With the abundant sunshine in California, adding a solar system to your home can be a simple way to cut your utility costs dramatically. Solar is a significant investment, however, so it's important to consider your options for installing them. While buying solar panels yourself is often the best option, there are other ways to get a system installed and start saving, including solar leases and power purchase agreements.
Buying Your Solar Panels
Purchasing your solar panels is the most cost-effective option, as you will pay less over the lifetime of the solar panels. You will also be eligible for tax incentives and rebates that help to offset some of the initial investment, such as the 30% federal tax credit for solar installations or rebates from your local utility company. This can dramatically reduce your initial costs. Additionally, once you own the solar panels, your home value can increase, earning you more if you sell it.
Payment Options for Buying Solar Panels
There are several payment options if you are considering buying the solar panels yourself:
- Cash: If you have enough savings or liquidity, you can buy the solar panels upfront. This eliminates any monthly payments or interest charges, and the solar panels can immediately start paying you back through lower electricity bills.
- Home equity loan: A home equity loan or line of credit allows you to borrow against the equity in your home for improvements like adding a solar system. This tends to offer lower interest rates for financing your solar panels.
- Solar loan: A dedicated solar loan will likely have higher interest than a home equity loan, making it slightly more costly over the life of the solar system, but it's still a cost-effective alternative to leasing.
The Downsides of Buying
Buying your solar panels does require a larger initial investment, and if they are financed through a home equity or solar loan, selling your home before the loan is paid off can be more challenging. You will either have to pay the remainder of the loan before the sale or arrange with the buyer to assume the payments if the lender agrees. Also, when you own the solar system, you are responsible for all the maintenance to keep it operating properly and the repairs if something goes wrong.
Leasing a Solar System
In a solar lease agreement, you will essentially rent the solar panels from a third party, paying a set monthly fee to have the solar system installed at your home. The main benefit of this is lower utility bills. You will not own the solar panels, so all the maintenance and repairs will be the responsibility of the company that you lease from. Depending on the terms of the lease, you may be able to buy the system at the end of the agreement for a reduced price compared to the cost of a new solar system.
The Disadvantages of Leasing
Because you do not own the solar panels with a lease agreement, you aren't eligible for solar tax credits or rebates. You must stay current with all the lease payments to avoid hefty fees or removal of the system. It can also be quite hard to sell a home with a leased solar system, as the new homeowners may not be willing to continue the lease, or the company that granted the lease may not be willing to transfer it to the new owners.
Power Purchase Agreements
With a power purchase agreement, a third-party provider will install a solar system on your home, and you will pay that company a set fee for the electricity that you consume from the system. Similar to a lease, you do not own the solar panels, but the company that provided the system is responsible for all maintenance and repairs. The benefit of a power purchase agreement over leasing is that you pay primarily for the power you use instead of set monthly payments.
The Downsides of PPAs
You will not earn any tax credits or rebates with a PPA, and you do not own the solar panels, so if you choose to discontinue the agreement, the solar panels will be removed. Selling a home with a PPA will also be challenging unless the new owners are willing to continue the agreement.
Buying vs. Leasing Solar
If you can afford the upfront payment or obtain favorable terms for a loan, buying your solar system will be more cost-effective than leasing, and you can also enjoy long-term savings after the system has paid itself off through lower energy costs.
If you want to start saving money right away without the responsibility of maintaining or repairing a solar system, a solar lease or a power purchase agreement may be the right choice for your home.
Residential Solar Installations in the Bay Area
Are you considering solar panels for your Bay Area home? Talk to our team at Simply Solar. We offer high-quality solar energy systems with solar panels, inverters, and battery storage solutions from the top industry manufacturers, and we serve homeowners throughout the San Francisco Bay, Fresno, Napa Valley, and Sonoma Valley. Our company is NABCEP-certified, and we offer superior service and workmanship, with a 25-year warranty on all our new solar installations.
Stop paying too much for electricity! To request your FREE solar installation estimate in the Bay Area, call Simply Solar today at (707) 285-7037.