Step 2: Understanding Financing Options

Understand your financing options when comparing solar quotes.

Bringing Green Energy Home

The three most popular financing models include homeowner Purchase, Solar Lease and Power Purchase Agreement (PPA)

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Purchase/Loan: You can purchase your system with cash or finance it with a solar loan. Solar loans allow customers to borrow money from a lender or solar developer for the installation of a solar PV system that they own. With an initial upfront investment, solar owners can see greater benefits after the payback period.

Solar leasing: With a solar lease, a developer installs and owns the solar system on the home. In return, the homeowner pays a series of scheduled fixed or escalating lease payments to the developer, usually monthly, and over a 15-20 year term.  At the end of the term, the customer can choose to extend the lease, purchase the system at a discount, or have the system removed.

Leasing allows you to go solar for no money down. But if you choose to make a down payment, you will lower your future monthly payments. Escalating leases typically increase at an annual rate of 1-3%.

Power Purchase Agreement (PPA): Under a residential solar PPA, a solar finance company buys, installs and maintains a solar system on a homeowner’s property. The homeowner purchases the energy generated by the system on a per-kilowatt-hour basis through a 15 to 25 year contract at rates competitive with the local electricity rate.  At the end of the term, the customer can choose to extend the PPA, purchase the system at a discount, or have the system removed.

PPAs allow you to go solar for no money down in return for the responsibility of a monthly payment. But, if you choose to make a down payment, you will lower your future monthly payments. With a PPA, you know your monthly solar costs will vary based on production – so, expect higher PPA bills in the summer and lower PPA bills in the winter.

Sources and tools for understanding financing options. For more information, read the Clean Energy States Alliance’s comprehensive Homeowner’s Guide to Solar Financing to help understand different financing options.