If you’ve been researching solar panel systems, you may have come across companies that offer “free solar panel installation.” Unless you were born yesterday, you probably know there’s no such thing as a free lunch or solars.
What do solar companies mean when they say “free solar panels”
What do marketers and salespeople actually mean when a business offers “free solar panels” or similar terms? Usually, they are talking about solar leases and power purchase agreements (PPAs). A solar company will build, enroll, or maintain a solar system on your roof under these solar finance agreements at no upfront cost to you.
However, the truth is that the system is not technically yours. The solar energy the panels generate is not covered by a “no-cost” solar program. You are responsible for paying for the electricity it produces while the solar company retains ownership under lease agreements.
Does the government provide solar panels?
The government does not give solar panels for free. This is a marketing gimmick used to attract you to buy solar by promising free installation. There are no press releases or news articles to back up this claim. The truth is that you will be presented payment plans that are basically solar leases or PPAs. If you want to find out how the federal and local governments can finance the installation of solar panels, we recommend studying more about the Renewable Energy Tax Credit and evaluating your eligibility for state and local programs.
Solar Lease
Suppose your top priorities are saving money, stopping paying utilities, and lessening your carbon footprint. Concentrating on the financial benefits of going solar is vital because the environmental advantages are the same no matter who installs your system. Solar leases might be a good choice if you’re looking for $0 out of pocket.
Despite its reputation for doing good, the solar industry is like any other industry in that the businesses selling its products want to profit. Solar lease providers profit from selling you electricity at a lower price than you pay your utility but with a built-in margin and a long-term agreement, an agreement that carries stiff penalties for early termination.
Although businesses like SolarCity once dominated the market for solar leases, many new competitors have since flooded the market. And SolarCity is no longer in operation. With some solar leases, you will save more money on your electric bills than others. As a solar customer, you can choose a company based on its offerings. Therefore, even if environmental concerns are more important to you than financial gain, you should still shop to ensure you’re getting the best deal.
In search of free solar panels? Instead, consider getting a solar loan to pay for your system
Solar leases were groundbreaking that they allowed practically anyone with a roof to go solar. Regardless they had money in the bank to pay for a system. In the past, when the cost of solar systems was prohibitively high, solar leases were essential in lowering entry barriers.
However, since the advent of solar leases, much has changed. Since viable alternatives to solar leases for financing have emerged, solar systems are now more affordable than ever. The solar loan is the most important of these, combining the zero-down feature of the solar lease with the benefits of system ownership.
To avoid making a mistake:
- Consider twice before signing up for the “free solar panel” offer you see.
- Make sure you know what you’re getting into and that you’ve explored your other options.
- Get multiple quotes.
Let’s compare cash, loans, and leases for solar purchases
Cash:
Purchasing your rooftop solar panel system is usually the best value over 25 years. Even if the initial investment is significant, you will gain all of the financial perks and savings that come with adopting solar such as incentives, tax credits.
Solar leases and PPAs:
Going with a solar lease or PPA is an option for some homes worth considering. The best thing is that there is no upfront investment. But keep in mind that the value is reduced by the solar firm, which takes a part of your savings through monthly payments. The solar company will have profited from more than half of your potential savings by the end of your warranty period.
Loan:
Regarding return on investment, the next best option is applying for a solar loan. Although there is no upfront cost, interest payments limit energy savings for a few years until the loan is paid off. After that time, you get to keep your energy savings. The payback period for a solar loan is equal to the amount of time it takes you to pay it off.
Reduce your initial investment with federal and local solar incentives
The major takeaway from a ‘no cost’ PPA or solar program is that you do not own the solar panel system—the installer does. Most agreements are written so that the finance party or the company leasing the equipment benefits greatly, allowing them to get the Federal Solar Investment Tax Credit (ITC) and any local incentives for going solar.
Other government incentives and the solar income tax credit
If you’ve been debating whether or not to switch to solar energy, the government may offer a financial incentive that will help you make the decision. The Federal Tax Credit, or ITC, is currently the best solar incentive available to all U.S. homeowners. If you buy a solar energy system, you can now claim up to 30% of the purchase and installation costs. The credit will be worth up to 30% of the cost of a solar energy system. Only if it’s installed and functioning by December 31, 2032.
If you opt for a “no-cost” PPA or solar program, your installer will receive this credit instead of you. In essence, you would be foregoing one of the most significant financial advantages of investing in renewable energy.
Other incentives
Solar Renewable Energy Credits (SRECs) and performance-based incentives are other programs worth mentioning. First, some states with ambitious renewable energy goals are attempting to meet solar production quotas, resulting in SRECs. SRECs can be claimed by eligible homes with solar systems capable of producing more than one megawatt-hour (MWh) of electricity. Furthermore, performance-based incentives are rewards for making a specific amount of solar energy. If you are eligible for performance-based incentives, your utility will pay you for producing a set amount of electricity from your solar system. This is regardless of whether you consume it or send it back to the grid.
State and local incentives
Another benefit is that you can utilize both federal and state incentives to reduce the cost of going solar by using the 30% discount on the costs of your solar system after taking advantage of any state-level rebates or incentives.
The incentive programs, which typically take the form of tax credits, vary from state to state. You may also participate in state net metering programs, depending on where you live, in which your utility company compensates you for excess kilowatt-hours of electricity you send back to the grid. Many local cities and counties also provide direct rebates to help with the costs of installing solar panels.