Your Options to go Solar
Jameson Harmon
Let's delve into the differences between solar financing, cash payment, and leasing (also known as Power Purchase Agreement or PPA).
Solar Financing
Definition: Solar financing refers to the various methods by which homeowners or businesses can pay for solar panel installation without having to pay the entire cost upfront. This can be through loans, solar leases, PPAs, or other financing options.
Loans: Just like any other loan, a solar loan allows you to borrow money to pay for your solar system. You then pay back the loan in monthly installments, with interest.
Advantages:
Ownership: You own the system from day one.
Tax Credits: You can benefit from federal or state tax credits since you're the system owner.
Increased Home Value: Owning a solar system can increase the value of your home.
Disadvantages:
Interest: You'll pay interest on the loan, which can add to the total cost of the system.
Credit Requirements: You typically need a good credit score to qualify for a solar loan.
Solar Lease: This is where a third party owns the solar system, and you lease or rent the system for a set period.
Advantages:
No Upfront Costs: You don't have to pay for the system installation.
Maintenance: The leasing company is often responsible for maintenance and repairs.
Disadvantages:
No Tax Credits: Since you don't own the system, you can't claim any tax credits.
Fixed Lease Term: You're bound by the lease term, which can be 20 or even 25 years.
Cash Payment
Definition: This is the most straightforward method of paying for a solar system. You simply purchase the system outright with cash.
Advantages:
Ownership: You own the system outright from day one.
No Monthly Payments: Since you've paid for the system in full, there are no monthly payments.
Tax Credits: You can benefit from any available federal or state tax credits.
Maximum Savings: Without interest or additional fees, you can achieve maximum savings over the life of the system.
Increased Home Value: A solar system can increase the value of your home.
Disadvantages:
High Upfront Cost: The initial investment can be substantial.
Maintenance Responsibility: As the owner, you're responsible for any maintenance or repairs.
Leasing (PPA - Power Purchase Agreement)
Definition: A PPA is a financial agreement where a third-party developer designs, permits, finances, and installs a solar energy system on a customer's property. Instead of paying for the solar system itself, the customer buys the power generated by the system at a predetermined rate.
Advantages:
No Upfront Costs: You don't pay for the installation of the system.
Lower Energy Rates: Typically, the rate you pay for the solar power is less than the local utility's rate.
Maintenance: The PPA provider is responsible for system maintenance and repairs.
Flexible Terms: Some PPAs offer the option to purchase the system later.
Disadvantages:
Long-Term Agreement: PPAs typically last 15-20 years.
No Ownership: You don't own the system, so you can't claim tax credits.
Variable Rates: Some PPAs have rates that increase over time.
Conclusion
Choosing between solar financing, cash payment, and leasing (PPA) depends on your financial situation, long-term goals, and personal preferences.
If you have the cash on hand and are looking for the highest return on investment, a cash purchase might be best.
If you want to go solar without the upfront cost and are okay with not owning the system, a lease or PPA might be the right choice.
If you want the benefits of ownership without the upfront cost, solar financing through a loan might be the best route.
Regardless of the option you choose, going solar can be a sustainable and economically beneficial decision. Before making a choice, it's essential to consult with a financial advisor and solar provider to understand all the implications and benefits of each option.