Something new is happening in the “green energy revolution” almost every day. Renewable energy sources are coming online everywhere and becoming more efficient, and new ideas in solar power are revolutionizing the way that individuals and businesses produce and use electricity.

But this explosion of new ideas extends beyond the technology. New concepts in the economics of solar power are opening up new opportunities for people who might have thought that a new solar installation would be too expensive.

One of the most exciting new ideas in the world of solar power that’s come along recently is the “solar lease”. This is basically a way to pay for a solar installation while still lowering your utility bill, just by using the electricity generated by the power of the sun. Solar leases are already available for commercial application in Hawaii and residential solar leases are sure to come soon. It’s a great option for people who might like to spread cost over time, or lower the up-front cost of an installation.

Basically, a solar lease is a way of financing a solar installation based on the potential for future energy production. It’s as simple as leasing a car, but the lease is paid for by the photovoltaics themselves and the resulting total monthly savings. As for the security of the investment over the long term, well, there are few bets as safe as the generating capacity of solar cells in sunny Hawaii.

Here’s a simple breakdown of how it works.

Let’s take the example of a typical residence with favorable conditions such as a good, south-facing roof angle (or the ability to install panels at that angle). Let’s assume that a monthly utility bill from one of the state’s utilities (HECO, HELCO, or MECO) will be about $200. For this scenario, we will assume an installation of a modest system which has the capacity to offset the monthly bill by 75%, resulting in a $50 bill each month. The solar lease payment will vary depending on a wide variety of factors, but it is reasonable to assume that payments would end up being around $100 a month. This means that from the outset of this green energy venture, your household would be saving $50 a month.

There’s another important factor in understanding the value of a solar lease, and that’s the reason why it’s impossible to calculate total savings over the life of that lease. The reason is that energy prices and utility rates will continue to rise, but the lease payment negotiated prior to the original investment will be locked in for the duration. You will continue to save money for years (or decades)—it’s just a matter of how much. The upward fluctuation of prices is particularly pronounced in the state of Hawaii because of the isolation of each island’s generating stations and the distance from the mainland. Solar power generation is a good way to insulate yourself from these swings in utility costs.  

With the ability to generate your own electricity, you might as well have a money tree sprouting in your garden. Under normal conditions, even a modest system will generate enough electricity to reduce your monthly bill by more than the amount of the monthly lease payment, effectively creating the opportunity to install and operate a solar energy system for free.