Solar: renting vs. buying

Issue 8 2023 Power Management

Solar solutions have taken centre stage in South African homes and brought consumers to a crucial crossroads; should you rent or buy your solar system?

Understanding the differences between owning and renting a solar system becomes essential as we navigate the landscape where cost-saving and uninterrupted power supply meet environmental consciousness. After all, the end goal remains the same; harnessing the sun’s power to electrify our homes.

“When you decide to rent a solar system, you agree with a solar service provider to use their solar panels and associated equipment for a specified period,” explains Dylan Schnetler, commercial head for Synapse Ultra at Rubicon. “By renting, you gain the right to use the solar system to generate electricity for your home. Instead of purchasing the system upfront, you pay a monthly rental fee to the service provider. They usually take care of all the maintenance and necessary repairs.”

When you choose to lease a solar system, it is important to remember that since you do not own the equipment, the solar service provider maintains the right to remove the system if the agreement ends. Conversely, owning a solar system entails purchasing and installing the solar panels and associated components on your property, granting you full control. You also assume responsibility for all maintenance, cleaning, and repairs.

In the long run, buying is the more sensible option because it allows you to harness long-term financial benefits, whereas renting merely provides temporary access without the benefits of ownership. “Over time, the renting model will cost you more and never be fully paid off, making it a perpetual fiscal drain. On the other hand, purchasing offers the advantage of once the payment is complete, all the benefits continue to accrue with no further costs,” says Schnetler.

What components do you need?

Regardless of whether you choose to rent or buy your solar system, the components you will need remain largely the same. A solar system usually consists of several key components that work together to convert sunlight into usable electricity.

The principal components of a solar system are:

• Solar panels: Solar panels, also known as photovoltaic (PV) panels, are the most recognisable part of a solar system. These panels comprise individual solar cells that absorb sunlight and convert it into direct current (DC) electricity.

• Mounting system: The mounting system provides the structure and support for the solar panels. It ensures that the panels are securely installed on a roof, ground-mounted structure, or other suitable location while allowing for proper orientation and angle to maximise sunlight absorption.

• Inverter: The inverter is a critical component that converts the DC electricity generated by the solar panels into alternating current (AC) electricity, which is the type of electricity used in most homes and businesses. Inverters also optimise the power output from the solar panels to ensure maximum efficiency.

• Batteries: Many solar systems incorporate batteries to store energy. These batteries store excess electricity generated by the solar panels during the day for use during periods of low sunlight or at night. Battery storage allows for greater energy independence and can provide backup power during load shedding as well.

“The specific components and configuration of a solar system can vary based on factors such as system size, location, energy needs, and budget,” says Schnetler. “A solar energy professional or installer can provide more detailed information tailored to your specific requirements.”

So, should I buy or rent?

“When choosing between renting or owning, homeowners should carefully contemplate their options,” says Schnetler. Rubicon offers an exclusive solution called Synapse Ultra. “Customers can use our online calculator to determine their ideal Synapse Ultra solution. Based on your specific needs, the calculator will propose an appropriately sized system, the cost, potential energy savings, and return on investment.”

Once you have identified the system that meets your requirements, the next consideration is whether to purchase it or opt to rent a comparable system from a solar service provider. Now, let us examine the advantages and disadvantages of both choices.

Buying your solar system

The upsides

• Financial savings: Owning a solar system allows you to benefit from long-term financial savings. By generating your own electricity, you can greatly reduce or even eliminate your monthly electricity bills, leading to substantial savings over the system’s lifespan. Solar panels are durable and have a long lifespan, typically ranging from 25 to 30 years or more.

• Energy independence: Owning a solar system provides energy independence. You are less reliant on traditional energy sources and grid electricity provided by Eskom, giving you more control over your energy production and reducing vulnerability to power outages or rising energy prices.

• Positive environmental impact: By generating clean energy from your solar system, you actively work towards reducing carbon emissions and mitigating climate change. Your decision to own a solar system helps promote a greener and more sustainable energy future.

• Long warranties: The Synapse Ultra solar solution comes with a ten-year warranty. This gives you peace of mind, knowing your investment is safe should any part break or malfunction.

• Option to finance: Many banks and institutions offer appealing financing options for your solar system. Going this route, you keep full ownership of the system while having the flexibility to divide the substantial upfront cost into manageable instalments over a period of time.

• Increased property value: Installing a solar system can increase the value of your property. Prospective buyers are attracted to homes with solar because of the potential for reduced energy costs, environmental benefits, and the growing demand for a power supply independent from Eskom.

• Tax incentive: The National Treasury allows individuals to receive a 25% tax rebate, up to a maximum of R15 000, for eligible solar panels that are put into operation from 1 March 2023 to 29 February 2024. A rental system does not qualify for this incentive.

• Customisation and control: When you own a solar system, you have the freedom to customise it according to your specific energy needs. You can determine the size, number of panels, and system configuration, allowing you to maximise energy production and optimise your savings.

Although investing in a home solar system undoubtedly provides long-term benefits to a household, it is important to recognise that there are still drawbacks to consider.

The drawbacks

• High upfront costs: Purchasing a solar system requires a significant upfront investment to cover the cost of equipment, installation, and associated expenses. Although this upfront cost may pose a challenge for some homeowners, there are ways to alleviate it. One option is incorporating the cost into your existing home loan or utilising a credit facility.

• Higher monthly cost if financed: If you finance your solar system through your bank, your monthly repayments could be higher compared to renting a solar system. Your instalment will also vary based on fluctuations in interest rates.

• Responsibility for maintenance and repairs: After a certain period, the solar system’s service and maintenance costs will shift to you, even if some solar installers offer an initial period of free service and maintenance.

• Insurance and warranty considerations: As the solar system owner, you will need to ensure that you have proper insurance coverage to protect against any potential damages or losses. Once your warranty expires, you will be responsible for any repairs or replacement costs not covered by your insurer.

• Limited flexibility: Once you install a solar system on your property, it becomes a semi-permanent fixture. If you decide to move or sell your home, you will need to negotiate its value with potential buyers.

Renting your solar system

The upsides

• Lower upfront costs: Renting a solar system generally involves minimal or no upfront costs compared to the significant investment required for purchasing and installing a system. This makes it more accessible for individuals or households with limited financial resources.

• Maintenance and repairs included: When you rent a solar system, the solar service provider takes responsibility for the maintenance and repairs of the system. This ensures that the system operates optimally without incurring extra costs. However, it’s important to research your rental provider’s track record and responsiveness.

• Transferability: If you are in a rental property or have plans to sell your house, choosing to rent a solar system instead of purchasing one could be more advantageous. Ending a solar rental agreement is generally straightforward, but you will most likely incur penalties for cancelling your contract early.

• Performance guarantees: Rental agreements often come with performance guarantees, ensuring that the system meets certain energy production levels. If the system underperforms, the service provider is usually responsible for addressing any issues and ensuring optimal performance.

• No long-term commitment: Renting a solar system offers flexibility in terms of contract duration. If you are unsure about the long-term commitment or if your circumstances change, you have the option to end the rental agreement at the end of the agreed-upon period. However, be aware of possible penalties or cancellation costs.

• Rent-to-own: Many solar subscription options provide the opportunity to transition to a rent-to-own agreement after a few years. Nonetheless, it is essential to remember that the rental payments made before the conversion to rent-to-own may not be applied to the eventual buy-out.

While there are benefits to renting, it is important also to consider the drawbacks of this option.

The drawbacks

• Long-term cost: While renting may offer lower upfront costs, the cumulative rental payments can exceed the cost of purchasing a system outright over the long term. Renting may, therefore, not provide the same level of financial savings as owning a solar system.

• Annual increases: You can expect to see annual increases in your monthly rental agreement. These tend to range between 5% and 7% per year, further adding to the long-term cost burden.

• Limited control: When you rent a solar system, you have limited control over the equipment and its maintenance. The solar service provider handles system maintenance and repairs, which means you may have less flexibility in choosing the components or upgrading the system.

• Contractual obligations: Renting a solar system often involves signing a contract with specific terms and commitments, such as granting permanent property access. It is vital to fully understand the terms and obligations outlined in the contract before signing.

• Cannot claim incentives: Unlike owning a solar system, renting currently does not provide access to government incentives or tax benefits. Selling back any excess power generated to the grid for your own benefit is not possible. The service provider keeps ownership of the excess power.

• No increases in property value: As the solar system is rented, it does not help increase the property’s value. When selling the property, you may need to negotiate with potential buyers to take over the rental agreement, which can add complexity to the sales process.

The bottom line

“In the debate of buying versus renting a solar solution, buying offers bigger financial benefits over the long term,” concludes Schnetler. “Both options offer homeowners the advantages of reduced electricity bills, continuous power supply, and environmental sustainability. Although the upfront investment associated with buying a solar system is no small matter, selecting the appropriate financing product will help negate this obstacle.”

Rubicon provides a user-friendly tool that allows users to calculate upfront what their Synapse Ultra solution will cost based on their specific requirements. This online calculator lets consumers apply for financing options at favourable interest rates. “Making the optimal choice between buying and renting requires a careful evaluation of your financial situation, long-term goals, and electricity requirements. By considering these factors, you can make an informed decision that aligns with your needs and maximises the benefits of solar.”

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