A solar panel system can provide clean and renewable energy for your home, but it's a big investment. The up-front cost of a solar system will depend on a variety of factors, including the size of your system, equipment options, location, labor costs and local permitting costs.
Solar Financing Options
There are a variety of financing options available if you don't have the funds to purchase the system outright or you simply don't want to own it yourself.
A solar loan allows you to finance your system just like you would any other major home improvement project. Solar loans may be offered by solar panel manufacturers, banks, credit unions and other lending institutions.
With a solar lease, you to rent your system instead of owning it. Under a solar lease, you agree to pay a fixed monthly fee to your solar company in exchange for the electricity generated by your system. Because the solar company owns and maintains your system, they're entitled to any available rebates, tax credits and financial incentives.
Power Purchase Agreements (PPAs)
Similar to a solar lease, PPAs allow the solar company to own and operate the solar panel system on your roof. Rather than a fixed monthly payment, you agree to purchase the electricity generated by the system at an agreed upon per kWh price. The rate is typically lower than the rate you would pay your energy company but may increase over time. Any tax credits or financial incentives are given to the solar company.
PPAs typically range from 10 to 25 years and the solar company is responsible for the operation and maintenance of the system for the duration of the agreement. When the contract expires, you can extend the agreement, buy the system, or have the solar company remove the system.
State and Federal Tax Credits
The federal government offers a credit of up to 26 percent of qualifying project costs (declining to 22 percent in 2021 then 0 percent in 2022). Individual states also offer energy-savings tax credits. Consult with your tax advisor to see if you qualify for credits.
Cost vs. Savings
Before you invest in a solar panel system you'll want to investigate the true savings you can accrue over the lifetime of your solar panel system.