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Solar Panels on Rooftop


Businesses that sell Residential Solar Systems usually offer a variety of financing agreements. These agreements detail the financial arrangements between a homeowner and a solar provider.  Many businesses sell these services using high-pressure door-to-door sales. Always ask for a copy of the contract before you sign it, and review it thoroughly.  Better yet, contact an attorney who is familiar with these financing products to help you understand the long-term implications!


Some common types of residential solar financing agreements include:


1. Solar Leases:

Description: In a solar lease, homeowners agree to pay a fixed monthly fee to lease the solar equipment from a solar provider. The lease payments are generally less than the monthly savings on the electric bill, making this an attractive option for those who prefer not to make an upfront investment. The solar provider remains responsible for the maintenance and repairs of the system.

  • Advantages: No or low upfront costs, predictable payment schedules, and no responsibility for system maintenance.

  • Disadvantages: Homeowners do not own the system, and the long-term savings are typically less than purchasing the system outright.


2. Power Purchase Agreements (PPAs):

Description: PPAs are similar to leases in that homeowners do not own the solar panel system. Instead, they agree to purchase the power generated by the system at a set per-kilowatt-hour rate, which is usually lower than the local utility’s rate. The solar provider installs, owns, and maintains the system.

  • Advantages: No upfront installation costs, potentially lower electricity rates, and no maintenance responsibilities.

  • Disadvantages: Limited control over the system and potential issues with contract terms upon selling the home.

  • Additional information concerning Solar Power Purchase Agreements can be found HERE.


3. Solar Loans:

Description: Solar loans are financing options that allow homeowners to borrow money to purchase and own their solar systems outright. These can be secured (backed by your home, like a home equity loan) or unsecured.

  • Advantages: Homeowners own the system, can capitalize on federal and state tax credits, and increase home value.

  • Disadvantages: Requires a credit check and responsibility for maintenance.


4. Property Assessed Clean Energy (PACE) Financing:

Description: PACE programs allow homeowners to finance solar panel installations through a special assessment on their property tax bill. The assessment is attached to the property rather than the individual, which can be beneficial if the property is sold.

  • Advantages: No upfront costs, long repayment terms, and the loan may be transferred with the property.

  • Disadvantages: Adds a lien to the property, which could complicate future real estate transactions.


5. Cash Purchases:

Description: Homeowners pay the full cost of the solar system upfront. This option requires significant capital but offers the highest long-term savings and return on investment.

  • Advantages: No interest payments or ongoing monthly payments, eligibility for tax credits, and increased home value.

  • Disadvantages: High initial cost, and the homeowner is responsible for maintenance.


Each financing option has its own set of implications regarding ownership, maintenance, financial obligations, and how they affect the value of the property. Homeowners considering solar investments should carefully evaluate their financial situation, long-term residency plans, and local solar incentives to choose the most appropriate financing option.

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