Covering the cost of solar panels

The number of households with solar is skyrocketing. From 2006 to 2013, the number of homes with solar increased by more than 1,000 percent. 1 If you're someone who recently made the decision to go solar, congratulations! As you're preparing to choose an installer and the type of system that will work best for your home, we also know you're deciding how you'll pay for your solar system.

Ultimately, the payment option you select depends on your short- and long-term goals. You'll have to think about the following:

  • Are you more interested in contributing to clean energy or reducing your utility bill?
  • Would you like to put down more cash down upfront, or pay your costs out of pocket over time?
  • Are you taking advantage of government tax credits, or looking for savings through your solar installation company?  

Your Solar Financing Options

When it comes to deciding how to pay for your solar system, three basic options are available: paying cash, leasing, or financing. Your solar company of choice will likely have specific agreements or payment requirements for each option, but understanding the fundamentals upfront will make the process easier for you.        

Buying Your Solar System

Purchasing your system outright gives you sole ownership. Many purchasers find that their system more than pays for itself over time thanks to savings on utility bills. With no monthly payment and reduced cost or free energy now available, your savings are immediate. As a U.S. resident, you’ll qualify for a federal income tax credit of 30 percent of the system’s cost, and depending on solar policies in your state, other incentives or tax credits may also be available.

You might also make a profit from surplus energy your system produces through your utility provider. Plus, installing solar panels typically increases the resale value of your home. A recent study by Berkeley Lab found that solar systems add about $15,000 to a home’s value.2

If you're worried about the responsibility of owning your system, keep in mind that many solar manufacturers and installers offer a warranty for the system and installation. When comparing solar installers, be sure to ask how long a warranty lasts and what it covers. 

Leasing Your Solar System

When you lease a solar system, the financier owns the system. For example, if you decide to lease a solar system from SunPower&reg, SunPower Capital, LLC will own the system. Often, if you partner with a solar company, the company will be responsible for system maintenance and repair, usually over a 20-year agreement. Be sure to ask if your contract will increase annually or remain the same. If you live in a state that allows net energy metering (NEM), you’ll be able to sell back any surplus energy produced by your panels. You should also check to see if your lease can be transferred to new homeowners if you decide to sell your home.

Another option similar to leasing is a power purchase agreement, or PPA. In this agreement, you pay for the energy and not for the use of the system. The solar company covers the cost of installation, while you as the homeowner are responsible for buying energy from the solar system. Any incentives or tax credits are used by the solar company to lower the cost for you, the homeowner.

Leases or PPAs may be ideal for those who don’t qualify for tax incentives or credits, or for those who don’t want the responsibility of system maintenance beyond the initial warranty.

Financing Your Solar System

If you want to own your system but don’t have the funds for an upfront purchase, a loan or other type of financing may be your answer. Your solar installation company can help you find a loan provider. A short-term loan is the best option if you’re willing to pay more over a shorter period, so you can enjoy the full benefits of reduced utility bills more quickly. A long-term loan also allows you to start saving, since loan payments are often lower than pre-solar utility bills. After the loan is paid off, you’ll be able to enjoy the benefits of owning your solar system for much of the system’s lifetime. Loans also allow you to keep tax credits or incentives from the federal government and from your state, if applicable.

Once you’ve found a payment option that aligns with your goals, you can kick back, relax and enjoy your energy savings.

  • 1. U.S. DOE Annual Energy Outlook 2014 and SunShot Vision Study (2012) data.
  • 2. "Exploring California PV Home Premiums", Lawrence Berkeley National Laboratory, December 2013. This research builds on work published in 2011 entitled “An Analysis of the Effects of Residential Photovoltaic Energy Systems on Home Sales Prices in California,” Study analyzed 72,000 homes, 2,000 of which had solar. Average system size: 3.1kW.