A complete investigation into how our solar customers are going solar in our mature solar markets.
Homeowners shopping for a home solar system will want to understand the different purchasing options available to them. When receiving an estimate from a solar company, it is common to be led towards the installer’s preferred financing method. Whether the financing plan you have been presented with is best for you or not, it’s important to first educate yourself on what is available as a homeowner so you can make the most informed decision.
What is “free” solar?
According to SEIA.org, there have been 72,900 solar installations in Pennsylvania, 198,614 solar in New Jersey, and Florida continues to rise above with 245,503 solar installations to date. The fact is, the majority of these solar customers did not outlay a significant amount of money for their installation. In fact, you have probably heard terms like “free solar,” and “no money down” solar, and in a sense that is what the majority of these systems are – a solar panel system that was financed.
“Free solar” is not a scam, but the phrasing and marketing of this financing method can sometimes be misleading. All “free solar” means is that the system was installed without laying out any capital. Instead, the installer pays for the installation themselves. The installer is then reimbursed by the financing company for their work, and the homeowner is left with a monthly payment to that financing company. In most scenarios, this should be a win-win for all parties involved.
At Public Service Solar, pricing for our solar installations start at $2.39/watt and top out at around $3.52/watt for a standard roof mounted solar installation. For our customers, their average electric bill is approximately $200/month. This would mean, in order to offset their electric usage, they would need to install a system that is at least 12.5 kW in size for a price tag of $37,500 in order meet their needs. Of course not everyone has or wants to spend that kind of money, and that is where solar financing can fill the gap.
What solar financing options are available to homeowners?
Besides purchasing a system outright, the available residential solar financing options to homeowners in NJ, PA, and FL include solar loans, solar leases, and solar PPAs.
What are solar loans?
Solar loans are a common way to go solar and the solar financing method preferred by Public Service Solar for our clients. With a solar loan, a homeowner can go solar for no money down and pay monthly for their system while actually owning the system and still saving money over time.
- Solar loan benefits
With a solar loan, the homeowner owns their solar installation which makes them eligible for all the solar incentives available. With ownership, in addition to all the solar energy produced by the system, the homeowner is entitled to the 30% Tax Credit (ITC) for themselves, and even SRECs (in NJ and PA) for 15-years. These are important financial incentives that can be forfeited with other financing options like a solar lease or solar PPA.
Additionally, solar loans can have flexible terms ranging from 5–25 years, competitive interest rates, no prepayment penalty, and are unsecured – meaning there is no financial lien on the home but rather on the solar equipment itself.
- Solar loan drawbacks
Some homeowners prefer the production guarantees and maintenance warranties that come with other solar financing products over solar loans. However, as a Panasonic Elite Dealer, a Public Service Solar installation comes with the Panasonic AllGuard warranty which covers the product and performance of your solar system from top to bottom for 25-years. This includes solar panels, inverters, and racking with labor coverage.
What are solar leases and solar PPAs?
Solar leases and solar PPAs have more similarities than differences and are often interchangeable. With both programs, the homeowner does not own the solar, the solar equipment is installed and then rented. A solar lease is similar to a car lease. You pay monthly for the system and benefit from the monthly electric savings. The main difference between a solar lease and solar PPA is that a PPA is a Power Purchase Agreement. This means you are paying for the solar power produced by the system at a set kWh price while a lease is based on a dollar amount instead of a set kWh rate.
- Solar lease/PPA benefits
Solar lease/PPA arrangements are a great $0 down solar option for those who do not qualify for the 30% Tax Credit which has substantial implications in the economics of a $0 down solar loan. Solar lease/PPAs also come with production guarantees ensuring the system is doing what it is supposed to with financial compensation should the kWh production not meet the agreed upon amounts. Finally, they are designed to save you money and should be installed using quality solar equipment.
- Solar lease/PPA drawbacks
Solar lease/PPA programs are notorious for starting out at a low cost, saving the homeowner money in the first years, and then the monthly price starts to increase every year. This increase in price overtime is known as an escalator. Oftentimes, the homeowner is unaware of the compounded impact of an escalator clause. Historically, like most things in the world, utility prices have continued to rise over time. The average price of electricity for residential electric customers in Pennsylvania is .181 cents, New Jersey is .177 cents and Florida is .152 cents. Financing solar can be an amazing long term cost saving proposition because of the long term set rates, but only when those rates do not increase a significant amount more than utility inflation. When done correctly, solar should be like locking in the price of gasoline for your car for 20 years.
Other drawbacks could include any possible issues with the transfer of ownership of the system, limitations on choices in solar equipment, and possible servicing issues if the installation is completed by a large national corporation without a local and available service department.
What can I finance with my $0 down solar program?
A solar lease can be quite limited in what you can finance as keeping the cost as low as possible is paramount in seeing long term savings although some programs have battery add ons available. A solar loan on the other hand can offer financial support for a wide array of solar energy related site improvements. So what qualifies?
- Solar installation – Including any home electrical upgrades needed to support the solar installation.
- Battery storage – Battery storage can be financed with a solar loan, and battery storage even qualifies for the 30% Investment Tax Credit (ITC). Battery storage is also often available in many solar lease programs.
- EV charging – EV charging can be included in the solar financing program and allows the homeowner to charge their vehicle using solar energy.
- Roofing – Sometimes there are site upgrades that are needed to support solar equipment which is designed to last 25 + years. It is no wonder that roofing is a common need for homeowners and something that falls under the coverage of most solar loan programs.
- Tree Work – A productive solar installation requires clear solar access and often times more solar access than a homeowner might expect. In some cases, tree removal or trimming may be necessary to improve the solar access and ultimately the production of a solar installation. Tree work can qualify for solar financing as it can be an essential site upgrade for solar energy.
How do I qualify for solar financing?
Verify your site: You can find out if your home qualifies for solar online using our free Google Project Sunroof tool. This tool can provide an instant estimate by comparing your available roof space with the available incentives in your area and your home’s average monthly electrical demand. This process is free, easy, and can be done in just a few minutes on your phone or computer.
Credit qualify: In order to be qualified for solar financing you must complete a credit application. There are a variety of financing companies with different credit requirements but generally they are looking for a high credit score (over 660) and a low debt to income ratio.
You can apply now (Plan 4780) for financing ahead of time and enter the conversation with your solar company with confidence.
What about purchasing solar outright?
Solar financing is just one way to go solar on your home. Some customers happen to be in the position to purchase their system outright. In this case, payments are made to the solar installer in milestones throughout the installation process with a final deposit reserved for the completion of satisfactory work. With purchasing outright, like a solar loan, the homeowner is entitled to all the available solar incentives and all the electricity produced by the system for the system’s lifetime. Most homeowners purchasing solar will be motivated by a return on investment (ROI) with the environmental benefits being a nice bonus. Homeowners in NJ, PA, and FL can expect to meet their ROI in as little as 5-6 years.
The return on investment is calculated in three main ways:
- Electric savings through Net Metering which includes the avoided utility cost increases over time.
- Solar Renewable Energy Certificates – SRECS (in NJ and PA).
- The Solar Investment Tax Credit (ITC).
Whether the solar system is owned through an outright purchase or through a solar loan – ownership is ownership. Beyond the cost saving advantages, homeowners who own solar can expect an increase in their home value with the addition of a home solar energy system. According to a study by Zillow, homes with solar sell at a 4.1% premium over non solar homes.
Conclusion
Solar is not a one size fits all option. Some may have the money upfront to purchase the system and are happy to do so. Others, whether they have the capital or not to invest in solar, opt for the savings and potential positive cashflow through a solar loan. And some, who may not qualify for the tax credit or simply prefer not to own, may find a solar lease or solar PPA to be beneficial for them.
Above all, a homeowner should never feel pressured towards going solar in one form or another. Solar is supposed to be a positive thing. Both financially and for the environment. A solar customer should be able to compare options, feel like all their concerns and questions are heard, and feel comfortable with their decision. Contact a local, reputable installer to learn if solar financing is right for you.
