Solar financing is the option for homeowners to instruments like loans and leases to come up with the funds needed to purchase a solar system by paying in installments over time instead of out-of-pocket upfront at the time of purchase.
There are two ways to pay for a solar panel system that you own outright: an upfront, cash payment and a solar loan. A cash purchase of a solar panel system is the best way to maximize your savings from solar. Think of it this way: if your solar panel system is designed to produce 100% of your electricity needs, then if you purchase your solar energy system upfront you’ve just paid for 25 years’ worth of electricity. Pretty cool! You’re insulated from any future electricity rate increases and you’ll receive all of the financial incentives and rebates associated with going solar. Overall, this means you’re likely to see a better return on your investment from solar than if you were to put that money into the market.
The second main way to own a solar panel system is with a solar loan. Solar loans are a wonderful financing option because they allow you to go solar and own the system with no money down, and often at a lower cost than what you pay for electricity at the moment. In other words, solar loans make it so that if you can afford your monthly electricity bill, you can afford to put solar on your roof. Not too shabby!
Solar loans may seem similar to a solar lease or PPA, but there’s one key difference which has two major implications: with a solar loan, you own the system, whereas with a solar lease/PPA, a third party owns the system. This means that with a solar loan, you’re now eligible to receive any rebates and incentives for the solar panel system, but you’ll also be responsible for any future maintenance.
With a lease/PPA, you’ll typically lock in a set rate for electricity for the next 25 years, about 10 to 30 percent below the rate you currently pay for electricity. Historically, leases and PPAs built in an escalator to your payments, meaning that each year you would pay more for your solar than you did the year prior, but recently, the trend has been for leases/PPAs locked in at a specific rate for the entire contract period. What’s more, with a lease/PPA, the third party owner is responsible for monitoring the system and any maintenance on it, meaning there’s always somebody looking out for the well-being of your solar panel system.
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