Typical escalation rates in solar lease contracts generally range from about 1% to 5% annually. This escalation, often called an “escalator,” means that the fixed monthly lease payment increases each year by a preset percentage to account for inflation or rising costs during the lease term, which typically lasts 20 to 25 years.
More specifically:
- Most solar leases include an annual escalator of around 1% to 3%, with common values cited near 2% to 3% per year.
- Some contracts have escalators closer to 2.9% annually, a figure often used in sales pitches to show savings compared to utility rates but which can lead to significantly higher payments over time.
- In rare cases, solar leases can have fixed payments throughout the contract duration without escalation, but this is uncommon.
For commercial solar land leases (where landowners lease property for solar installations), escalation rates of about 2% to 3% per year are typical during the operations phase of the lease, designed to keep pace with inflation over the decades-long contract term.
The implication for homeowners is that while initial monthly lease payments may seem affordable or lower than their utility bill, the annual increase means payments can nearly double by the end of a 20- to 25-year lease, potentially outpacing energy savings.
| Parameter | Typical Range | Notes |
|---|---|---|
| Annual Escalation Rate | 1% to 5% | Most common: 1-3%; 2.9% typical example |
| Lease Term Length | 20 to 25 years | Standard residential solar lease terms |
| Fixed Payment Leases | Rare | Most leases include escalation |
In summary, typical escalation rates in solar lease contracts are about 1-3% per year but can be as high as 5%, and this gradual increase is a key factor for consumers to consider when evaluating the long-term cost-effectiveness of a solar lease compared to other financing options.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-typical-escalation-rates-in-solar-lease-contracts/
