High electricity costs and the rising need for sustainability have pushed homeowners, businesses, and communities to explore solar energy. But many hesitate because of the hefty upfront investment required to buy and install solar panels.
This is where solar leasing comes in — a simple, affordable way to go solar without owning the system. In this guide, we’ll explain what solar leasing is, how it works, the costs involved, and why it may (or may not) be the right choice for you.
What is Solar Leasing & How It Works
Solar leasing is a financing model where you rent a solar power system instead of purchasing it. The solar provider installs and owns the panels, while you pay a fixed monthly fee or a rate based on electricity generated.
How it works in practice:
- The solar company designs and installs the system at zero upfront cost.
- You pay a monthly lease fee (15–25 years contract).
- You consume electricity generated by the system, lowering your grid bill.
- At the end of the lease, you can renew, upgrade, buy, or remove the system.
This makes solar accessible for households, SMEs, and institutions without requiring heavy investment.
Solar Leasing vs. Buying vs. PPA
| Feature | Solar Leasing | Buying (CAPEX) | Power Purchase Agreement (PPA) |
|---|---|---|---|
| Ownership | Solar company | You | Solar company |
| Upfront Cost | ₹0 | High | ₹0 |
| Maintenance | Company handles | Owner responsibility | Company handles |
| Subsidy & Tax Benefits | Not available | Available | Not available |
| ROI | Moderate | Highest | High |
| Contract Period | 15–25 years | None | 15–25 years |
In short:
- Leasing = affordability, no ownership.
- Buying = best long-term ROI.
- PPA = pay only for units consumed, no fixed rent.
Benefits for Homeowners, Businesses & Industries
For Homeowners & Housing Societies
- Zero upfront cost → go solar without loans.
- Lower electricity bills from day one.
- Hassle-free system maintenance.
For Businesses & SMEs
- Fixed energy costs, protecting against grid tariff hikes.
- No CAPEX burden → conserve cash for business growth.
- Meets sustainability goals without complexity.
For Large Industries
- Reduce carbon footprint to comply with ESG standards.
- Flexible long-term contracts with predictable savings.
- Strengthens green branding for global supply chains.
Typical Contract Terms, Hidden Costs & Escalator Clauses
Solar leasing contracts are usually 15–25 years long. Key things to watch out for:
- Escalator Clauses: Payments may increase 2–5% per year to adjust for inflation.
- End-of-Term Options: Renew, upgrade, purchase at fair market value, or request removal.
- Hidden Costs: Some contracts include fees for early termination, insurance, or system relocation.
Always review the fine print to avoid unexpected expenses.
ROI and Savings Analysis
- Immediate Savings: Lease payments are typically lower than monthly grid bills.
- ROI: While leasing reduces bills, the highest ROI comes from ownership.
- Long-Term Impact: Over 20 years, leasing can save 20–40% on electricity bills compared to grid-only usage.
- Example:
- Grid Tariff: ₹8/unit
- Lease Effective Tariff: ₹4.5–5/unit
- Savings: 35–45% annually
Eligibility and Financing Options
Solar leasing is designed for customers who want solar without capital expenditure.
Eligibility Factors:
- Rooftop ownership or permission from housing society.
- Good credit score for contract approval.
- Sufficient rooftop space for solar installation.
Financing Models:
- Flat Lease Payment: Fixed monthly rent.
- Performance-Based Lease: Pay only for units generated.
- Hybrid Options: Base rent + generation-linked charges.