

The elimination of this tax credit, along with rising prices of imported solar components, will have a significant effect on the overall cost of a residential solar pv system in 2026 and beyond. However, under the new federal tax guidelines, solar installation companies that lease residential solar systems can still claim the 30 percent tax credit for themselves for solar pv systems installed before January 1, 2028. Because of this tax incentive, we expect a greater push for residential solar leasing instead of sales. 

BTU permits customers to have solar panels installed on their homes and businesses as long as they are up to safety standards and city codes, but it is important to consider the pros and cons of solar installation before receiving a full sales pitch.

Here are some answers to common questions about the solar leasing process:

How does solar leasing work?

A solar installation company installs a solar pv system at a home and contractually leases the system to the homeowner for a set monthly rate. This contract usually coincides with the lifespan of the solar panels, which is 20 to 25 years. During the term of the contract, the homeowner will receive all of the power produced by the system, reducing the amount of electricity purchased from the electric utility company. For the lease to benefit the homeowner, the new lower electric bill plus the lease payment should be less than the old electric bill (prior to the solar installation).

What are the benefits of solar leasing?

  • Lower upfront costs - Homeowners who purchase solar pv systems can pay tens of thousands of dollars for a new installation. Because the leasing company owns the equipment, the homeowner does not incur this major expense and typically pays little to no upfront costs.
  • Homeowner is typically not responsible for maintenance - Under most agreements, the leasing company is responsible for monitoring the system for optimal output and typically covers the maintenance and repair of all system components.
  • Less variability in monthly utility costs - Because the monthly lease payments are consistent, the customer should see smaller peaks in energy usage throughout the year.
Man installing solar panels on a roof

Stock image courtesy of Pexels

What are the disadvantages of solar leasing?

  • Escalating lease payments - Many solar leases include an annual price increase, which will cut into the customer's savings over time and may result in monthly lease payments that are higher than energy savings.
  • Long-term contracts - Solar lease contracts are usually 20-25 years, meaning the homeowner has little flexibility to change. Lease buyouts can be very expensive.
  • Potential impact to home sales - If the homeowner decides to sell while the lease is in effect, the buyer must commit to assuming the lease, which might scare away a significant number of potential buyers. As an alternative, the seller can buy out the remainder of the lease, which may reduce the profit on the home sale.
  • May be responsible for "detach and reset" fees - If a customer's roof needs replacing within the lease contract term, the solar panels will have to be removed and replaced once the new roof is completed. This is known as "detach and reset" and can result in a significant cost to the homeowner.

If you are a homeowner considering leasing a solar pv system. we advise you to get multiple quotes and fully understand all leasing costs and conditions. For information on what to do before you sign a lease, read the guide provided by the U.S. Treasury Department. If you have any questions regarding solar pv systems, email us at solar@btutilities.com.