Your options for purchasing a solar installation range from outright purchase to loans and leases.
Purchasing your solar system outright (cash or loan) allows you to take advantage of most of the financial incentives, but the upfront costs could be a significant.
A solar loan allows you to finance your system just like you would any other major home-improvement. Solar loans may be offered by solar panel manufacturers, banks and other lending institutions.
The Massachusetts Department of Energy Resources (DOER) and MassCEC have partnered to offer the Mass Solar Loan program that connects Massachusetts homeowners with low-interest loans for solar electric systems.
Leasing your solar panels is similar to renting versus buying your home. When you sign a lease, you agree to pay a fixed monthly payment to the solar leasing company and in turn you benefit from the potential energy savings generated by your solar panels.
With a lease, you'll get two monthly bills, one from the solar company and the other from the electric utility.
Power Purchase Agreement (PPA)
A solar PPA is similar to a lease but instead of a fixed monthly payment you agree to purchase the power generated by your solar panels at a set price per-KWh. The rate is typically lower than the rate you would pay your energy company but may increase over time.
Note: with either a lease or PPA, the solar company, not the homeowner, is entitled to tax credits or other financial incentives.
Solar Company Responsibilities
Leases and PPAs can 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 might be able to extend the agreement, buy the system, or have the solar company remove the system.
When your solar installation generates more energy than you use, the excess is sent back to the electric grid and you can earn net metering credits on your monthly electric bill. This incentive is available to most solar system owners regardless of purchase method.
Solar Massachusetts Renewable Target (SMART) Program
SMART is a solar production-based incentive program launched by the MA DOER in partnership with Eversource and other Massachusetts utilities. Typically, residential SMART customers receive monthly incentive payments and are eligible to participate for 10 years.
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 system you'll want to investigate the true savings you can accrue over the lifetime of your solar panel system.