So what is a third party owned solar product?
If you've seen an advertisement for a solar panel system touting "free solar panels", the first thing that might pop into your head is what's the catch? Is it a scam?
If you look into it in more detail you'll work out that the term "free solar panels" is essentially referring to a zero down method of installing solar panels on your house.
This can be because the solar panels are funded 100% by a loan or more commonly because it is a third party owned solar product that the solar company is offering to install for you.
A third party owned solar product is a product where the solar company retains ownership of the solar panels they install on your roof but charge you a rate for the power they produce for a length of time, usually either 15 or 20 years.
There a broadly two types of third party owned solar products. Solar Leases and Solar PPA products. The difference is that with a lease the monthly payment is fixed for the lease term and with a Solar PPA the amount charged is an amount per kwh (usually 15-17 cents per kwh). In both cases the solar company retains ownership of the solar panels until the end of the contract term and then usually the ownership would pass to you the home owner. In the case of a solar lease there may or may not be a residual payment at the end of the lease.
Are zero down solar offers a scam?
Getting back to our original question, are zero down solar offers a scam? The answer, generally is no!! Whilst there are better and worse third party owned solar deals they are based on fundamentally sound economics both for the home owner and for the solar company. There is a number of reasons why solar leasing companies can offer you zero down solar panels. Firstly, when they do this they retain ownership of the 30% federal solar tax credit and any other upfront or ongoing incentives that attach to you installing solar panels on your roof. Also, the real cost of solar panels to large companies like SolarCity or Vivint is much lower than the retail market price for installed solar systems.
"The real question is not whether zero down products are a scam the real question is whether third party owned products are the best way for you to get solar panels."
The issue is this: You only have one roof and one electricity load to service. You have to choose to either buy your own solar panels (either cash or with a HELOC loan) or enter into a third party owned zero down solar agreement. Both will save you money, but cant do both. The reason that both will save you money is predominantly because of the 30% solar tax credit and the effect of the net metering law. These incentives have been awarded to you the home owner by the legislature and they afford you a rare opportunity to make a significant profit on an investment.
This is the real issue with zero down products, its not that they don't save you money, they typically will (and you take no financial risk) it is just that usually you could have saved tens of thousands of dollars more if you bought your solar panels outright.
To demonstrate this point I used a home owner in Los Angeles with a $200 per month power bill.