Are free solar panels actually free?
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You might have seen solar installers advertising 'free solar panels' and thought, “Is this too good to be true?”
Your gut instinct is right - free solar panels are too good to be true. While there are installers that install rooftop solar panels without any upfront costs, they aren’t exactly free. You have to pay for the electricity the solar panels produce.
In this article, we’ll go over what installers really mean when they say 'free solar panels', the downsides of installing solar this way, and if free solar panels are really the best way for you to go solar.
When installers talk about free solar panels they are referring to one of two solar financing options:
With both solar leases and solar PPAs, you enter into a long-term contract with a solar installation company that will perform the solar panel installation at little to no cost to you. The solar company is the owner of the system and they are responsible for all maintenance and installation costs.
Learn more: Solar leases vs. solar PPAs
No, free solar panels are not a scam. Once the solar panels are installed on your roof at no cost to you, you get to use the clean energy the system produces to power your home and lower your electricity bill.
Great sales pitch - right? Here’s the thing - the solar panels are “free” because they aren’t yours. Instead of paying for the solar panels yourself, you pay the solar company for the solar energy the system produces.
Here’s how it works: the solar energy produced by the panels on your roof will be used to power your home. Using solar power reduces the amount of electricity you take from your utility. Plus, with net metering, you can sell excess electricity back to the utility which will lower (or eliminate!) your electric bill.
Now you don’t have a utility bill, but what you will have is a solar PPA or solar leasing payment. Essentially, you’re swapping out your utility electric bill for a “solar electric bill”.
How exactly does this save you money? In most cases, your monthly solar payment will be lower than what your energy bill was before installing solar. So, if your utility bill was $200 each month before installing solar panels, your solar lease payment might be somewhere around $125 each month, saving you $75 per month on electricity.
The appeal of free solar panels is that you don’t need to have thousands of dollars on hand to switch to solar. This was great 10 years ago when the prices of solar panels were much higher than they are now. In fact, solar leases and solar PPAs helped drive the solar industry forward.
Now, however, the cost of solar is cheaper than ever, so making cash purchases or taking out a solar loan is a realistic option for homeowners. Free solar panels just don’t offer as much of a benefit as they once did.
Actually, they tend to come with more downsides.
Free solar panels provide the lowest long-term solar savings out of all of the solar financing options.
This is because while you are continuously making monthly payments, the system will never be paid off. In fact, the total that you end up paying in solar lease payments could end up being more than what your solar system would have cost to purchase in the first place!
Most solar loan or solar lease contracts include a price escalator to take the increasing value of electricity into account.
However, if the actual increases in electricity prices aren’t in line with the price escalator in your contract, you could end up paying more for solar electricity than you would if you had simply stuck with your utility.
When you get free solar panels, the panels on your roof aren’t yours. Because you don’t own the solar panels, you can’t get many of the incentives associated with going solar.
So, you won’t get the benefit of the federal solar tax credit, or other local rebates and incentives, like SRECs. Not qualifying for these incentives can end up making your long-term savings with free solar panels even lower.
Because you don’t own the solar panels on your roof with a lease or PPA, they aren’t considered a fixture on your house and don’t add any value to your property. In reality, free solar panel systems can do quite the opposite.
It can be extremely difficult to sell your home with a leased system because few potential buyers will be willing to take over a long-term lease contract.
If you can’t find any buyers that are willing to take your lease agreement, you might have to break the contract, which can cost tens of thousands of dollars.
Don’t let the word “free” fool you. There are other solar financing options that can provide you with way better solar savings in the long run.
Ideally, you would want to purchase your solar panel system with cash. This provides the highest long-term savings out of all the financing options.
But while solar is at the lowest price it’s ever been, it’s still pretty expensive to install a system. So, if you don’t have $10,000 to drop on a solar installation, don’t worry, there is another financing option: solar loans.
Cash purchases and solar loans will give you the best long-term solar savings.
Solar loans provide a happy medium for people who want to go solar, but can’t shell out the upfront cost. Taking out a solar loan allows you to own the solar system and have higher long-term savings than solar PPAs or solar leases.
Plus, you’ll get to take advantage of the solar incentives and rebates in your area.
So, while you might be able to avoid the upfront investment, free solar panels will give you much lower electric bill savings than if you had purchased the system. Not only that, you don’t get to take advantage of all of the tax credits and solar incentives in your area.
The best way to install a solar energy system without having to worry about the upfront cost is with a solar loan. Solar loans allow you to own the solar panels, take advantage of solar rebates, and give you higher energy savings over the lifetime of the system.
Free solar panel systems only really make sense for homeowners who don’t qualify for the federal tax credit or a solar loan.
Before you decide to get free solar panels, you should weigh all of the other financing options and get quotes from multiple solar installers. This way you can get the best solar installation at the best possible price.
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