Solar Site Lease Pros and Cons | NRG Market

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Site Lease

Who is a Solar Site Lease Best for?

We recommend the Site Lease method for property owners/businesses with low on-site electrical usage and underutilized roof space, or real estate companies whose tenants pay for the electricity. The unique solar site lease model allows firms with smaller electrical bills to take full advantage of a larger installation. The lack of capital or liability in the system makes the passive income model appealing for property owners who are less inclined to invest in solar themselves, and can increase the value of the property over the 20 year period as well. Site lease contracts are easily transferred between owners in the case of a sale, and generally drive up the selling price. It is useful to note, however, that in order to demolish a building before the lease ends, the property owner must buy out the remainder of the system in order to terminate the lease.

Pros and Cons of a Solar Site Lease

Pros


• Generates annual income through predetermined lease payments

• No maintenance and insurance cost

• Lease is easily transferable to future property owners

• Increases a property’s value and cap rate with fixed future income

Cons


• Lease is binding for the duration of the contract—the property owner is liable for the remaining value of the system should they chose to prematurely terminate the lease

• Doesn’t reduce current electrical bill (generated electricity is not available for on-site use)

Which States are Best for a Solar Site Lease?

Developers calculate lease rates depending on the size of the system, the utility, and the town, among other factors. Some states have strong incentive programs that make site leases very attractive, while others are much less solar-oriented or don’t offer community solar programs. Strong state-wide incentive programs and higher than average electricity costs drive the value of going solar. Some of the most popular states for solar site leases include Massachusetts, New York, and California. These states provide lucrative rates for solar developers driving up the lease payments to property owners.

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