Is renting Tesla solar panels better than buying them?

Tesla announces new rent solar program

On August 18, 2019, Tesla announced their new solar rental program with hopes that it will bolster their declining solar business. The program is offered in 6 states — Arizona, California, Connecticut, Massachusetts, New Jersey, and New Mexico — with costs starting as low as $50 per month.

Not only does the program offer a low monthly rate, there are no upfront installation fees or long-term contracts. Being that there is no binding obligation, a renter can choose to have the system removed from their home at anytime - for a fee. As part of the agreement, renters give Tesla the rights to all eligible tax credits, rebates, and solar renewable energy credits (SRECs).

Image source: Telsa.com

But is the rent solar program as great as it seems? In some cases, yes, this program can be the perfect way to take advantage of solar without having to worry about a large financial expense. For many others, though, buying solar is a significantly better long-term investment.

What are the costs of renting solar?

Homeowners can choose one of four system sizes to rent:

• A small system, equal to 3.8 kilowatts (kW) in size
• A medium system, equal to 7.6 kW in size
• A large system, equal to 11.4 kW in size
• An extra large system, equal to 15.2 kW in size

The rental fee you pay each month depends on where you live and what size system you choose. The monthly payment covers the price of the panels and other hardware, installation, support, and system maintenance. But be aware, according to Tesla’s subscription agreement, these monthly rates are subject to change at any time.  

The following table shows the monthly rates for each system size where solar rental is available:

State	Small Monthly Rental Rate	Medium Monthly Rental Rate	Large Monthly Rental Rate	Extra Large Monthly Rate
AZ	$50	$100	$150	$200
CA	$65	$130	$195	$260
CT	$50	$100	$150	$200
MA	$50	$100	$150	$200
NJ	$50	$100	$150	$200
NM	$50	$100	$150	$200

The most unique feature of this program is the lack of a term contract; there is no minimum amount of time that solar panels have to be on your roof. If a renter decides a month after installation that they don’t like the solar panels, all they have to do is contact Tesla. You can cancel your subscription at no cost and leave the solar panels on your roof indefinitely. If you want the panels removed, Tesla will remove your system for a flat fee of $2,500.

If a renter loves having solar on their roof, Tesla offers the option to purchase the rental system after 5 years. Tesla has not provided much detail on this, so it is unclear what the cost would be to purchase the system after the rental period.  

Update on March 27, 2020: Tesla has quietly put into place a new incentive for those who sign up for their solar subscription program. When you sign up now to rent solar panels through Tesla, the company will waive your first two monthly payments. For example, let’s say your Tesla solar system is connected on May 1 - you would not have a monthly payment for May or June. This offer is available until April 30, 2020.

Image source: Telsa.com

Am I eligible for Tesla’s rent solar program?

Tesla’s rent solar program is only available in 6 states in the US: Arizona, California, Connecticut, Massachusetts, New Jersey, and New Mexico. Additionally, only residents who are serviced by certain utility companies can take advantage of renting solar. Qualifying utilities are listed on Tesla’s rent solar website. You must own your home in order to be able to rent solar.

How do incentives work with the Tesla solar rental program?

Even though solar panels are installed on your roof, Tesla owns the system. Because ownership of the system belongs to Tesla, not you, the homeowner, Tesla will receive the available solar incentives offered in your state and will retain the rights to any SRECs the system produces. In New Jersey, for example, homeowners with a 5 kW system can earn over $2,400 a year from SRECs alone.

The good news is that homeowners can still take advantage of net metering. So if the system you rent produces more electricity than you use, you will receive a credit on your electric bill that will offset future energy usage costs. Check out Solar Power Rocks for a detailed look at the specifics of net metering in your state. 

Renting vs. buying Tesla solar

Renting gives homeowners added flexibility over buying solar panels in that they can remove the panels whenever they’d like. This option could allow homeowners to immediately enjoy the benefits of solar without having to incur large upfront costs.

While renting through Tesla is a good short-term option, it is not the most profitable way to go solar. If you take a closer look, you will see that with the amount spent on rent over time, you would be better off buying the system outright. Even the CEO of Tesla, Elon Musk, acknowledges that it is better to buy a system than to rent. 

The tables below illustrate the estimated long-term savings for renting versus buying through Tesla. “Value generated per year" is taken from the low-end of Tesla’s approximations.

For the sake of simplicity, many factors such as O&M costs, rate inflation, module degradation, and value from SRECs are not taken into consideration. However, factoring these in would not substantially change the results.

Estimated 25-year savings by renting a medium (7.6 kW) solar system

State	Annual Rent	Value Generated per Year	25 Year Savings (including cost of rent)
AZ	$1,200	$1,400	$5,000
CA	$1,560	$2,100	$13,500
CT	$1,200	$1,400	$5,000
MA	$1,200	$1,400	$5,000
NJ	$1,200	$1,200	$0
NM	$1,200	$1,400	$5,000

 

Estimated 25-year savings by buying a medium (7.6 kW) solar system

State	System Cost after Tax Credits	Value Generated per Year	25 Year Savings (including system cost)
AZ	$13,098	$1,400	$21,901
CA	$15,162	$2,100	$37,338
CT	$15,162	$1,400	$19,838
MA	$14,162	$1,400	$20,838
NJ	$15,162	$1,200	$14,838
NM	$15,162	$1,400	$19,838

It is clear that over time, the savings from buying a solar system are significantly greater than the savings from renting a system. In New Jersey, renting solar could potentially offer zero additional savings, as the value generated by the system would just cover the rental costs.

In other states, such as Connecticut, renting solar would provide savings, but the savings you would accumulate had the system been purchased are almost 5 times higher. If you plan on having a solar system on your home long-term, it would be best to purchase the system, as opposed to renting it.