Oh, the Ways You can Go (Solar)!

Solar Finance Options and Programs Explained

“There are many ways to skin a cat” when it comes to going solar. In our experience, we’ve found that homeowners are often confused about the different options available to them when making the switch and which of them would be best for their situation; this often leads to a hesitance to begin the process altogether. This can be an issue as, no matter how you slice it, solar paneling is almost always more cost effective than utility-based electricity.

Here at Spartan Solar, we believe in providing clear and consistent information on how a solar panel system will affect you and your home once installed, and today’s entry will focus on the different options available to homeowners across the US looking to make the switch to renewable energy.

The Residential Solar Argument Made Simple

There are a million explanations for what solar is and how it affects the average homeowner in the US, but most of them are confusing and make it difficult to ascertain exactly what a homeowner is getting out of a system when they get one installed. We’d like the make the objective of solar for homes as simple as possible:

Solar paneling is a different way to pay the costs of electricity.

That’s it. Solar is not a way to “get off the grid”, avoid power outages, or store power for later. While those things often go hand-in-hand with a solar install, they are separate from the primary function of solar which is to lower the costs associated with a homeowner’s electricity bill.

The Primary Ways to Go Solar for Homeowners in the US

Given that solar is a different way to pay the power bill you have to pay if you want to live in the states (unless you’re Amish!), there are a few ways to tackle that cost - unlike the utility’s rate, which is one choice: pay a premium rental fee every month for power. 


The financial options for solar can be separated into 4 main categories: cash, loan, lease, and PPA.

Cash

The cash buyout option for a solar panel system is the most straightforward. The panel installation company will provide a quote for the cost of all parts, labor, and warranties combined into one sum total that can be paid in full by installation. This is likely the option people are thinking of when they say “solar is expensive”, as the total price for a solar panel installation package is often comparable to a new car. Once you have a system, however, you never have to pay for electricity generation from the local utility again if the system was built properly.

Loan

Traditional financing can make the large perceived cost of a solar package more manageable by spreading the cost across a long period of time. The most common financing terms in the solar industry are 25 or 30 years, comparable to a mortgage, and have no down payment whatsoever, meaning homeowners usually save on their power expenses on day 1 when switching to solar.

For people who disparagingly say they “don’t want to take on another mortgage” when arguing against going solar, we like to remind them that the function of the mortgage on their own home is to avoid wasting money renting a property and instead owning the asset and building equity on it; the exact same argument stands to be made for electricity by using a traditional solar to finance the asset instead of renting power from the grid.

Lease

A solar lease is a way to reap the benefits of a solar panel system without taking on any ownership of a panel system. Like traditional financing, there are typically no upfront costs of a solar panel lease, and if your property gets considerable sun, the monthly costs of a solar lease are pennies on the dollar compared to the usual going rate for grid-based electricity. For homeowners who struggle to acquire long-term financing, do not have liquid capital required to purchase a system outright, or lack the taxable income required to reap the tax benefits of owning solar, the lease is a perfect option.

PPA

A Power Purchase Agreement (PPA) is a solar option that works similarly to the lease, but instead of paying a monthly cost associated with the solar panel system itself, you instead pay a monthly cost for the electricity the system on your home produces. Because these rates are often much lower than the rates the utility grid charges for the same power, the PPA option is similar to the lease in being a low-to-no barrier to entry solar option for homeowners looking to cut down on their utility expenditure.

When comparing any solar option to the utility grid, homes that get considerable sun will always find the solar choices making more sense financially. To illustrate this, we’ve included some real-world examples below:

DISCLAIMER: ALL values below are example values used for the sake of demonstration. For more exact values as they relate to you, contact a local utility provider for utility rates in your area and a professional solar installer for exact costs associated with a system on your property.

Real-world examples

When comparing any solar option to the utility grid, homes that get considerable sun will always find the solar choices making more sense financially. To illustrate this, we’ve included some real-world examples below:

DISCLAIMER: ALL values below are example values used for the sake of demonstration. For more exact values as they relate to you, contact a local utility provider for utility rates in your area and a professional solar installer for exact costs associated with a system on your property.

Cash vs. Utility

  • Homeowner A pays an average of $200/month in utilities.
  • Over the course of 25 years, including the average rate of electricity rate inflation, this totals $102,685.90
  • Homeowner A can buy a solar panel system to cover all of his power usage for the same time frame for $30,000 from Solar Company B instead of paying the total utility bill above. Additionally, he gets to reap all the tax benefits of going solar.

Loan vs. Utility

  • Homeowner A pays an average of $200/month in utilities.
  • Over the course of 25 years, including the average rate of electricity rate inflation, this totals $102,685.90
  • Homeowner A can finance a solar panel system to cover all of his power usage for the same time frame for $50,000, paying $190/month instead of paying the total utility bill above. The monthly price is about the same, but the monthly costs never go up and the payments go towards equity on the system; at the end of the term, Homeowner A owns the system as if he bought it cash. Additionally, he gets to reap all the tax benefits of going solar.

Lease vs. Utility

  • Homeowner A pays an average of $200/month in utilities.
  • Homeowner A can lease a solar panel system that meets his electricity needs for $150/month. He does not collect the tax credit or incentives, but his billing rate starts lower and increases slower meaning he always saves money compared to doing nothing.

PPA vs. Utility

  • Homeowner A pays an average of $200/month in utilities.
  • Homeowner A can enter a PPA with a solar panel system that meets his electricity needs for $130/month. He does not collect the tax credit or incentives, and has no options to buy out the system in the future, but his billing rate starts lower and increases slower, meaning he always saves money compared to doing nothing.
Choosing the Right Option for Your Home
With a selection of options at your disposal, you may find it a bit frustrating to identify exactly which one is best for you. At Spartan Solar, we believe in providing consistent, transparent information for everyone looking to take advantage of this technology, and we are always ready to chat with you. If it would benefit you to know exactly which program would suit you and your home best, we’d love to identify that together with you.
Calculate Savings
Call Now
READ MORE
Related Articles