Instead of paying Hawaiian Electric Co. for electricity, local residents can pay Vivint for the electricity generated by solar panels installed on their rooftops for 20 years in what is commonly referred to in the industry as a solar leasing arrangement.

“These are very new financial products,” said Joseph Saturnia, president of Honolulu-based Island Pacific Energy. “Compared to leasing a car and all the regulations that came to pass in regards to all of the abuses that existed in the auto leasing business, we just haven’t come to that point yet on residential solar leases.”

Other companies known for such agreements include SolarCity and SunRun, large national firms that also have operations in Hawaii. None of the money the customer pays during the course of 20 years goes to purchasing the actual system.

Leasing agreements have come to dominate the solar market during the past couple of years. Their proponents say they are enticing for customers because they offer a simple way to switch to solar and save money on electricity. The homeowner doesn’t have to hassle with claiming tax credits or maintaining the system. But critics say the contracts can carry hefty risks.

For homeowners who lose a job, get hit by medical bills or go through a tough financial spell sometime during the life of the contract, the financial penalties of missing an electricity payment can be severe. If you can’t pay your bill or want to cancel the contract, Vivint can charge you $7 per watt for the system, which you will then own. The $7 watt cost, which equals $28,000 for an average size system, is the retail value of a solar array, according to Daniel Reed, a Vivint sales manager for Hawaii.

However, you’ve lost the chance to take advantage of generous federal and state tax credits that can reduce that cost to $10,000 because Vivint has already tapped the incentives.

Reed conceded that it's not a good deal for someone seeking to purchase the system outright, and said that imposing the buy-out penalty was the least attractive option for Vivint.

“It wouldn’t be someone being 30 days late and us saying you have to buy the system,” he said. “It would be a last resort. The intention is to have people purchase power from us for 20 years.”

Vivint, as well as other companies that offer the solar leasing program, say it offers a great deal to customers who can save money on their electricity bill from Day One, without paying anything upfront.

“The (lease agreement) is a wonderful, wonderful product,” said Reed. “When looking at all of the data points and factors, it’s an incredibly smart financial system.”

But not everyone agrees.

Saturnia said that entering into a financing arrangement to pay for a system is far better for consumers. He said it's common to offer zero-down financing deals and that a system can be paid off in less than four years from the savings on your electricity bill. After that, you are paying nothing for the electricity generated from your solar panels.

There are other details in the contracts that consumers should be aware of, said Guy Akasaki, CEO of Commercial Roofing & Waterproofing Hawaii, a Honolulu company that installs photovoltaic systems.

"They don't explain it to people, so that's why a lot of these guys get stuck," he said. "They don't tell them the other side. The other side ticks me off."

The other side includes some important details.

Vivint isn't regulated by the Hawaii Public Utilities Commission and the rates aren't subject to review.

Its contracts start off at 25 cents a kilowatt hour in Hawaii, where residents on Oahu are paying about 34 cents per kilowatt hour for electricity. Neighbor island residents pay more.

But Vivint can raise that rate by about 4 percent a year, according to the terms of the contract, and by the end the cost could be about 50 cents a kilowatt hour.

Reed said that the increase actually serves as a cap on how much Vivint can raise rates, making it a consumer protection measure.

Other aspects in the fine print of the contract that consumers should be aware of include:

• If you need to do repairs on your roof, Vivint will charge you $500 to remove and reinstall the system.

• You must pay for all of the electricity generated by the solar panels, as opposed to how much electricity you use every month. So if you are out of town for a month, you still have to pay for the electricity. And you should make sure your system isn't over-sized, or you will be paying for a lot of electricity that you aren't using.

• If your roof catches fire and burns down your house or injures someone because of a faulty installation, Vivint can't be liable for more than "the amount you have paid for the energy produced by the system." If you have only had your system for a few months, this could be less than $1,000.

• If you try to sell your house and the new buyer refuses to take over the solar contract or Vivint decides that the new owner is deemed uncreditworthy, Vivint can charge you $4 per watt as a relocation buy-out option.