Financial Options for Going Solar: A Comprehensive Guide

Switching to solar energy is a smart financial move for most homeowners, but understanding the available options can be overwhelming. With various ways to finance a solar panel system, choosing the best fit for your situation is key to maximizing benefits. This guide, provided by Spartan Solar, simplifies the choices to help you make an informed decision about going solar.

If you’d like to skip the reading, take a listen to the short video below!

---

The Simple Truth About Residential Solar

At its core, a solar panel system is just another way to pay for residential electric costs. While many people associate solar with energy independence, reduced outages, or energy storage, the primary goal is simple: lower monthly utility costs. That being said, the “devil is in the details” about how a homeowner can take advantage of solar paneling on their property; we will outline those details below.

---

The Four Primary Financial Options for Solar

Solar offers flexibility that utility electricity doesn’t—allowing homeowners to choose how they pay for their power. Here’s an overview of the four main approaches:

1. Cash Purchase

Paying cash for a solar system is the simplest option. You pay the full cost of the system upfront, covering all parts, labor, and warranties. While this approach requires significant capital—often comparable to the cost of a new car—it eliminates future electricity bills if the system is properly designed.

• Best For: Homeowners with the capital to invest upfront and a desire to cashflow their monthly utility billing.
• Advantages: No ongoing costs for electricity and eligibility for tax incentives.
• Considerations: Requires a large initial investment.

---

2. Loan Financing

Solar loans spread the cost of a system over time, much like a mortgage. With common terms of 25–30 years and no down payment, homeowners typically start saving on energy expenses from day one. Monthly payments build equity in the system, just as mortgage payments build equity in a home.

• Best For: Homeowners who prefer manageable monthly payments without upfront costs.
• Advantages: Savings begin immediately, fixed monthly payments, and ownership of the system after the term ends.
• Considerations: May feel like taking on additional debt, though it replaces utility expenses.

---

3. Solar Lease

A lease allows homeowners to benefit from solar power without owning the system. There are typically no upfront costs, and monthly lease payments are often much lower than utility bills. However, tax credits and incentives belong to the leasing company, not the homeowner.

• Best For: Homeowners without the means to purchase or finance a system and who prioritize lower electricity costs.
• Advantages: Low barrier to entry and immediate savings on electricity.
• Considerations: No system ownership or eligibility for tax incentives.

---

4. Power Purchase Agreement (PPA)

A PPA is similar to a lease but focuses on purchasing the electricity produced by the system rather than leasing the equipment. Rates are typically lower than those charged by utility companies. However, as with leases, homeowners don’t own the system or qualify for tax benefits. It is important to note that this option is not currently available as of the time of this article’s posting in Spartan Solar’s home state of Florida.

• Best For: Homeowners seeking lower electricity rates with minimal commitment.
• Advantages: Immediate savings and no upfront costs.
• Considerations: No ownership and no option to buy the system later.

---

Solar vs. Utility: Real-World Comparisons

To illustrate the financial benefits of solar, here are a few simplified scenarios (with example values, not to be taken literally):

Cash vs. Utility

• Scenario: Homeowner A pays $200/month for utilities, totaling $102,685.90 over 25 years (including inflation).
• Solar Option: Pay $30,000 upfront for a solar system that meets all electricity needs.
• Result: Significant savings over time, full ownership of the system, and eligibility for tax incentives.

Loan vs. Utility

• Scenario: Homeowner A pays $200/month for utilities, totaling $102,685.90 over 25 years (including inflation).
• Solar Option: Homeowner A finances a $50,000 solar system with a $190/month payment over 25 years.
• Result: Monthly payments are comparable to utility bills but fixed, and the homeowner builds equity in the system while reaping tax benefits and fixing their billing into the future.

Lease vs. Utility

• Scenario: Homeowner A pays $200/month for utilities.
• Solar Option: Homeowner A leases a solar system for $150/month.
• Result: Immediate savings, though the homeowner doesn’t own the system or collect tax credits.

PPA vs. Utility

• Scenario: Homeowner A pays $200/month for utilities.
• Solar Option: Homeowner A pays $130/month for electricity generated by a solar system under a PPA.
• Result: Lowest upfront costs with ongoing savings, but no ownership or tax incentives.

---

Choosing the Right Solar Option

Each solar financing option has its pros and cons, and the best choice depends on your financial goals and circumstances. At Spartan Solar, we’re dedicated to providing clear, transparent information to help you make the right decision. Whether you’re just starting to explore solar or ready to take the next step, we’re here to guide you. Contact us today to discuss the option that best suits your needs and budget.

Spartan Solar

https://www.spartansolar.earth