Image: Solar panels on rooftop
Reed Saxon  /  AP
Installers assemble solar electrical panels on the roof of a home in Glendale, Calif.
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updated 1/21/2011 2:15:20 PM ET 2011-01-21T19:15:20

Converting a home to solar power can seem wildly expensive, but new financing makes it possible to generate most of the electricity your household uses at low or no cost.

Companies across the country are increasingly offering home owners the option of leasing a rooftop solar array, and installers say orders are soaring from customers looking to avoid the $12,000-plus cost.

Just as you can lease a car without putting any money down, homeowners in a growing number of states can lease solar arrays for monthly payments equal to the electricity portion of their utility bill — with no down payment.

Just as with the car, you won't own a leased solar array when the lease ends, but there's a key difference: Most solar leasing companies will perform all maintenance and repairs, and they'll remove the system when the lease ends if you don't want to buy it.

Going solar by leasing probably won't save you big money on electricity, but if you're interested in making the switch for environmental or other reasons, here's how leasing works.

WHO CAN PARTICIPATE: You have to own a single-family home. Leases are widely available in California, Arizona, Colorado, Oregon, New Jersey, Pennsylvania, New York, Massachusetts and other states and becoming increasingly available.

"A lot of people are interested in savings," says Jonathan Bass, spokesman for SolarCity, which is credited with pioneering the leasing trend in 2008. "Especially when you get outside of the Denver, Boulder, San Francisco and Portland areas, people are less environmentally motivated and more financially motivated."

WHY THE COMPANIES DO IT: As the owners of the panels that they or their agents install, solar leasing companies receive the 30 percent federal homeowner tax credit plus any state or local incentives the homeowner qualifies for. They pay for permitting and cope with pesky local rules and inspections.

HOW THE NUMBERS PAN OUT: Instead of generating the electricity you use from one moment to the next, a leased solar array feeds into the regional power grid and homeowners are credited on their monthly electric bill.

In some states, like California, the less power your household uses (after deducting for what you generate), the lower rate you pay so it makes financial sense not to generate every last kilowatt you use but to buy some power at the lowest rates.

So leasing companies recommend installing the smallest system that will bring the biggest benefit. With Sungevity Development LLC, an Oakland, Calif., leasing company that contracts with other companies for installation, leasing a 2.8 kW system in town will cost about $67 a month and be guaranteed to generate enough power to wipe out most of an $80 average monthly electricity bill, leaving the homeowner roughly breaking even with an estimated monthly electricity bill of $12. Buying the same system through Sungevity would cost about $16,000 after incentives.

Larger systems are more common, especially in areas where homeowners use more electricity or there is less sunshine.

WHAT ABOUT BUYING? It may be a better deal to buy solar panels and pay up front, if you're going to be in your house a long while and can afford it, says Molly Sterkel, who supervises solar initiatives for the California Public Utilities Commision, the state's utility regulator.

But most homeowners probably can't afford it. Sterkel says that's why new residential leases more than doubled in California in 2009, compared with 2008, when SolarCity Inc. started leasing there.

Leases help make solar make "economic sense," as well as environmental sense, says Bass, the SolarCity spokesman. His company has installed about 10,000 residential solar systems, including about 7,000 that it leases to homeowners.

WHO'S LOOKING OUT FOR CONSUMERS: The downside of that rapid growth — especially during an economic downturn when governments are cutting back on monitoring — can be shoddy work or even fraud, says Gaurav Naik, a principal with GeoGenix in Rumson, N.J., who says calls to his solar installation company's business are skyrocketing.

"So it is a huge concern, how we are going to police this," Naik says of his lightly regulated industry.

But both he and California's Sterkel say leasing companies seem to be bringing the benefits they promise to everyone involved. And Sterkel points out that leasing and installation companies are covered by state contracting laws.

TO LEARN MORE: Sungevity, SolarCity and numerous other companies offer online calculators where you can determine, based on your current electricty consumption, what size system you'll need. And they'll offer a variety of quotes and price comparisons.

If you're concerned about pitfalls, check with your state's utility regulators for rules covering solar installation and financing. And check with business groups that represent the industry, such as the California Solar Energy Industries Association, which offers a helpful checklist for anyone considering a solar lease, at http://calseia.org/residential-leases-and-power-purchase-agreements.html.

WHEN IT'S NOT GOING TO WORK: There are states where residential solar leases can't work because utility companies don't credit home owners for generating power. And there are still lots of states where leasing remains rare.

But Bass says SolarCity plans to double the number of states where it operates by the end of 2011, including some on the East Coast.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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