Product Purchase vs. Service Purchase

Should you be your own electric provider when it comes to Maintenance and Insurance Burdens?

Many people around the country are experiencing the low-cost, clean energy benefits of residential solar power. Homeowners wanting to save money on electricity with solar then have to make a decision: purchase and maintain the solar system themselves or sign up for solar as a service with a company who owns and maintains the system on your roof.

Let’s first cover the differences between solar as a service vs. as a product purchase. In solar as a service, the homeowner signs a contract with a third-party company who owns and maintains the solar system on your roof, providing low cost power in a worry-free manner. So, just like your current utility service, solar service providers sell you power and worry about how to get the power to you. You stay out of the power business and go about life.

Embedded into a solar service payment is the cost to insure the system, provide metering or monitoring, and provide all maintenance and cleanings for the life of the system. Also embedded into some solar service companies cost structures are the sought-after Investment Tax Credits. With this structure, homeowners still receive the ITCs; because they are built in as savings across the solar contract term.

Considering the lifetime comprehensive service structure solar companies are able to provide, you can think of your solar service provider as your solar valet. When your solar panels need maintenance, you do not have to bother searching for a reputable and qualified repairman; you do not even have to worry about paying for the maintenance performed. You just pick up the phone and call your service provider.

Large scale service providers have the advanced IT systems, experienced teams, cultivated relationships, purchasing power, and the knowledge of the industry that all create a distinct value for the customer. As an individual homeowner, who is going to get a response first when your system needs maintenance or has a warranty claim? – you as a single homeowner, or a company that has purchased, and continues to purchase, millions of dollars of product from the manufacturers and installers? The service that solar companies sell; low cost power, is something that is easily quantifiable and is the only thing people care about at the end of day.  Besides, making monthly payments is the way people have been buying power for decades.

If a homeowner concludes that they will be able to make use of the tax credit and decides to purchase a solar system, the homeowner can write a check usually ranging from $15,000 – $40,000 with most averaging $25,000. It is easy to understand the attractive nature of never having a power bill again if you could spend $25,000 upfront. However, the idea that your electricity is now ‘free’ because you paid a lump sum upfront isn’t quite that simple.

The common adage, “There is no such thing as a free lunch” holds quite true here. In order to live without an electricity payment for 25 years, the homeowner has to pay $25,000 and forgo the comprehensive system protection plans a solar company would have provided for the life of the system. To appropriately prepare for maintenance costs on solar panels, an individual should factor in at least 1.5% per year in costs. For a $25,000 system over 25 years, that works out to be $9,375. When the homeowner is still putting money into the solar system, it’s not truly paying for itself. For example, if a homeowner has paid off their house and no longer makes a monthly payment to occupy their home, it does not mean living at the residence won’t cost the homeowner anything; the homeowner still has to pay to properly maintain and insure the house.

If you plan to purchase a solar panel system, you as an individual need to know all about solar and what makes for a good solar installation. If you do not have an engineer check your install, then you are taking a risk. In addition, you have to monitor the system in order to know if you have a problem, locate the right person to fix the problem when one arises, negotiate a good rate with the repair person, track down the equipment company for their warranty if necessary, and manage that entire process during your busy days.  As an individual you do not have access to economies of scale and therefore will most likely paying more than a large company would for the same repairs.  In addition, the single homeowner is quite possibly doing something that they will never need to do again. Not a great use of someone’s time and energy.

Insurance for the solar system against major accidents is not free either.  Some will say to just add the solar system to your current home insurance policy and that the coverage will be “free”.  Insurance companies are in business to make money so they never cover anything for free.  In addition, such a policy on an individual basis is most likely to be more expensive than a large scale solar service provider is be able to negotiate given that the service provider is covering thousands of systems at a time.

The idea that the solar panels are going to take care of themselves for the next 25 years with no maintenance and insurance expense is just not true; no piece of equipment will maintain itself for 25 years.  Bottom line is that owning a solar system is a large responsibility that will come with unforeseen maintenance expenses, as all equipment does. When a problem arises with a solar system on your home, would you rather have the time and financial burden to fix the problem yourself or be able to call on your solar service provider to handle it all?