Solar Financing Options

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Consumers have many more choices than they did just a few years ago for financing a solar energy system. These are some of the ways consumers are paying for solar:

 DLR solar furnace

Photo Courtesy of DOE/NREL, DLR solar furnace


  1. Buy your own system from available funds

    This has been the most readily available option until recently. People who can afford the more than $10,000 cost of a residential system of photovoltaic panels to offset their electricity bills choose a contractor and have a system installed designed for their home. Often, the cost of the system is cut roughly in half by the use of Renewable Energy Credits and per-watt fees paid by the utility to help satisfy its renewable energy obligations, and incentives and tax credits offered by federal, state and local governments. In addition, homeowners benefit from net metering, laws that require utilities to interconnect with small solar systems and buy excess power produced. Essentially a two-way meter is installed and consumers are credited for electricity they send to the grid. Advancements in technology, including thin-film systems, are expected to lead to continuing price drops.

    Pros: You have no financing cost, outright ownership of system, free power in perpetuity, improvement to home’s property value.

    Cons: Expensive upfront cost, lengthy payback period, little ability to take it with you if you want to move.

  1. Get a loan to purchase the system and then use energy savings to help repay it

    Until recently, it was challenging for consumers to get a bank loan for a PV system because the rates tended to be high compared to energy savings. But loans for renewable energy are growing more available with “green’’ home equity lines of credit that can offer well-qualified borrowers attractive rates. Energy-efficient mortgages that wrap the cost of the system into the mortgage payment are also growing in popularity. The Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture may offer a mortgage option that works for you. Some solar equipment manufacturers are also starting to offer their own financing.

    Pros:You own the system and it becomes part of the value of your home; less upfront cost than buying the system out of pocket; you get full value for the energy credits and incentives as well as purchasing less electricity from the utility.

    Cons:Finance costs on top of the cost of the system; you probably have to pay off the loan before you sell your house; finding a financing product that will work for you takes more effort.

  1. Contract with a company that will own the system and sell you its power.

    Third-party solar leasing is a relatively new option for consumers, but it’s modeled on how cities have been benefiting from solar power in recent years. A solar company owns and installs the system and you buy the power that it generates. The company can take advantage of the renewable energy credits and other tax incentives and benefits that are not always useful to individuals. The company then sells the power generated by the system to the consumer who is “hosting” the solar array.

    Pros:You can have a solar system on your roof without having to front the substantial cost; companies in many cases promise lower electricity rates than utilities charge.

    Cons: Relatively new model with issues unfamiliar to cities, Realtors, etc.; you don’t own the system; if you want to sell your house, you need to find a buyer willing to take on the lease or pay it off at the time of the sale.

  1. Pay for your solar system as part of a special property tax assessment

    Programs that allowed property owners in special districts to borrow money to install improvements such as solar panels and pay them off through a special tax on property tax bills were growing very popular until 2010. Boulder, Colorado was a pioneer in such a program with its ClimateSmart Loan Program set up after voters approved bonding capacity for a local district to make loans. But federal housing agencies managed to shut down such programs, known as PACE (Property assessed clean energy) with arguments that the assessments interfered with federally guaranteed home loans.

    Pros:Removes much of the financial risk of installing solar because the debt remains with the property rather than the home owner; usually entails audit or other way to ensure home is a good candidate for solar first.

    Cons:Such programs need to be established by law and were virtually shut down as of early 2011 as officials sought a compromise.

  1. Join a larger community solar project and buy its power

    Relatively new models involve community systemsin which consumers benefit without necessarily hosting solar panels.

    In some cases, a company aggregates solar systems in a neighborhood, gaining enough customers to allow a bulk purchase and less expensive installation on individual rooftops with less work for each individual home owner.

    In other cases, coops, municipal utilities or community groups install a large array and then sell shares back to consumers in what are sometimes called “solar gardens.” These arrays, encouraged by laws in some states, are designed to allow renters, low-income people, residents of multi-family housing and others to benefit.

    Colorado passed a “solar gardens” law in 2010 that requires investor-owned utilities such as Xcel Energy to buy a small amount of power from such community arrays.

    Pros: Consumers may benefit from solar without having to do all the homework or pay the full retail cost for an expensive system on their home; solar gardens offer solar option to renters, condo owners and folks whose solar resource isn’t good

    Cons: New models only available so far in a handful of locales; some legal issues yet to be resolved, tax benefits for solar gardens may not match those for individuals.

Mobile demonstration unit for educating rural consumers about PV systems and options

Photo Courtesy of DOE/NREL, Mobile demonstration unit for educating rural consumers about PV systems and options

More information:

American Solar Energy Society:

The Interstate Renewable Energy Council:

Colorado Solar Energy Industries Association:

The Solar Foundation:

Database of State Incentives for Renewables & Efficiency:

Solar leasing:

Solar City:


Solar aggregation:

One Block Off the Grid:

Solar financing:

Solar Gardens:


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