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Paying for Solar: Know Your Options

Aug 26, 2019

Paying for Solar: Know Your Options

There’s more than one way to pay for solar — and with the right financing, it can be easy! Enphase is here to make sure you understand your available options when you’re looking to finance a solar project.

Cash

It’s the simplest method for financing a solar system, and the quickest option for you to see a return on your investment. By purchasing your system with a cash payment, you immediately own the system, so you are able to receive all available tax credits and deductions. But it’s also a big upfront expense — and the downside is that as the owner, you are responsible for all repairs and maintenance to your solar system.

Loans

Going through a lender of your choice is perfect if you lack the savings for a cash purchase of a solar system but still want to own your system. With loans, you can own the system with little to no money down, while also saving on your energy bill. Loans are offered by both installers and independent lenders and come in two types:

  • Unsecured loans: These loans have the benefit of allowing you to quickly finance your project with zero money down and without the use of collateral.
    • Requires a good credit score for approval
    • Has a higher interest rate than a secured loan
  • Secured loans: Unlike unsecured loans, secured loans require an asset (usually your home or solar system) as collateral.
    • Often have a lower interest rate
    • The interest paid on these loans can be tax-deductible
    • Often considered to be the preferable loan option

Leases and Power Purchase Agreements

If you’re looking for a less expensive gateway to solar that requires little to no maintenance, then leasing a solar system may be a good option. With leasing, your solar provider owns your system and rents its use to you at a below-market energy rate with little to no money down for installation. Your savings will be less than buying the system through a cash or loan payment, but with leasing, the solar provider carries the responsibility of maintenance and repair. With a PPA (Power Purchase Agreement), your solar provider still owns your solar system, but instead of a set monthly payment, like with a lease, you will be expected to pay the total cost of the electricity generated by your system at a fixed per-kilowatt-hour rate — this is still generally lower than average market rates for an energy bill. Lease payments are made monthly with a typical contract spanning 20 to 25 years. Can still save you up to 10–30% on your monthly energy bill. Since your solar provider is the owner of your solar system, this disqualifies you from eligible rebates and tax deductions associated with solar. If you sell your property before your agreement is over, you will be obligated to pay out the remainder owed on the contract or transfer it to the new homeowner.

  • Lease payments are made monthly with a typical contract spanning 20 to 25 years.
  • Can still save you up to 10–30% on your monthly energy bill.
  • Since your solar provider is the owner of your solar system, this disqualifies you from eligible rebates and tax deductions associated with solar.
  • If you sell your property before your agreement is over, you will be obligated to pay out the remainder owed on the contract or transfer it to the new homeowner.

PACE Financing

Property assessed clean energy financing (PACE) is a financing program available in certain regions where local governments have set aside funds to help homeowners make clean energy improvements. Like a loan, PACE agreements grant you ownership over your system by paying the upfront cost — allowing you to benefit from tax credits, deductions, and rebates. And, like a cash or loan payment, as the owner you are responsible for all maintenance and repairs to your system.

  • PACE agreements are paid in annual lump sums rather than monthly.
  • PACE is attached to the property, not the owner, so the responsibility of paying off the agreement falls on the new owner if your property is sold.
  • It’s a good choice for property owners who may not have the ideal credit for a loan since the financing amount depends on a tax capacity assessment of your property.

It’s important to consider all of your options when figuring out what financing method works best for you and your home. Take some time to get multiple estimates and consider your expectations for a solar system before committing to any long-term financing agreement.

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