A Quick Guide to Solar Financing
Even though the cost of solar power has fallen considerably over the past few years, it's still an investment. For instance, a California resident can expect to pay between $18,000 and $25,000 for a 4-6 kW system, which can be reduced by 30% after applying the federal solar tax credit and perhaps more, depending on which rebates you may be eligible for. These numbers vary quite a lot between states too. Even though the savings that will result over the 25 to 30 year life of a solar power system will more than cover the investment, many homeowners still think twice about investing this much upfront.
Enter solar financing
Of course not everyone can afford to pay for solar panels up front. Attractive solar financing models were developed, which allowed homeowners to go solar at their own pace, which included everything from paying the full amount upfront, to zero-down power purchase agreements.
Here are some of the most widely prevalent financing schemes available...
Solar lease: Solar leases are some of the most common solar financing methods and are available to more than 75% of the American population. Under this solar financing option, an installer leases a solar power system to you for a fixed duration.
The installer runs and maintains the system, and sells you the electricity it produces at a predetermined amount. The draw of solar lease is that you are not required to make any upfront payments, and the monthly repayment fees is typically lower than your current utility bill, allowing you to save money from day one.
Power Purchase Agreements: PPAs are exactly like a solar lease, except you pay a fixed amount for every kWh of electricity generated, instead of paying a fixed amount per month regardless of how much electricity the system produces.
Whether you can opt for a solar lease or PPA will depend heavily on where you live, and which utility you get your electricity from.
Loans: Solar leases and PPAs are attractive options for those who are looking to enjoy using electricity at a highly reduced rate right away. However, owning the solar power system entitles you to the 30% federal tax credit and state sponsored rebates. Not to mention, you can sell your electricity back to the grid via net-metering as well. These incentives can potentially save you more money in the long run.
Home equity loans, where your home's equity is used as collateral are therefore a great solar financing option. The interest rates, which typically range from 2.49 -7.5 percent are often tax deductible, and you can start saving money instantly as the savings due to lower electricity bills exceed the loan repayment rate.
Property Assessed Clean Energy Program (PACE): PACE Program is one of the most innovative solar loans out there. These are available in 31 states so far. Under PACE, you borrow money from a municipality such as your town, state or county, and finance your solar project through it. Repayment of loan is done through an annual assessment on your property tax. Verengo partners with CaliforniaFIRST to offer the PACE program to its customers.
While PACE is great for solar power financing, it can be used for any other energy efficiency upgrade. Also, as the loan is attached to the property, it can be passed to a new owner without issues.
These are some of the more popular solar panel financing options that are currently available. The tricky thing about solar panel financing is that they vary greatly from state to state. In fact, the only real way to know how much you can save, and what your options are, is by getting a free solar quote.
What Can You Save With Solar?
With no end in sight for soaring electricity rates, your switch to solar will secure affordable power for your home & family for years to come.