When making any major purchase or investment decision, we recommend that everyone solicits different options and attempts to compare the advantages and disadvantages of their choices. Here are three of the most popular...
1) Solar Loans
Like any loan, a solar loan gives a homeowner the opportunity to borrow money from a lender for the purchase of a solar system. With this option, the homeowner owns the system. Most solar loans obtained through a solar developer uses the solar system as collateral. If loans are obtained through other financial means, such as a bank, the loan possibly is subject to a lien or security interest held by and defined by the lender. Lenders for solar loans can be banks, credit unions, state programs, utility companies, solar developers or other solar financing companies.
Advantages:
* Homeowner is eligible to receive applicable federal and/or state tax and/or other incentives, such as the Federal ITC tax credit (2020 = 26%).
* Homeowner eligible to receive Solar Renewable Energy Credits (SRECs) which can be sold.
* Homeowner owns the solar system
* In most cases, lower overall cost
Disadvantages:
* Not all homeowners can obtain a loan
* Homeowner responsible for relatively minor costs associated with maintenance and repair of system
* Possible minor increases in insurance costs
2) Solar Lease
A solar lease is a lease of the energy a solar systems produces. This option allows a homeowner to enter into a contract to make monthly payments to a solar utility company in exchange for receiving their electricity produced by the solar system. Lease payments generally escalate annually at a low fixed rate. A typical lease term is 20 to 25 years. The solar utility company pays for the procurement and installation of the system and is responsible for all repairs and maintenance of the system. Additionally, the solar utility company owns the system located on the property using the energy it provides. The solar utility company also owns the SRECs produced by, and the tax incentives related to, the system. There are many variations on the terms and conditions of solar leases and the proposed contracts of each offer should be fully compared.
Advantages:
* Little or no upfront cost to homeowner
* Leasing company responsible for maintenance and repair of system at no cost to the homeowner
* With Sunpower, lease is transferable if home sells to new homeowners
Disadvantages:
* Most leases restrict some property improvements or repairs; for example, new construction that may create shade on the system, roof replacement, home sale, etc.
* Tax incentives may not be available to the homeowner
3) Cash Purchase
Paying cash for a solar electric system is generally the most cost-effective way to obtain a solar system. This options can bring the lowest cost with the greater return on investment (ROI). Like the solar loan purchase, the homeowner owns the system.
Advantages:
* Homeowner is eligible to receive applicable federal and/or state tax and/or other incentives, such as the Federal ITC tax credit (2020 = 26%).
* Homeowner eligible to receive Solar Renewable Energy Credits (SRECs) which can be sold.
* Homeowner owns the solar system
* Higher yield on ROI
* Lowest cost option
Disadvantages:
* Not all homeowners can afford to pay cash
* Homeowner responsible for relatively minor costs associated with maintenance and repair of system
* Possible minor increases in insurance costs