Recent industry developments have allowed the cost of solar photovoltaic (PV) systems to decrease substantially. Federal, state, and local incentives have increased, helping to lower the payback period dramatically. Additionally, companies have come up with new and creative ways to help you finance your solar installation.
Much like a traditional home improvement decision where a homeowner needs to consider the resale value of the improvement versus the cost. Solar is unique in that there is an added investment benefit. Unlike cosmetic improvements like bathrooms and kitchen remodeling, solar actually results in lower ongoing operational costs. And after the system is paid for, typically 7-12 years, the homeowner has no more energy costs.
There are many options to consider when deciding on the right solar financing program. Considerations include budget, financial goals, tax credit appetite and other factors.
Solar loans are similar to home improvement loans, when a homeowner borrows money from a lender, they agree to pay it back, plus interest, in monthly installments over the loan term.
They can be either secured or unsecured, which results in a wide array of interest rates, term lengths, and credit requirements.
Many solar loans are $0 down and offer immediate returns by saving you money on your electricity bills right away, even as you repay the loan. After your loan is paid, you’ll be enjoying free energy cost for as long as you remain in the home.
With a solar lease, you agree to pay a fixed monthly “rent” or lease payment, which is calculated using the estimated amount of electricity the system will produce, in exchange for the right to use the solar energy system.
Solar leases are similar to renting your solar panel system. You enter into an agreement with the solar leasing company that entitles you to the energy that the solar panels generate for the term of the contract, which is generally around 20 – 25 years.
The solar leasing company owns and maintains your solar panel system, and is thus entitled to the rebates, tax breaks, and financial incentives that are available for the solar panel system.
Power purchase agreements (PPAs) are similar to leases, however with a solar PPA, instead of paying to “rent” the solar panel system, you agree to purchase the power generated by the system at a set per-kWh price.
As with the lease, the PPA company is entitled to the rebates and incentives.
In some states you can finance solar through a Property Assessed Clean Energy (PACE) Program. PACE pays for 100% of a project’s costs and is repaid for up to 20 years with an assessment added to the property’s tax bill.
PACE programs do not reduce equity in your home. If you sell your home, the tax liability is simply transferred to the new owner. Terms typically last for 15-20 years and no credit check required