Solar power is a popular solution for home owners looking to reduce rising electricity costs and escape unreliable municipal infrastructure. However, while solar subscriptions offer an appealing way to access renewable energy without upfront costs, they often come with significant financial drawbacks, warns Teresa Kok, Director of One Energy.
The market is flooded with solar-as-a-service options promising convenience but a closer look at the fine print reveals hefty initiation fees, annual escalations, perpetual rental terms and steep buy-out clauses. These arrangements often fail to deliver the financial benefits expected.
Here are some key considerations before committing to a solar rental or subscription:
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No ownership, no equity
Solar subscriptions leave ownership with the provider so any potential property value increase due to the system does not benefit the home owner. Unlike purchasing, these models do not provide an asset at the end of the contract. -
Escalating costs and long-term financial strain
While avoiding upfront costs, subscriptions often include annual escalation clauses of around 7%, which quickly erode expected savings. Combined with rising grid electricity costs – projected to increase by at least 20% annually – this creates a dual financial burden that undermines the viability of subscriptions. -
Penalties and “buy-out” costs
Early termination of rental agreements can result in substantial penalties while buy-out clauses to take ownership after the contract term are often financially prohibitive. Carefully reviewing these terms is critical to avoid unexpected liabilities. -
Resale complications
Solar rental agreements can complicate property sales as buyers must agree to take over the lease. This may limit buyer interest or require the home owner to settle the agreement at a significant cost. -
Maintenance and performance limitations
Maintenance is typically included in subscriptions but issues, such as restricted battery use to preserve lifespan or delayed service, can reduce the expected benefits.
Alternatives to consider
A high-quality solar system with a hybrid inverter, batteries and panels offers a productive lifespan of 15-20 years, making ownership the most cost-effective option in the long term. By financing and paying off the system within five years or less, home owners can enjoy 10-15 years of free electricity and thus maximise the return on investment.
For those concerned about upfront costs, several financing options are available:
- Solar finance: Similar to vehicle financing, this approach allows for fixed monthly payments – often offset by immediate electricity bill savings. At the end of the term, the system is fully owned, eliminating buy-out fees and providing long-term financial predictability.
- Rent-to-own: This hybrid model combines elements of renting and ownership. The most viable contracts avoid annual escalation clauses, ensure ownership at the end of the term with minimal additional costs and allow early settlement without penalties.
- Using a bond: Home owners with surplus cash in their bonds can use this option but it is most effective when repaid over a short term. Extending repayment to 20 years significantly increases the total cost due to accumulated interest.
While solar subscriptions may appear convenient, they often lack the financial benefits of ownership. Subscriptions come with escalating costs, limited savings and no equity. By comparison, ownership provides long-term financial predictability, access to tax incentives and increased property value.
Carefully evaluating the long-term implications of these options is essential for making an informed decision. Ownership remains the most sustainable and financially sound choice for maximising the benefits of solar power.
