Are free solar panels actually free?
You might have seen solar installers advertising 'free solar panels' and thought: this is too good to be true.
Well, your gut instinct is correct - most things in life don’t come free. These tricky “free solar” marketing tactics refer to certain financing options where homeowners don’t own the solar panels on their roof and instead just use (and pay for!) the energy they generate.
Trying to navigate what a company offering free solar panels is trying to sell you can get confusing. Luckily, we’re here to help. Keep reading, and we’ll tell you exactly what you’re getting into before you choose free solar panels.
When installers talk about free solar panels, they are referring to one of two solar financing options:
With solar leases and PPAs, you enter into a long-term contract with a solar company. The company will install solar panels on your roof at no cost to you. This is why companies will often advertise these financing options as “free”.
However, you are still paying money for going solar. Instead of paying for the solar panels, you’re paying for the solar electricity.
It’s also important to note that if you go solar through a lease or a PPA, you do not own the solar panels on your roof. The installation company is the sole owner of the solar system.
Learn more: Solar leases vs. solar PPAs
Free solar panels aren’t necessarily a scam as much as they’re a sneaky marketing tactic. As we said, the solar panels are, in fact, free. Companies just tend to leave out the part that you have to make monthly payments to them for the energy the panels generate.
Here’s how it works: the installer puts the panels on your roof and retains ownership of the system. You get to use the energy generated by the solar panels instead of taking energy from the grid, which lowers your monthly utility bill. You also get to take advantage of net metering, which reduces your utility bills further.
However, you do have to pay the solar company for using that solar energy. Exactly how the monthly solar payment works depend on if it’s a lease or a PPA and the terms of your contract. The solar payment is typically designed to be lower than your utility bill before the panels were put on your roof, so you will still be saving money on electricity.
No, you cannot get free solar panels from the government. However, other state and federal solar programs provide homeowners with incentives to help bring down the cost of installing solar panels.
The largest government solar incentive is the federal solar tax credit. The tax credit is equal to 30% of your solar installation costs and lowers what you owe in federal income taxes.
But, in order to take advantage of the 30% tax credit, you need to be the owner of the solar panels. You do not qualify for the solar tax credit if you choose to install free solar panels through a solar lease or PPA.
Free solar panels can save you money on your electricity bill. Solar lease and PPA payments are usually designed so that what you pay for the solar energy you use is lower than what you paid your utility company for electricity.
With a solar lease, you’ll be given a flat fee you have to pay to the solar company each month. If your electricity bill was typically about $150 and your lease payment was $100, you would ultimately be saving $50 a month thanks to the lease.
Solar PPAs work a bit differently. Instead of being charged a flat lease payment, your monthly PPA payment is based on the amount of electricity a solar energy system produces. The PPA agreement will list a rate for the solar energy generated, similar to how your utility company has electric rates. If your utility’s electricity rate is $0.15 per kWh, your PPA rate might be somewhere around $0.12 per kWh, so you will still be saving money.
Beware of price escalators. Solar PPAs typically include price escalator clauses, indicating how much they will increase your solar charges yearly. You’ll want to ensure that the escalator is lower than how much your utility prices typically increase yearly. Otherwise, you might actually end up spending more on your PPA payments over time than you would have on your utility bill if you never went solar at all!
You will likely still get a utility bill if you install free solar panels. If your home uses more energy than your solar panels produce in a month, your utility company will have to charge you for the power you take from the grid.
Your utility may have other fees or taxes that cannot be offset by solar, so you’ll still have to pay them. There may also be a monthly minimum bill requirement. Check your utility rate plan to see what charges you can expect after going solar.
Cash purchases and solar loans will give you the best long-term solar savings.
Don’t let the word free fool you – other solar financing options can provide you with much better solar savings in the long run. In fact, financing your solar panels through a solar lease or PPA will save you the least amount of money.
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, even though you do have to fork up thousands of dollars upfront.
But, we get it, solar isn’t cheap. Not everyone has $15,000 lying around to get a solar panel installation. Luckily, you can take out a loan to finance your solar system. Solar loans give you the best of both worlds: you don’t have to worry about the upfront costs of installing solar, but you are the system's owner and still get substantial long-term savings.
Yes! There are lots of solar incentives and rebate programs throughout the United States that can help lower the cost of installing solar panels. We have already touched on the federal solar tax credit, which reduces the cost of solar by 30%. Some states, like Arizona, have a state solar tax credit that helps lower what you owe in taxes, too.
Some states and utilities offer solar rebates that directly lower the solar installation cost. In New York, for example, homeowners can earn $1,400 when they install a 7-kilowatt solar system thanks to the state’s NY-Sun program. Some states will pay you for the energy your solar panels produce through Solar Renewable Energy Credits, or SRECs, which can potentially earn you hundreds of dollars in extra cash per year.
There are also several low-income incentives to help ensure everyone can enjoy the benefits of going solar. One of the most notable is California’s Single-Family Affordable Solar Homes program (SASH). The SASH program is run by the nonprofit organization GRID Alternatives, which works to increase access to clean energy.
Remember, you won’t be able to take advantage of most of these incentives if you install free solar panels because you do not own the system.
The easiest way to find what local incentives are available is to use our solar panel incentive calculator.
You can sell your home if you have free solar panels installed. While it can technically be done, it isn’t easy. Solar leases and PPAs can be transferred to a new homeowner, but you have to find a buyer willing to take over the contract, which is more complicated than it sounds.
If it becomes too difficult to find a buyer because of the free solar system, you could technically buy the system from the installation company or break the contract. However, both of these options are extremely expensive.
It’s much easier to sell your home with solar panels that you own because the new homeowner doesn’t have to enter into a contract with a solar company. Owning a solar system also adds value to your home!
Free solar panels only make sense for homeowners who don’t qualify for the federal tax credit or a loan. Otherwise, the best way to get rooftop solar is by buying a system with cash or a solar loan.
Purchasing a solar system provides you with substantially higher solar savings, potentially tens of thousands of dollars over the system’s lifespan. Buying solar panels also allows you to take advantage of all the great incentives and rebates that are available in your area.
Most homeowners choose to take out a loan when going solar, as it allows them to avoid having to pay high upfront costs but still reap the benefits of being the owner of the panels. So, while free solar panels might help avoid the high initial costs of going solar, they end up biting you with low lifetime savings.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.