In Part 2 we will peel back some more layers of the MyPower package by focusing on the financing. Make sure you have read about the product in Part 1 of the review if you haven’t yet.
In 2015, the solar industry is shifting away from the unfairly priced lease/PPA model to loan financing. MyPower does indeed provide loan financing, but you get the impression it looks a lot like a Power Purchase Agreement (PPA). Reading through their 34-page contract will not clear this up for you (a concise solar contract should cover everything in 3–5 pages – this contract takes fine-print to the next level). Payments are made to SolarCity based off system production at an “equivalent rate per kWh” that increases 2.9% each year. These variable payments (due to being based off of production) are applied to the loan as any mortgage payment would be. The variable payment structure is set up with the goal of having the system completely paid off after 30 years. However, if the solar system doesn’t hit the “Expected Annual Production”, which the monthly payments are based on, it is possible to still owe thousands of dollars at the end of 30 years. The power production guarantee is considerably lower than the “Expected Annual Production”, making this an entirely possible scenario. The contract has a clause called “Variance of Loan Term” which discloses this possibility. It explains that in the event there is a remaining balance at the end of the Loan Term, MyPower will provide a refinance option for the outstanding balance.
The financing has another ingeniously deceptive twist. By charging you a low “equivalent rate per kWh” upfront (and then increase it by 2.9% each year), most of your initial payments will go toward interest. As the rate increases over the years, you start paying off more of the principal. Loan structures are typically setup this way, to pay more interest upfront, but by increasing the payments with an escalator, it completely skews the payback dynamic. The customer ends up paying a much larger amount toward interest and ultimately thousands more than would have been paid with a conventional flat monthly-payment financing option. With this payment structure, the effective APR ends up being almost a full percent more than the 30 year stated rate.
MyPower Review Conclusion
SolarCity is a company with a very strong brand in the solar industry. They offer an industry leading warranty, but their prices are well above market, and the MyPower financing option is structured to keep homeowners making ever-increasing payments for three decades – and sometimes beyond. The numbers speak for themselves:
6.5kW solar system
SolarCity MyPower System Cost: $33,150
Lifetime payments (tax credit used): ~$50,550 (30 year loan)
Avg. Cost Per kWh: 17.3 cents (30 years)
Avg. Payments: $140 (30 years)
Typical Installer System Cost: $23,400
Lifetime payments (tax credit used): ~$22,310 (12 year loan)
Avg. Cost Per kWh: 9.3 cents (25 years)
Avg. Payments: $155 (12 years)
It’s hard to justify paying more than double for a longer warranty. For more insights on going solar, check out the rest of the Pick My Solar blog here.