Eco Brief: Financing Solar

February 23, 2016

As solar arrays have grown more cost efficient and aesthetically attractive, the appeal to average homeowners has risen. Paying for solar has also become much easier with new financing options, allowing more Americans to participate in residential renewables.

Besides paying up front, there are three other ways for homeowners to go solar: Power Purchase Agreements (PPAs), solar loans and solar leases. Choosing a program can be tough, as each one has different benefits. The great thing about these financing options is that no matter if you are making loan, lease or PPA payments, they are more consistent and generally lower than utility rates.

Ownership

solar panelIf you want to own your panels, you can take two approaches: pay all at once or pay over time with a loan. With both of these options you can benefit directly from the Solar Investment Tax Credit (30% off of your investment), rebates and other incentives that accompany solar installations. There are also Solar Renewable Energy Credits, which utilities will buy from you for feeding a certain amount of power into the grid. Many solar companies will even help you with the paperwork to get these incentives.

The downside of ownership is bearing the upfront costs for the panels and the installation, and the long-term costs of monitoring and repairs. Luckily, solar panels are incredibly low maintenance and generally have 20-25 year warranties with the expectation that they will perform for even longer.

If you would rather avoid those initial investments and responsibilities, leasing your panels or getting them through a PPA might be the move for you.

Leasing and Power Purchase Agreements

As with a lease on a car, lease payments for solar panels are like rent. You don’t own the panels, but you make fixed monthly payments to have them on your roof. The array provides your home with energy, which you can either store in a battery or send out to a utility, when you aren’t using it. If you send the energy out, you receive energy credits, which you can use when you need them.

solar panelThe difference between a lease and a PPA is this: with a lease you pay a monthly rate based on expected power generation and with the PPA you pay a rate for the actual power generated in dollars per kilowatt hour. In both scenarios, the company you purchased the panels from will cover the design, permitting, installation, monitoring and maintenance. Many solar providers offer zero-down financing options, as well.

The biggest advantage of a lease or Power Purchasing Agreement is avoiding these upfront costs. You won’t receive the tax incentives that accompany ownership, but the company who sold you the panels will, and they can pass the savings on in the form of lower monthly bills.

Every option gives you the benefit of consistent payments over fluctuating utility rates and the joy of knowing you’ve reduced your carbon footprint. If you have the resources to pay up-front, that will yield the greatest advantage in long-term savings. A loan similarly provides more benefits in the long-run, minus the cost of interest. With a lease and a PPA you are saved the responsibilities and initial costs of ownership, but you pay a premium for it, making these options more convenient, but more expensive in the long-run.

solar panelBefore you make a decision, you should first get a consultation to see how suitable your home is for solar and to compare your utility rates with solar financing options. Whether or not your home gets a lot of sun, you could save a huge chunk of your electricity bill with solar and even cancel it out completely.

-Aidan Kelly

Photo Credit: Flickr/Michael Coghlan, Flickr/mjmonty, Flickr/jonsowman

 

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