Adding solar panels to your home can provide many environmental and financial benefits. In fact, not only do they lower or completely eliminate your electric bill, but they also increase your home’s value. However, solar systems are not cheap. Thus, there’s a big chance you might wonder — what are my solar financing options? Luckily, we’ll explore the three main ways you can purchase solar panels and enjoy this clean and affordable energy source.
Naturally, the first and most obvious way you can get solar panels is to buy them using an upfront cash payment. This provides one of the best returns on investment and allows you to maximize your savings from using solar energy.
Think about it this way — if your solar energy system generates 100% of your electricity needs, then purchasing it is similar to paying for at least 25 years’ worth of electricity. That way, you don’t have to worry about future energy rate increases, and you’ll also be able to take advantage of all the financial incentives and rebates.
But, as mentioned earlier, solar energy systems are quite expensive. Generally speaking, you’ll need to pay anywhere between $9,000 and $11,000 for a 5 kWh system. Fortunately, there are many incentives and rebates that can reduce the cost of solar panels, such as the Federal Solar Tax Credit.
If you can’t afford to purchase your own solar panels, you can apply for a solar loan. This financing option allows you to buy and install your own solar energy system with little to no money down. Sure, you’ll need to pay a specific amount of money each month. However, it is often lower than what you would pay for a regular energy bill. Simply put, if you can afford to cover your monthly electricity bill, you can most likely afford a solar loan.
Although loans might look similar to leases or PPAs, they have one key difference: with a loan, you own the system. Therefore, you will be eligible for incentives and rebates, but you’ll also have to handle any future maintenance costs.
PPAs and Solar Leases
Power purchase agreements and solar leases have played a vital role in the growth of the solar industry. They both involve a third party, which installs and owns the panels on your property and then sells you the generated electricity at a specific rate. With these financing options, you’ll lock in a set rate for energy for the next 20–25 years, which is usually much lower than the local bill prices. And, at the end of the contract, you can either extend it, purchase the panels, or have them removed.
Until recently, PPAs featured an increasing payment scheme, meaning that each year you would pay more for your energy. But now, most companies lock in a specific rate for the entire contract period, making PPAs more consumer-friendly.
It’s important to mention that, since a third party owns the solar energy system, you are not responsible for maintenance. Thus, there should be no extra costs in the case of accidents or other failures. However, while you’re not eligible for rebates or financial incentives, the company that owns the system is.
In addition, while properties with solar systems are more valuable, that’s not really the case for leases or PPAs. That’s because the property owner will have to continue the contract or lose the benefits of solar energy. But despite these disadvantages, PPAs and solar leases are great options for those who want the benefits of solar energy but can’t afford their own system.
So, Which Financing Option Should I Choose?
As energy experts, we always think about the most cost-effective way for people to get solar panels. However, the best financing option varies on a case-to-case basis. On the one hand, if you can afford solar panels, the up-front payment is always going to provide a great return on your investment. On the other hand, solar loans are better if you want to spread your payments over a period of time. And if none of these options meet your budget, you can choose a solar lease or PPA and enjoy lower energy bills!