Everything you wanted to know about solar financing but didn’t know who to ask…

For homeowners thinking about going solar, there are a few different ways of financing a system, including lease financing, power purchase agreements and PACE financing.  It can all be a bit confusing at first but, by the end of this blog post, you’ll be a virtual expert and can assess which is the best option for your home.

  • The Solar Lease:  A straightforward lease, like leasing a car-you make monthly payments and, at the end of the lease period, have the option of buying the system at fair market value, upgrading to a new system or renewing the lease.  At the outset of the lease, some companies (not Sungevity) require a down payment.  Under the terms of the lease, the amount of power your system generates is guaranteed.
  • Power Purchase Agreement (PPA):  A PPA works like a lease but with one small difference:  Instead of guaranteeing how much power your system produces, the PPA bases your monthly payment on the amount of power your system produces.

As you can see, there’s not a whole lot of difference between a solar lease and a PPA.  Under either type of financing agreement, you’ll want to look carefully at the following details which differ depending on the installer:

  1. Is a down payment required?  How much?
  2. Does the monthly payment increase over time?  How much?
  3. How long is the lease period?
  4. What are your options when the lease expires?  (Most leases and PPAs provide some mechanism for buying out the system or transferring it to the new owner).
  5. What services are offered with the system?  Make sure to ask about monitoring, maintenance, insurance and repairs.

What about PACE (Property-Assessed Clean Energy)?

PACE is an exciting development for consumers in areas of the country that are not serviced by installers who offer lease financing or PPAs.  If you participate in a PACE program, here’s how it works:  Using municipal bond revenues and federal stimulus dollars, your city or county pays for your system to be installed.  You pay the system off over time (usually 20 years) through an assessment on your property tax bill.  If you sell your home, the new owner must continue paying off the system.

PACE works a little differently in every municipality and, in many areas, the programs aren’t up and running yet.  You can keep track of PACE developments in your area at pacefinancing.org.

Heads up San Francisco residents, you can use PACE to finance energy-efficiency and water conservation improvements, such as low-flow toilets, solar hot water heaters and insulation.

Now that you’re an expert on solar financing, share your wisdom with your friends and neighbors-there’s a solar financing mechanism out there for everyone!

-Erica Etelson

3 thoughts on “Everything you wanted to know about solar financing but didn’t know who to ask…

  1. If these are installed on my house, why isn’t all the power generated mine? Shouldn’t I be selling you my excess power?

    • Hi Nagual,

      If you live in a state with Net Metering (most states), all of the power you generate will be credited by your utility. Effectively, the utility becomes your battery. Does that answer your question?

  2. Pingback: Big Solar’s Death Panels

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