At over $10,000 or more, a solar installation is still a big investment. If you want to go solar but don’t want to buy a solar PV system with cash, solar pv financing through SolarSME gives you a lot of options. SolarSME can help you understand and choose which options are best for you. These options include $0-down solar energy loans, PPA (Power Purchase Agreements), and leases. Each will help you save money on your electric bill while still allowing you to benefit from producing your own energy.
Solar Loans
Loans for solar panels are a great choice to finance a solar system if you want to purchase it. Most solar energy loans, secured or unsecured, will fund the entire cost of your system. You can borrow such loans through a bank, local entity, or, in some cases, from the federal government. Solar loans can also be part of a home improvement loan and can be rolled into a refinanced mortgage. Since solar systems are known to increase property value,a solar system that was financed through a solar loan will add value to the home at the time of resale. Since it’s not owned by a third party under a PPA or lease, it makes it easier to sell and for a new buyer to purchase.
Points To Consider For Solar Loans
- Using a solar loan to finance your panels can help you save 40% to 70% compared to what you would have paid for electricity over the lifetime of your system.
- Solar loans use the same general framework, terms, and conditions as most other home improvement loans. Some states and counties also offer subsidized solar energy loans with interest rates below the cost of other home improvement loans.
- By financing a solar system with a loan, you are considered the owner, qualifying you to experience the full benefits of financial incentives such as the Federal Investment Tax Credit (ITC). Interest paid on solar loans can also be tax-deductible, which reduces your income tax.
Solar Leases And PPAs
Solar leases and PPAs are other ways to finance a solar installation. They give you a lot of the financial advantages of installing a solar panel system without paying for it up-front or owning it. This is one of the easiest ways homeowners can finance a solar energy system. With solar leasing or PPAs, a third-party finances and owns the system and pays for the installation. You pay a fixed price for the system or for the solar power produced by the system on a monthly basis.
Points To Consider For Solar Lease And PPAs:
- With a lease or PPA, the third-party owner (TPO) will install and own solar panels on your property. In return, you agree to pay them for the use of solar energy for the duration of the agreement.
- Selecting a PPA or lease as a solar panel financing option can help you save 10% to 30% on your electricity bills with no upfront investment needed from you.
- The TPO is responsible for the maintenance of solar panels. At the end of the contract they will either uninstall them or sell the system to you at the fair market value of the system at the end of the contract, like leasing a car.
- Since the TPO owns the solar panel system, it receives the benefit of the incentives offered by the government, the state, and any local utilities and shares those savings with you.
Pros And Cons Of PPA Solar Power Financing Options
Pros
Cons
No initial investment, making solar accessible for most homeowners.
Providers handle maintenance and repairs, relieving the burden from the homeowner.
Lower electricity bills from day one, reducing costs.
Assurance of optimal system efficiency and energy production.
Adjustable contracts provide purchasing options.
Long-term commitment. Contracts often span 15-25 years, limiting flexibility.
No direct tax incentives or ownership advantages for homeowners.
Price increases built into the contract may impact long-term savings.
Specific location requirements may limit installation possibilities.
The homeowner is vulnerable to a renegotiated agreement or loss of maintenance if the TPO goes out of business.
What Is The Best Way To Pay For Going Solar?
The best way to fund your solar array depends on your financial situation and what you want to achieve. The main options are financing it or paying for it upfront. Each has positives and negatives.
If you have a great credit score and/or cash on hand, it might be cheaper overall than financing options. Paying for it up front or financing it with a solar loan gives you ownership and allows you to take advantage of all the incentives, like the 30% Investment Tax Credit and local rebates, directly. However, it also subjects you to the risks of ownership and maintenance that other options don’t.
If you don’t have cash on hand and have a lower credit score, you may still qualify for a solar loan, often at a higher interest rate, or for solar leases and PPAs. These give you the benefits of solar and some of the incentives that the financier uses to bring you solar at a lower cost. Depending on your location and financing agreement, you may have access to additional benefits like net metering. With home solar finance agreements you can get one additional benefit buying them outright doesn’t often come with—a maintenance program.
Buying them outright or financing a solar array with a loan may be less expensive and the quickest way to recoup your investment and start saving money, but it comes with more risks. Financing solar with a lease or PPA may be more expensive but it doesn’t cost anything right away and small monthly payments are easier for many people, plus the third-party owner should maintain the system for you. You should still see your overall energy costs reduce, and they’ll drop further over time.
The best advice is to speak with a well-respected solar installer who will take the time to explain all the options to you as well as how much the different residential solar financing options will cost you. They’ll help guide you to a solution that helps you enjoy the sun in a whole new way!