Guest Blog Post: Solar Lease Versus Solar Loan

Original Blog Post is on 18/07/11

If you are considering solar panel installation for your home or business, there are many different financing options available to you. Entering a solar lease can be a great way to step away from fossil fuels without having to spend a lot of money upfront. Other financing options include solar loans (public and private), Power Purchase Agreements, and payment in full. It is important to understand your options in order to make a decision that is best for you.

Solar Lease: Solar panel lease programs allow home owners to promote the benefits of clean and renewable energy without the high upfront costs. The home owner does not own the photovoltaic panels on their property. Instead, they borrow the system from a solar company for a set rate per month. Property owners are usually given the option of buying the system at the end of the lease (“lease-to-own” options). Sungevity is known for their solar lease program and many smaller installers are starting to get in on the action as well. Monthly payments on the solar lease tend to be roughly the same as an average energy bill was prior to solar installation. One of the downsides of leasing your solar equipment is that you often do not qualify for government tax credits because you are not the owner of the equipment.


Solar Loan: Solar loans are private or  public loans in which home owners borrow the capitol needed in order to install solar panels. Monthly payments areSo made for the principle amount (the amount borrowed) plus accrued interest. State-sponsored loans provide very low interest rates (usually 0-5%), making solar financing more enticing to property owners. Private loans work in much the same way, but often at higher interest rates. Both usually require an initial down payment.

Power Purchase Agreement: A solar power purchase agreement (PPA) is a long term contract to buy electricity produced by a solar system. As with a solar lease, the system is not owned by the property owner; the owner is simply buying the energy produced at an agreed upon rate for a certain period of time. Individuals in a PPA are often given the option to purchase the system at the end of the agreement.

Payment in Full: This is clearly the most cost-efficient way to finance your solar system, but most homeowners do not have the cash they need in order to pay out of pocket for the initial installation. Property owners own their solar system outright from day one and don’t have to pay any interest. In addition, when you own your solar panels outright, you get the full benefit of tax credits that you would not receive if your panels were on loan or part of a PPA.

This post is written by Michelle Fitzpatrick.