Tesla solar renting program: What you need to know

Tesla discontinued the solar rental program it initially launched in 2019. The program was a return to Tesla's SolarCity roots, with a unique twist on the product that made SolarCity the leading national installer of solar before its acquisition by Tesla. Learn more about other options for going solar with Tesla here.

NOTE: The Tesla solar rental program is no longer available.

Generally speaking, two primary methods for financing solar are customer-owned or third-party-owned. In a customer-owned installation, you purchase your panels outright, either with an upfront purchase or a solar loan. With a third-party-owned installation, a solar company installs solar panels on your property. It retains ownership of the equipment while you pay monthly for the solar power produced by the panels.

Tesla's solar rental program was a new twist on the traditional third-party ownership agreement. Instead of signing a 20-year contract for a solar $0-down lease or a power purchase agreement (PPA), the Tesla solar rental program allows you to install solar with no upfront cost and no long-term contract commitment.

The Tesla solar rental program offered customers in six states–Arizona, California, Connecticut, Massachusetts, New Jersey, and New Mexico–three pre-set options for installing solar on their homes:

• A small, 3.8 kilowatt (kW) installation for $50 per month;

• A medium, 7.6 kW installation for $100 per month;

• And a large, 11.4 kW installation for $150 per month (note these costs are higher for California residents).

For a size reference, in 2018, the average system size installed in the US was 7.6 kW (according to SEIA), while the average EnergySage solar shopper received quotes for 9.6 kW systems.

When first introduced, Tesla included a $1,500 solar panel removal clause. However, they updated the terms of the rental program to remove that cancellation fee, meaning the rental program truly has no long-term commitment.

The rental program was a shot in the arm for Tesla's struggling solar business. Since acquiring SolarCity, which was once the largest residential solar company in the US, Tesla has slowly been phasing away from the solar market. Tesla's quarterly solar installations dropped from 93 megawatts (MW) in Q3 2018, to 73 MW, to 47 MW, and, finally, to 29 MW in Q2 2019.

This came about as Tesla moved away from traditional residential solar marketing practices, quickly introduced solar purchasing to their electric vehicle stores, and then moved the entire solar business online. The Tesla solar rental program has the potential to make solar more accessible to a broad group by pairing no upfront cost with no long-term contract.

The short answer: yes, but not as much as you would save by owning your solar panels (a fact that Elon Musk has acknowledged in the press since the rental program's launch). The longer answer? It depends.

The amount of money you could save with the Tesla solar rental program primarily depends on where you live, influencing two key factors: solar electricity production and the price you pay for electricity. The amount of electricity produced by solar panels varies dramatically across the six states where the Tesla solar lease program is available, with the same size solar system having nearly 40 percent more electricity in New Mexico than in Massachusetts, according to PVWatts data.

Given that the monthly cost of rental solar panels is the same in New Mexico and Massachusetts, solar shoppers would receive more bang for their buck from a production standpoint in the Southwest than in the Northeast.

The other key component of determining whether the Tesla solar rental program can save you money is how much you pay for electricity. Solar saves you money by helping you avoid a portion (or all) of your electricity bill. Since the cost of electricity varies across the country, it's important to know how much electricity your panels will produce and how much you would have paid for electricity if not for your solar panels.

For instance, although you would receive more solar production for the same price in New Mexico than in Massachusetts, the cost of electricity is much higher in the Northeast. As a result, the savings from the rental program–i.e., the cost of purchasing electricity from your utility versus the monthly cost of the rental–might be higher in Massachusetts, even though the panels produce less electricity.

Although Tesla no longer includes a panel removal fee, if they were to re-introduce it at a later date, here is how to calculate how much you could save by joining the program: if you stand to save an average of $30 per month from the solar panels, or $360 per year, you'd need to keep the solar panels for about five years to ensure that you break even (by saving enough on electricity bills to offset the cost of the panel removal fee.)

There are several key questions we encouraged homeowners to ask before participating in the Tesla solar rental program:

1. What solar equipment is used?

There is a wide variety of quality and performance across solar panels, which come at different price points. Knowing what equipment is installed on your roof may help you determine whether you're getting a good deal and the likelihood that the panels will continue performing for a long time.

2. Are you okay with not receiving the ITC and other incentive benefits?

One significant aspect of owning your solar panel system is receiving the full benefit of the solar investment tax credit (ITC) and checks in the mail for any rebates or performance-based incentives in your state. In this case, Tesla receives those credits since they own the system.

3. Will your monthly costs to rent increase in the future?

Early looks at the Tesla contracts indicate that they can increase the monthly cost of the rentals in the future. It's essential to know how frequently and by how much they can increase your monthly fee; this will help ensure that you don't end up paying more for solar than you would for electricity from the grid in the future.

The Tesla solar rental program was an exciting new twist on the old third-party ownership model that allows people to go solar without putting down any money upfront. However, third-party ownership is not the only way to go solar while paying zero down.

In fact, over the last couple of years, solar loan providers have begun to offer $0 down payment loan options for financing solar. Interested in owning solar but prefer not to pay for the panels upfront? Register for a free account on the EnergySage Marketplace to receive custom solar quotes from local solar companies.