Best Way to Finance Solar Panels ? Lease, PPA, Loan or Mortgage ...

The cost of a solar panels system is probably the biggest obstacle for people looking to generate their own clean electricity. Nowadays, the total cost of a residential solar system is typically somewhere in-between $15,000 and $60,000.

In the last couple of years, smart and creative payment models have made solar a financially feasible solution for almost everyone. In this article we will look closer at these, and hopefully giving you a sense of direction regarding which option suits you the best.

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These solar financing models will be covered:

Third-Party-Owned Solar Panels

Loans and Mortgages

Community Shared Solar

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Third-Party-Owned Solar Panels

The market for third-party-owned solar has exploded in only a few years. Data from February this years shows that now more than 70% of Californians choose third-party-owned solar (PV Solar Report). The same trend can be seen around the country.

Depending on where you live and what electric utility that you are connected to, either leasing or power purchase agreements is available.

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Leasing

In both leasing and power purchase agreements, the solar company pays and owns the solar system, installation and is responsible for maintenance and repair costs. Depending on the solar company this drastically reduces or even eliminates the upfront costs of solar.

If you choose to lease solar panels, you pay a fixed amount every month independent on how much electricity that is generated.

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Power Purchase Agreement (PPA)

A power purchase agreement is essentially exactly the same as solar leasing, the only difference being that you pay a fixed rate for every kWh the solar system produces every month.

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Loans and Mortgages

With loans and mortgages you pay the full upfront costs and you are the owner of the solar system, which increases the value of your home.

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Energy Efficient Mortgage (EEM)
The federal government offers energy efficiency mortgages that can be used to finance solar panels. An energy mortgage is a mortgage that credits a home?s energy efficiency in the home loan.

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Home Equity Loan

Taking out a home equity loan in your local bank is another possibility to finance solar panels. This finance was typically how people paid for their solar systems in the past.

The borrower uses the equity in their home as collateral, creating a lien against the home and reducing its equity. More households qualify for a loan this way.

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Property Assessed Clean Energy (PACE) Programs

PACE programs are established in some states as a means of financing residential solar. The homeowner loans money for solar from the state and pays back the money with higher property taxes.

Then of course there?s the option of buying a new or old home where solar panels already are integrated and a part of the costs.

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Community Shared Solar

Shading, structure and ownership issues are responsible for that only about one quarter of American homes are actually suitable for solar panels in the first place (NREL)

Shared solar gives the three quarters of homeowners that aren?t suitable for residential solar installations the opportunity to generate clean electricity after all. Put together some solar arrays on an empty piece of land or on a large rooftop in the community and you have a solar garden.

The Solar Gardens Institute (SGI) is helping organize communities to go solar. Visit their site for an overview over already established solar gardens and for more information on upcoming projects.

Shared solar can be both community-owned and third-party-owned (by the utility or an individual company), and which financial model in place depends on several factors. In a typical situation, a homeowner subscribes to a local solar garden and receives energy bill credits accordingly.

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Source: http://energyinformative.org/best-way-to-finance-solar-panels/

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