Buy Solar Panels: What are your best options?
Buy or lease solar panels? What are your options?
Solar energy is becoming one of the fastest growing and most trusted energy sources in the United States. The CEO of Duke Energy, one of the country’s largest Utilities recently commented: “If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using us for backup,”.
What is even more promising is that the costs of solar is coming down and that solar financing options are better than ever. Solar power is now an affordable and solid investment. The technology is proven. The returns are real. And freedom from utility bills is possible.
Many people are confronted with the question of how to finance solar, “Should I lease or buy a solar system?”
Here are some questions to consider:
OK, how do I know if I should buy solar panels?
Here are some basic tips that will help you determine if solar is worth looking into. First off – you have to own your home. Then – do you pay more than $100/month in electricity bills? Do you have air conditioning? Do you have a pool? Do you have more than one refrigerator? Do you live in CA, HI, AZ, NV, MA, NJ, NY, CT, MD, DC, MO, CO, NC?
If you answered yes to more than two of these questions, chances are solar can save you money.
First question: Should I Lease Solar Panels?
A solar lease works much like any other lease.
To start with, you enter into a lease agreement and pay a fixed monthly price for using the solar equipment owned by a solar company. So you just use the equipment to harness solar power while someone else owns and maintains it. Proper maintenance of solar panel is an overhead for users, but timely maintenance is highly necessary to bring down the cost of solar energy produced over a period. In the case of solar lease, a leasing company takes care of maintenance of solar equipment and you just don’t have to undergo this overhead.
Additionally, by entering into a long-term contract, your monthly solar energy bill is designed to be much lower than your monthly electricity bill, with little or no up front cost. So leasing a solar panel can be a better option if you don’t have a huge amount of money for a cash purchase. The big considerations here are 1) making sure you sign a deal with the right company and 2) the fact that over the long run, buying vs leasing is going to save you a lot more money.
Solar power purchase agreement (PPA) vs lease:
Both solar lease and solar power purchase work more or less the same. In the case of solar power purchase, someone owns and maintains a solar system on your property and you pay for the solar energy it produces. When you choose to buy solar power, you can go for a prepaid plan or pay a fixed monthly amount regularly. Prepaid option is nothing but paying upfront for all the power you need for a certain period for a pre-negotiated rate. Since the payment is done in advance, the average monthly rate can be less than what you pay in a solar lease.
When you have optimal energy needs, solar lease is the best choice, and when you need regular supply of huge amount of energy, it is better to purchase solar energy. In both the cases, a leasing provider is the one who manages the Solar Renewable Energy Credits, but you can use those credits in your contract agreement to bring down the cost even further.
I like the idea of buying solar vs leasing, but I’m not interested in the technical side of things…
Leasing a solar system is a very user-friendly and easy way to get solar on your home. With a decent credit score and electricity bills from the past 12 months, you are more than ready to get outfitted with a system. What’s more, the installation company will often offer such a system with no money down and you can start saving on your electricity bill right away!
I’m not sure how long I will own my home. Is leasing solar still a good idea?
If you plan on owning your home for a long time, the answer may well be that it is better to own your system. If a qualified installer builds a quality system, your home will be running relatively maintenance free for a long time on solar energy. Solar panels are rated to function at a high-efficiency for over 25 years – and panels have been producing energy at some locations for well over that amount of time!
How do I pick the best lease option?
Leasing a solar system is essentially trading your utility company for a solar company. Instead of paying bills to your utility company, you will now pay bills to your solar company – but your bill should be less than your utility bill. The main advantage with a lease is that it’s no money out of pocket, and less worry about long-term reliability. You should consider the reputation and experience of the solar company. You should compare downpayment, if any, and monthly payment amounts. And you should review any exit clauses – what happens if you sell your home?
I’d rather buy solar vs lease, and own the system. What’s the best way to buy a solar power system?
There are two main options for buying solar panels: you can buy them outright with cash or you can use solar loan. Cash is quickest way to go solar, and like all cash investments, if you can afford it, it’s probably the cheapest overall way to go solar. In many cases you will receive rebates or tax incentives that will recoup part of the cash investment within the first year. You will probably be surprised to see a relatively quick return on investment through utility bill savings – as quick as 4 years or less in some cases!
Alternatively there are numerous loan programs that you can use to finance a solar power system. You may be able to take out a home equity line of credit, or you can leverage some of the FHA approved 2nd mortgage programs that allow you to finance your solar power system with a 2nd mortgage. This second option also allows for a balloon payment to be made with any incentives or federal tax credits to quickly lower your monthly payments. Often this approach will yield a net savings from day one and after the term of the 2nd mortgage your system will be producing free, clean energy!
If I choose buying solar panels for my home, how long will they last?
See our post on this: How long do solar panels last?
Solar panels have been tested in various conditions for decades and have withstood the test of time. Your solar panels will be warranted to produce 80% as much power in 25 years as they do the first day they are installed on your roof. Solar panels have no moving parts and very low maintenance. There may be a few repairs in 10 years time, but with a few small repairs your system should be generating clean energy for a long long time – and for a good part of that it’ll be free!
Image credit: via FlickR under CC license