Community Solar Explained: Ultimate Guide to How Community Solar Works
If you’re like many Americans, a big part of your carbon footprint comes from the electricity used in your home. As CNBC reports, only around 40% of the U.S. electric grid is powered by clean energy sources. The other 60% comes from dirty fossil fuels that contribute to climate change and all sorts of pollution.
One way to replace dirty power in your home is to install a home solar array. However, this isn’t an option for everyone. Some people don’t own their homes. Some don’t have a sunny spot to put the panels in. And some just can’t afford the upfront costs.
Fortunately, there’s another way to get the environmental and cost-saving benefits of solar energy without using your own roof. It’s called community solar.
Perch Energy is helping bring the benefits of solar power to people who can’t install their own solar panels. By subscribing to a community solar project, you help clean up the power grid and save money on your electric bills, too.
In fact, annual savings on your electricity cost could be between 5%-15% depending on the project, where you live, and your average energy usage.
What is community solar?
Under a community solar program, local residents all share the output of a single large solar installation, called a solar farm. You can subscribe to a local solar farm and begin earning solar energy credits from your utility that reduce your electricity costs.
Community solar takes advantage of state renewable energy incentives to help homeowners, renters, and businesses save money while also supporting solar power in their communities.
For those who aren’t able to install rooftop installations on their own homes—due to the upfront cost, roof constraints, or you don’t own your home—community solar programs offer a way to participate in the renewable energy revolution and save money.
Residents can subscribe to a local solar farm that has been developed specifically for community solar and begin earning solar energy credits that reduce your electricity costs.
Under a community solar program, local residents all share the output of a single large solar installation. These large systems generate enough energy to power hundreds or even thousands of homes. (Though you’re not actually getting direct solar power into your home, you’re helping put that solar power onto the overall grid.)
The technical name for this type of installation is a photovoltaic power station. However, most community solar projects go by less formal, friendlier-sounding names, such as:
- Solar power plant
- Solar farm
- Solar garden
- Solar park
- Roofless solar
- Shared solar
These terms are all used more or less interchangeably to refer to the same thing: a big array of solar panels that supplies power to a given area.
Solar farms can go on a variety of sites. Some of them are literal farms with unused space. Capped landfills and abandoned industrial sites can also supply open space for solar gardens. But they don’t always have to be in the middle of a big open field. In some cities, solar arrays on public buildings, such as parking garages, serve as shared solar systems. All of these setups could be considered a form of community solar.
How does community solar work?
Community solar allows you to enjoy the benefits of solar power without installing rooftop panels. Local solar farms pump clean energy into the grid; residents and businesses can subscribe to a farm and get credited for a share of the power it produces. These credits, enabled by government incentives, are received as a discount on your own electricity costs—like a reward for helping the environment.
A community solar project can be started or owned by a utility, a nonprofit, or a “special-purpose” entity, meaning a company created specifically for the purpose of building and owning a solar farm.
The owner will work with solar developers to first identify a suitable site, get the right permits, and start construction. The build process can take many months.
The owner then invites people in the community to help finance the solar project by signing up for shares—or “subscribing” to the project. This is where Perch steps in. We work on behalf of the solar farm owner to find subscribers and manage their whole experience for the duration of their project subscription.
Once a solar farm is completed, it’s connected to a local utility and begins sending solar energy to that utility’s power grid. An electric meter keeps track of the farm’s energy production which the utility then translates into a monetary value, often referred to as a “solar credit.” These credits are what your community solar subscription will generate every month, and they are what ultimately offset the cost of electricity on your own utility bill.
You will still pay your same utility company for electricity. Subscribing to community solar does not change your utility or your electricity supply, because you’re not receiving the solar farm’s power directly. But you are getting a lower bill thanks to the credits!
Think of it as a reward for doing good by the environment. You’re helping support solar energy in your state and aiding the transition to a cleaner and more stable electric grid for everyone. In return, your state gives you a discount on your own energy cost.
To be clear, with a community solar subscription, you don’t own any portion of the farm or its panels yourself. But you receive a share of the credits it generates based on its clean energy production.
How does your community solar subscription save you money?
The solar credits you receive are available thanks to your state-legislated renewable energy incentive program. Your local government enables project owners to share the benefits by discounting your electricity cost.
If you’re subscribed to a project, you continue to receive your electricity through your local utility. However, the utility gives you solar credits on your electric bills based on the size of your share in the solar farm.
About the “size of your share in the solar farm.” When you subscribe to a community solar project with Perch, we first analyze your typical annual electricity usage so we can understand how many solar credits you’ll require in order to offset as much of your electricity cost as possible. Our goal is to maximize your savings.
The solar credits are available thanks to your local government—specifically your state-legislated renewable energy incentive program. Your state government enables project owners to share the benefits by discounting your electricity cost as a reward to you for supporting solar power generation in your community. And because the solar farm is connected to the utility company, the credits are efficiently applied right on your existing bill.
Understanding community solar billing
Community solar is still a fairly new concept to the clean energy industry, and thus, not every state implements it in the same exact way. One inconsistency is with billing.
As you know now, subscribing to community solar means you can save on your electricity cost—programs are designed explicitly to bring you annual savings, so long as you remain on your subscription. However, not every month will look the same.
New York only: Universal Consolidated Billing (UCB)—the same utility bill you’re already getting
In New York state, there is what’s called Universal Consolidated Billing (UCB). This means that, as a community solar subscriber, you simply receive your regular utility bill and it’ll just have an additional section or line item showcasing your solar farm credits and how much they’re offsetting your cost.
Note that while community solar will lower your electricity cost on an annual basis, the exact amount of discount on each bill can differ month by month based on how much energy your farm produces that month. Due to seasonality, your farm generates different levels of energy each month (i.e. summer months are much sunnier, so the farm generates more solar power than in winter months).
UCB is the preferred method within the industry and for you, the subscriber. That’s because you don’t need to do anything differently. Its one-bill model is seamless and efficient.
New York is currently the only state that’s rolled out UCB statewide for all new and future community solar subscribers—and even that is a recent development. Some existing subscribers in New York may not be on a UCB plan.
But UCB is picking up steam in many states and hopefully will become widely adopted soon.
All other states: Non-Universal Consolidated Billing (two bills—your existing utility bill and a Perch bill)
Unfortunately, due to various regulatory reasons, every other U.S. state that has community solar has not yet implemented UCB.
Instead, there exists a two-bill process. Rest assured you’ll still save! There is just an extra step each month.
Non-Universal Consolidated Billing works like this:
- Each month, Perch will send you a bill for your portion of credits based on your solar farm’s energy generation.
- You’re paying Perch for these credits, but thanks to the government and state incentives, we charge you for them at a discounted rate.
For example, if your subscription produces 100 worth of solar credits per month, Perch bills you 90. However, your utility then reduces your electric bill by the full 100—since that’s what your subscription portion generated—saving you 10 each month.
How seasonality affects your community solar credit billing
It is possible that in a given month your Perch bill will be higher than the credits you receive. This is due to the seasonal factors of energy generation of solar farms. During sunny summer months, your farm’s generating a ton of credits—potentially more than you actually need to offset your own electricity bill that month. But the excess credits are saved for you, and then utilized once the colder months arrive to make up for the fact that the solar farm is generating less, due to fewer sunny days.
The video below explains how seasonality affects your credit billing. But no matter what, the whole program is designed to deliver savings on an annual basis, so long as you remain on your subscription.
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What are all the benefits of community solar?
Community solar makes it possible for more people to directly benefit from solar power—and enjoy the kickbacks from state renewable energy incentives. Consumers (or businesses, non-profits, institutions, municipal buildings and more) get lower energy bills, and utilities get a stronger, more resilient power grid. And everyone in the community gains the climate and health benefits of cleaner energy.
Community solar is accessible to more people than other clean energy solutions like rooftop solar
Only about one in four Americans has the option to install a rooftop solar system. Some people can’t because they’re renters or live in shared housing. Others don’t have a big enough or sunny enough roof. And many can’t afford solar or simply don’t want to spend the upfront cost of installing a rooftop solar array.
Also, some people are barred from installing solar panels by restrictive homeowners’ association (HOA) rules. In some states, like New Jersey and Virginia, HOAs aren’t allowed to block solar installations. But this isn’t the case everywhere.
Community solar, on the other hand, is available to anyone within range of a solar farm (subject to certain eligibility requirements).
Community solar allows more people to dually benefit—you save money on electricity while also contributing to renewable energy generation and fighting global warming without any extra effort.
Community solar saves you money
Community solar isn’t the only way to get clean energy at home. In U.S. states with a deregulated energy market, you can switch your electricity supplier to one that produces power from renewable sources. But while solar and wind energy are getting cheaper to produce, they’re not always cheap to buy directly. In some cases, you might pay a little extra for green power. (It’s like buying a non-organic Apple vs. an organic one—you expect to pay more for organic because it’s better for you.)
With community solar, by contrast, you’ll always come out saving on an annual basis.
Community solar is free to join with no upfront costs
According to SolarReviews, the average cost of a 6 kW home solar setup is around 12,000—and that’s after the tax credit. That’s likely more than many homeowners can afford, even for a system that saves them money in the long run. And while financing is available, it increases the overall cost of the system. Plus, it locks you into a loan that can last 10 years.
Community solar gives you the benefits of clean solar power without that upfront cost. You also don’t have to deal with the hassle of getting your solar panels installed. And instead of a decades-long loan, you have a flexible contract.
Better still, if you move to a new home in the same area, you can take your community solar subscription with you. You don’t need to leave your solar panels behind and get a whole new set installed on your new home.
Your community solar subscription helps the environment and fights global warming
By bringing new solar power production online, community solar helps clean up our electric grid. Replacing dirty fossil fuels with clean energy from wind and sun has huge environmental benefits. It reduces a wide variety of harms, including:
- Carbon emissions that contribute to climate change and ocean acidification
- Other harmful air pollutants, such as particulates and nitrogen oxides
- Fossil fuel mines that damage or destroy wildlife habitat
- Runoff from mines that pollutes waterways
In fact, according to the EPA emissions calculator, a standard 5MW solar project avoids the CO2 emissions of burning 5 million pounds of coal—that’s the equivalent of taking over 950 cars off the road every year!
Each new solar farm helps keep our energy generation clean and our land, air, and water cleaner.
Solar farms directly support communities through job creation and energy independence
When you switch to a green energy supplier, you’re giving your money to a supplier that’s sourcing their electricity from an existing clean energy source—like a solar or wind farm (still awesome for supporting clean energy and lowering your footprint). But you’re not necessarily helping to get ones built.
But with community solar, you’re actually helping a new solar project come into being. And the more subscribers like you that join community solar, the higher demand goes, and the more solar farms that get built. Building new farms, and maintaining existing ones, creates high-quality jobs right in your community for your friends and neighbors.
Having a local solar farm also helps your area become energy independent. When electricity is produced locally, the grid is less dependent on big power plants. This can help minimize power outages and make the grid more resilient.
Solar farms stabilize the energy supply—good for you and the utilities
Having power generation spread out across smaller facilities, like solar farms, can be a good thing for utilities too. They can site roofless solar projects in areas that need power the most. That helps keep the grid running smoothly, so the utility spends less on maintenance and repairs.
As a bonus, the utility gets to count the solar farm as a renewable energy source in its service area. This helps them meet Renewable Portfolio Standards (RPS). These are requirements in certain states for a certain percentage of electricity to come from renewable sources.
Shared solar promotes energy equity
Historically, dirty fossil fuel plants have most often been built in disadvantaged communities. These communities have average lower incomes and, typically, more people of color. Because they’re closer to the plants, they suffer the most health effects from pollution. By contrast, clean energy projects historically have been more likely to go in higher-income areas.
Community solar can change that. Low-income and people of color can take control of their own energy future and bring solar power to their neighborhoods. And they benefit directly from the cleaner air and lower energy bills it provides.
Aside from residents, who can benefit from community solar?
The beauty of community solar is that it’s for anyone and everyone. As long as you pay an electricity bill and are eligible, you could benefit from joining a community solar subscription.
In addition to renters and homeowners, those that can benefit from community solar include:
- Businesses and franchises: Customers expect you to be environmentally conscious. Now you can, while improving your bottom line, too.
- Universities and hospitals: Use your community solar savings to better serve those who really matter.
- Religious orgs and non-profits: You’re giving so much to your community. Get something back in the form of energy cost savings.
- Large commercial and industrial: The higher your energy bill, the more potential savings you could get from community solar.
- Municipalities and civic buildings: Subscribe to community solar and reinvest the savings into local areas of need.
What’s the catch with community solar?
With community solar, there’s really no catch. There are no upfront costs. You don’t need to install anything on your home. It’s available to people who can’t install their own rooftop solar panels. And it saves you money on your bill.
Many Americans are still skeptical about solar power—particularly its cost. Even though solar power is now one of the cheapest ways to produce electricity, people often assume it will cost them more. Or at least, they think they’ll have to pay more up front to get its benefits over the long term.
But with community solar, there really is no catch. There are no upfront costs. You don’t need to install anything on your home. It’s available to people who can’t install their own rooftop solar panels (so long as you’re eligible and there’s a solar farm in your area). And it saves you money on your bill.
So, joining a community solar program is really a no brainer. There’s only one problem: not everyone has this option.
One reason is eligibility. Some solar farms require credit checks, shutting out people with poor credit or no credit (though that’s becoming less common). And others don’t allow big businesses to participate. The good news is there has been progress to solve some of these eligibility roadblocks so that community solar becomes even more inclusive and can be enjoyed by more people.
The biggest problem, though, is that community solar isn’t available everywhere yet. As of 2022, community solar projects exist in 41 out of 50 states (with at least one community solar project live). However, only 22 states actively support this type of program. About 72% of shared solar projects are concentrated in just four states: Minnesota, Florida, Massachusetts, and New York. Maine’s community solar program has existed since 2011 but hit some initial delays. This is all changing fast, as New Mexico, Maryland, Illinois, New Jersey, Washington DC, Delaware, Hawaii and other states all have community solar pilot programs in place or legislation in the works to approve community solar programs.
Why community solar is worthwhile
Community solar delivers the benefits of solar power to everyone in a community: renters, owners, local businesses, institutions, non-profits, municipal buildings and really anyone with an electricity bill. It saves you money, helps the environment, and strengthens the grid. It’s a triple win for everyone.
The only real downside is lack of availability. Fortunately, this is changing. As more shared solar plants get built and more customers enjoy the lower rates they provide, demand for this service will increase. This, in turn, will lower the cost to build new projects, setting off a virtuous cycle that will build on itself.
The beauty of community solar is that it brings together so many groups that all stand to benefit.
The utility gets closer to its renewable energy target and gets to manage a more efficient grid. Towns and cities boost their economy by creating jobs and reducing reliance on dirty fuel sources. Businesses signing up as subscribers can support renewables and their bottom line. Homeowners and renters have a simple way to support and participate in the renewable energy transition while saving money on their bill.
The more each group buys in, the more comfortable each will become with this exciting new model and the greater benefit for everyone.
In fact, this is already starting to happen. At the end of 2019, there were 2 gigawatts’ worth of community solar installed across the U.S. By the end of 2020, that had grown to more than 3.2 gigawatts, and in the next five years that’s projected to jump to 4.5 gigawatts. If community solar continues to grow at anything like that rate, it will be a major player in our renewable energy future.
Buying Is Usually Better Than Renting Solar Panels, According to This Expert
Buying solar panels gives you the best return on your investment. But renting or leasing is another option to consider.
Mike De Socio is a CNET contributor who writes about energy, personal finance and climate change. His path in journalism has taken him through almost every part of the newsroom, earning awards along the way from the Boston Press Photographers Association and the Society of Professional Journalists. As an independent journalist, his work has also been published in Bloomberg, The Guardian, Fortune and beyond.
- Journalism awards from the Boston Press Photographers Association, the Society of Professional Journalists and Boston University
A solar panel purchase is expensive and out of reach for many. But there’s another option: Renting or leasing your solar panels.
There are plenty of reasons to invest in solar panels right now. The climate crisis is urgent as ever, the cost of solar is the lowest it has ever been and the financial incentives for installing panels are only growing.
If you hope to see the most financial benefit from a solar panel system, experts say buying is better.
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
Buying leads to ownership and leasing doesn’t. It’s kind of akin to buying or leasing a car, said Gilbert Michaud, an assistant professor in the School of Environmental Sustainability at Loyola University Chicago.
But leasing or renting is also a worthy option as it reduces the barrier to entry, says Michaud. And leasing can be tricky if you plan to move.
Can solar panels save you money?
Interested in understanding the impact solar can have on your home? Enter some basic information below, and we’ll instantly provide a free estimate of your energy savings.
So which is better? Buying a solar system outright or leasing one from a solar company?
The answer depends a lot on your personal circumstances. There are pros and cons to each option, and they serve different goals. But experts say buying or leasing can both be good paths, as long as you know what you’re getting yourself into.
Here’s everything you need to know to decide if buying or renting solar panels is better for you.
What’s the difference between renting and buying solar panels?
When you buy a solar system for your home, you have to pay for (or finance) the entire cost of the installation, and the panels and equipment belong to you.
If you buy panels, you own the system and you have to pay those high upfront costs, but there’s a lot of pros to it, too, Michaud said.
Here some of the advantages and disadvantages to buying solar panels:
Buying a solar panel system
You can claim federal and state tax credits to offset the cost
There’s a higher upfront cost to installing solar
The panels will add to your property value if you sell your home
You are responsible for solar panel maintenance
There’s a potential for higher cost savings over the life of the panels
Leasing solar panels, on the other hand, is an entirely different scenario. Instead of purchasing and owning the system, you would allow a third-party company to install panels on your roof with little or no upfront cost, and then pay monthly to lease the panels.
You’ll still be generating clean energy and potentially lowering your electricity bills. But here are some other things to consider when leasing solar panels:
Leasing or renting solar panels
Little or no upfront costs
No boost in property value
Maintenance is done by the solar company
Less energy bill savings over the lifetime of the system when compared to buying
Lower monthly energy bills
Can become a logistical headache when you sell your home
Is it better to buy or lease solar panels?
There’s no one-size-fits-all recommendation when it comes to buying or leasing solar panels.
It depends on how much disposable income you have, and what your goals are, Michaud said.
If you have the money saved up, and you’re planning to stay in your home for 20 or 30 years, it’s probably better to buy the panels, Michaud said. Buying gives you the best solar payback period, and will give your home value a boost when you eventually do sell.
But maybe you don’t have a lot of cash for the upfront costs, and you want to start generating solar energy as soon as possible, for the environmental benefits. In that case, a lease might be the better, faster path to solar, Michaud said.
Not everyone owns a big home and can afford spending 20,000, Michaud said.
How much does it cost to lease or rent solar panels?
Lease arrangements for solar panels vary widely, depending on the size of the solar system and who your installer is. (Again, think of the analogy of leasing a car.)
Generally speaking, a solar lease will cost between 100 and 200 a month, according to Michaud. But the best way to know for sure is to get an estimate from a solar company.
How to lease or rent solar panels
The process for leasing solar panels is a lot like working with any other type of home contractor. Here are the steps you’ll need to take:
Reach out to an installer (or two)
Contacting a solar installer is the first step on this journey. The company will likely want to come to your home, assess your property and walk you through your options.
Michaud advises getting a couple of estimates, and working with trusted solar companies. If you’re not sure who to call, talk to your friends and neighbors and see who they would recommend.
You can also check out CNET’s list of best solar companies of 2023. CNET did the legwork for you by rating and scoring solar companies using these three criteria: equipment, warranties and service, and whether or not the company offers a lease or rent option.
Deciding between a lease or a power purchase agreement
Once the solar installers have done their homework, they’ll give you some price estimates. Depending on the installer, you might have to choose between a traditional lease, and something known as a power purchase agreement.
With a PPA, a solar company will install, own and operate the solar panels, just like in a lease. But instead of paying the company to lease the panels, you’ll pay the company a fixed rate for the electricity you use (some of which, of course, will be generated by your solar panels), according to Michaud.
The advantage of it, again, is you don’t have to pay those upfront costs, Michaud said. And locking in a fixed electricity rate could hedge against future energy cost increases from a traditional utility provider.
Review and sign the contract
Once you’ve decided between a lease or PPA, you’ll want to take some time to review the solar contract. It’s not a bad idea to have a lawyer review it if you’re unsure about anything, Michaud said.
After you sign the contract, the solar company will get to work installing your panels, and you’ll be generating clean electricity in no time.
How much does it cost to buy solar panels?
Just like with leasing, the cost to buy solar panels will depend on your home, how many panels you buy and who your installer is.
Michaud said he sees most residential customers spending around 15,000 to 20,000, including the cost of labor. That’s the total cost before any rebates or incentives; leveraging the federal solar tax credit, for example, could reduce that cost by 30%.
Another way of thinking about the price of solar panels is the average price per watt. According to 2022 data from research firm Wood Mackenzie, the average 8-kilowatt residential solar panel system cost about 3 per watt. A 6-kilowatt sized solar system at this price per watt would equal roughly 18,000 before incentives or rebates.
How to pay for solar panels
There are a lot of different ways to pay for your solar panels (and any other home improvement project, for that matter). Here are some of the options you might consider:
If you’ve got enough money saved up to pay for a solar installation in full, this is a great option. You’ll avoid paying any interest on a loan, which will also allow you to recoup your investment faster.
If you don’t have 20,000 laying around right now, you could save up for it using a high-yield savings account.
Many banks and solar installers offer loan products that are specifically designed for solar panels. Some states even offer low- or zero-interest loans to incentive solar installations.
Check with your local bank or utility company to see what’s available in your area. A solar loan could allow you to install solar panels a lot sooner, but the downside is that you’ll pay a lot more in interest, which prolongs the payback period of your panels.
Other types of loans
Most financial products can, at the end of the day, be used to pay for solar panels.
- A personal loan is a quick and relatively easy way to secure some cash, but it will come with a high interest rate and generally unfavorable terms.
- A home equity loan allows you to tap into your home value and draw a lump sum of cash. This type of a product has a lower interest rate, but it can be risky to use your home as collateral for the loan.
- A home equity line of credit is another way to tap your home equity, but it works more like a credit card than a lump sum of money. Be aware, though, that these loans usually have variable interest rates, which could mean your payment increases over time.
Lease or power purchase agreement
A lease or power purchase agreement allows you to get solar panels with basically no upfront costs. Instead, you’ll be on the hook for a monthly payment.
Because you don’t own the panels, you’ll either have to transfer the lease to the new homeowner, or have the panels removed. It’s a lot of logistical headaches, Michaud said.
Some credit cards have a high enough limit to cover a 15,000 solar installation. But that doesn’t mean you should take advantage of it.
Generally speaking, credit cards are not meant to finance large home improvements. Unless you can pay off the balance in full when your statement rolls around a month later, carrying a massive balance will quickly rack up interest at a high rate, and could trap you in a cycle of debt.
Home solar financing options
In the face of rising energy costs and a growing climate crisis, many homeowners are looking for ways to cut their electricity bills and reduce their environmental impact. As solar technologies improve and governments continue to incentivize home solar, rooftop solar systems are becoming more and more common. If you are looking into going solar, there are many solar financing structures available. In this article, we share and compare the available solar financing options for homeowners in the U.S.
Overview of solar financing options
There are quite a few solar financing variables to consider, such as ownership, upfront cost, credit worthiness, and more.
For starters, who do you want to be the owner of your solar system? You can often get the best value out of your system when you own it yourself, particularly if you qualify for financial assistance from federal and local solar incentives that can reduce the cost of the system. As a bonus, the added solar panels increase the value of your property.
The average cost of home solar is about 20,000, which is a hefty amount of cash to pay all at once, but it’s the best way to maximize savings if you can afford to do it. Alternatively, you can take out a solar loan to avoid paying the upfront cost and still maintain ownership of your system. Of course, if you plan to finance your system through a loan, your creditworthiness may be a qualifying factor.
If you don’t care to own the system yourself, you can choose a third-party ownership model with a solar lease or a power purchase agreement: A solar financing company or other third party will cover the entire upfront cost, as well as maintain ownership of it throughout the entire lifetime of the system. This way, any maintenance or repairs are the responsibility of the third party. you just get to benefit from the renewable energy produced by the system.
The primary factors of each solar financing option are broken down in the table below:
Power purchase agreement
A comparison of solar financing options
For the highest possible savings, look to purchase your entire solar system upfront. With an upfront cash purchase, you essentially secure roughly 25 years’ worth of electricity, which protects you from electricity rate fluctuations and provides you with energy independence. the power to produce your own solar energy.
Plus, you can capitalize on a variety of incentives and rebates offered to those who purchase their solar system outright. Solar incentives like the federal investment tax credit (ITC) can help offset the upfront cost, and net metering programs. which pay you for solar energy that you export to the grid. help you earn extra money from your system over time.
As the owner, you are responsible for any system maintenance and repairs. However, with your system paid in full, you benefit from not having regular payments or long-term contracts.
For financing that gives you ownership with low-to-no upfront cost, you can take out a solar loan and pay off the cost of your system over time. Just like with a cash purchase, you gain immediate ownership of the solar system, therefore you can be eligible for solar incentives and utility net metering programs. Typically, the payment installations come out to less than your monthly electricity bill, but you’ll still want to make sure that your loan’s interest rate keeps your system costs within your long-term budget. And as with most long-term loans, you’ll need a solid credit history to qualify for certain solar loans.
There are two types of loans: secured and unsecured. While you need an asset (typically your home) to serve as collateral for a secured loan, the interest rates for a secured loan tend to run 3-8%. To contrast, loan rates of unsecured solar loans. which don’t require a property lien. can be as high as 20%.
In California, Florida, and Missouri, homeowners currently can access a unique solar financing loan structure called Property Assessed Clean Energy (PACE). Through PACE, you pay back your loan annually through increased property taxes, which are assessed based on the added value of your solar system. Like other loans, it relieves the burden of the upfront cost and allows you to finance your system over time. It also attaches the debt of the system to the property instead of you as an individual. PACE programs are typically developed by state legislatures and then authorized by local governments. Check out more information about residential PACE programs here.
Solar leases are a great third-party ownership option for those looking to avoid paying the upfront cost of a system. Through a solar lease you pay for the electricity produced in fixed monthly installments, which are based on the estimated annual production of your system. Solar lease agreements typically range 20-25 years, after which you’ll have the option to buy your system at market value.
Because you don’t own your system, you forgo the benefits of solar incentives like the ITC and revenue from net metering programs. This means that your lifetime savings may be lower than that of a solar loan, where you can capitalize on the financial benefits that come with ownership.
Power purchase agreement
A power purchase agreement (PPA) is another third-party financing option, which means that you also cannot receive solar incentives or enroll in a net metering program. As with a solar lease, a PPA’s monthly payments are based on a fixed rate that is calculated from the system’s estimated energy production.
However, a PPA differs from a solar lease in that your payments will vary from month to month. A solar lease’s payments are the same every month, no matter how much energy you consume. Contrastingly, a PPA payment is based on the kilowatt-hours of energy that you consumed during that specific payment period. Because of this, you can expect slightly higher PPA payments during the summer or winter months when you might be using your air conditioner or heater more frequently.
PPA agreements typically include annual rate escalators, so your payments may increase over time. However, these increases are often lower than annual utility electricity rate increases, so you still reap long-term electricity bill savings.
A solar financing option for every homeowner
It’s becoming more and more affordable to go solar every year. Plus, homeowners can choose from a range of financing structures that combine the different benefits and drawbacks of factors like ownership and upfront cost.
Want an estimate of how much solar will cost you? Check out the Enphase System Planner, which allows you to customize the optimal system for your home’s needs.
What are the rebates and incentives available if I go solar?
Rebates and incentives vary based on your location and utility provider, but some common incentives include the federal solar investment tax credit (ITC). property and sales tax exemptions, and net metering.
What are my solar financing options?
Many people finance their solar systems through loans, leases, and power purchase agreements. Those who can afford it may purchase their system outright.
How can I get an estimate for my solar savings?
The Enphase System Planner. which allows you to customize the optimal system for your home’s needs and estimate the cost of such a system.
Should I buy or lease while purchasing a solar panel system?
If you can afford the upfront cost, buying a solar panel system gives you direct ownership over the system, and provides the most immediate savings on electricity. A lease, on the other hand, lets you avoid paying the upfront cost through monthly installments for the use of the system. however, you won’t have the option to own it until the lease ends.
Should I opt for solar loans or solar lease?
A solar loan is a great financing option for those looking to own their solar system right away but pay off the cost over time. You are also eligible for other solar incentives if you take out a solar loan. A solar lease might be better if you want someone else to handle the maintenance and upfront cost and are looking to make regular payments over time.
How do I find the best solar loan?
The best solar loan for one person might not be the best for another. You should first determine what your objectives are for going solar. Are you looking for immediate savings or maximum savings? Low rates or a short payback period? You will typically find that a secured loan will offer you lower interest rates, and paying as much as you can down will lower your overall loan amount.
How can I reach out to a solar installer?
The Enphase Installer Network is carefully designed to deliver the highest standards of customer service and system quality using Enphase products. Use the Enphase Installer Locator to find the best installers near you.
How to Buy Commercial Solar with No Upfront Costs
The thought of investing in a commercial solar energy system may seem impossible for your business or organization at this time. At EnergyLink, we know that times are financially tough for many people and we want to help you find a solution. By utilizing one of the solar funding options addressed below, you could install a solar system with no upfront cost and experience positive cash flows from day one. Here’s how:
C-PACE Financing Program
C-PACE (Commercial Property Assessed Clean Energy) is a financing program for businesses that want to install energy efficient or renewable energy improvements to their building. If you own commercial real estate and want to install solar arrays in a cost-effective way, CPACE may be a good option. Similar to other solar financing methods, C-PACE borrows capital from C-PACE providers to pay for the construction costs and the installment of a new energy system. One of the best parts of the C-PACE program is that there are no upfront payments. This means after the installation of the energy project, business owners enjoy energy savings from day one. Every year after the project, business owners will pay the C-PACE provider back in the form of property tax. The average project is paid off in 20 years although the payment plan timeline depends on the commercial property. C-PACE is becoming an increasingly attractive option for commercial building owners desiring solar as it leads to lower utility bills and oftentimes an increased property value. Overall, C-PACE is an innovative solution that allows property owners to install a solar energy system without having to drain working capital, all while giving them the flexibility to pay back the financing over a term that coincides with the life of the upgrades. For more information on how C-PACE works and if your company qualifies, check out our blog post that covers everything you need to know.
Who Should Consider This?
- Is located in a jurisdiction with C-PACE programs
- Wants long-term financing (over 10 years) with longer monthly payments
- Wants to invest in long-term improvements to building resiliency and reliability
- Does not plan to own or occupy its facilities long-term
- Is interested in improving their organization’s sustainability
Another way to receive funding for a solar project is through rebates. If your company or organization wants to save 10-20% on your solar installation, a rebate may be the perfect option.
A rebate is a sum of money paid by your local utility company to help you purchase a renewable energy system or energy-efficient technology. Rebates typically subsidize costs for solar panels as well as other energy-efficient technology such as building automation systems, lighting retrofits, HVAC upgrades, and energy-efficient water heaters. Ultimately, it makes your project more affordable upfront and it shortens the payback period.
In order to receive a rebate, a company or organization must apply. At EnergyLink, we know how stressful this process can be so we handle the application process for all of our clients. That’s right, no work on your end! Our team will work with your organization’s utility provider to facilitate applying for and receiving all renewable energy and energy efficiency rebates. To learn more about rebates and how to obtain one, check out this blog post.
The solar tax, a type of investment tax credit, is also a great resource to lower the cost of solar. But, with the tax credit declining each year, it is important to move quickly on this one to receive the most savings.
The solar investment tax credit is a tax credit that can be claimed on federal corporate income taxes for 26% of the cost of a solar photovoltaic (PV) system commencing construction on or before December, 31st 2020. Each year, the tax credit will decrease as shown below.
- 2020: 26% tax credit
- 2021: 22% tax credit
- 2022 onward: new commercial solar energy systems can deduct 10%. No federal credit for residential solar
Check out this blog post to see if your business could qualify for this tax.
At EnergyLink, we are committed to helping our clients find energy-saving solutions even in this challenging time. For more information on how to finance a solar energy system during this time, contact us! To learn more about other financing options not addressed in the post, click here.
How to Go Solar
There are many options to choose from to power your home with renewables.
Choosing to go solar is a great way to help solve the climate crisis. There are lots of options for you to consider.
Which Type of Solar is Right for Me?
Ground-Mount and Rooftop Systems
Traditional rooftop and ground-mounted solar systems are best for residents open to purchasing and owning solar panels. These systems can have higher upfront costs, and maintenance usually is up to the owners.
Former Mayor Suzanne Jones Checks out a rooftop solar installation in Boulder
Shares in a Solar Garden
In Colorado, Xcel Energy customers have access to community solar gardens. These often provide similar bill credits to roof-top or ground-mount systems, but don’t require roof space on your home. This is a great option for people who rent, live in multi-family buildings or who don’t want to own solar.
A team of residents install a solar garden north of Boulder