Harness Power


Posted On: June 15, 2020

Can I Get Solar Panels For Free?

Can I Get Solar Panels For Free

When shopping around for a solar system, you have probably heard at least one company advertise “free solar panels.” Most of these companies will go on to state that they install a residential solar system on your roof free of charge. At this point, its right to stop and become a bit skeptical. You are probably mulling it over in your head thinking “can I get solar panels for free” or does this sound too good to be true. Go with your gut instinct because nothing is truly free. 

Can I Get Solar Panels For Free or Is It Too Good To Be True?

Yes, some legitimate installers are willing to put free solar panels on your home, but there is a catch. You have to be able to decipher the sales pitch that they are giving you. The catch to free solar panels is, the company will require you to enter into a solar lease or power purchasing agreement (PPA).  

Both of these agreements will put free solar panels on your roof without any upfront costs, but they will charge you for the electricity that they produce. Most of these offers will save you money, but not all, so check the numbers carefully. You will need to be able to compare options and see what makes sense for you and your family. 

You could also consider buying your solar system or financing it for zero down with a solar loan. These options may work out better in the long run depending on your specific situation. When a salesperson says “free solar panels” they are usually referring to a solar lease or power purchase agreement (PPA). 

Can I Get Solar Panels For Free

Understanding Solar Leases and Solar PPAs

The one thing that solar leases and PPAs do is offer consumers a way to get solar without any upfront cost. However, there are other options available, such as financing your system with zero down.

A solar lease will allow the installer to build a system on your property and charge you a monthly fee to lease the equipment from them. This agreement will have you paying a flat monthly fee and will allow you to use 100% of the energy produced by the system. 

Power purchasing agreements (PPA) are somewhat similar, but rather than renting the equipment for a set fee each month, you will be required to buy power from the installer rather than the utility company. You will typically be charged a flat rate per kWh. Therefore, if you happen to use less power then what the system produces, you will be required to pay for the excess electricity is produced, but not to worry – this will all be trued up annually between you and the utility company if you live in a Net Metering region.

What Should You Be Wary Of Free Solar Agreements?

While it’s great that you are taking steps to improve your home and invest in clean energy, you will not technically own the system. Plus, the solar energy that is produced from your panels will not be free. Therefore, solar panels are never technically free. 

A solar lease or PPA agreement will mean that the solar company still owns the system, while you are charged either a flat lease fee (Lease) or a fee for any electricity that is provided by their panels (PPA). In essence, the company is basically building a miniature power plant on your roof to sell you electricity. 

Some PPA agreements are long term, which can mean anywhere between 20 to 25 years. Once the agreement is over, the company may offer you to buy the system outright or reclaim and remove the panels.  

Be aware that many PPA and solar leases will include assumptions and contingencies within the solar agreement that may have an impact on the value and return on investment. 

Another consideration when Leasing or entering into a PPA is the fact that you will not be able to claim the federal tax credit. It is the solar company in this case who will claim this money in order to subsidize the cost of energy to you. 

While these companies will install the panels for free on your roof, they do reap more benefits in this model.  Ask your CPA if you do qualify for the federal tax incentives and, if so, if it might be better to opt into purchasing the solar system through financing.  Fortunately, almost every solar provider has both options available to you.

Can Free Solar Panels Save You Money?

There are all kinds of reasons why you may want to go with solar. Most people like the fact that they will be saving money and eliminating costly utility bills while decreasing pollution. No matter which way you go, you will always have the joy of the environmental aspects of having a home solar installation.  

The financial benefits of “free solar panels” are where things get a little nuanced. Even though you are doing a great thing by going with solar, Companies who offer solar products and installation are in it to make a profit. 

Companies who provide you with a solar lease or PPA will make their profit by selling you electricity. This rate will typically be lower than you are currently paying for electricity. Some companies are out to help you save money and others are more interested in making as much money as possible. 

There is a possibility that you may reach a point in your lease where you are spending more than what you would on traditional electricity. For example, the size of your family can fluctuate. Perhaps your children were at home when you first signed your lease, but now they are away at college or have grown up and started their own families. 

In this scenario, you will be using significantly less electricity at this point in your life then when you first signed up for your solar lease. Just because the size of your family decreased, the lease cost will not. This could mean that your payments are more than what the average electric bill would be. The workaround here is to undersize your system proportional to your concern. 

As a solar shopper, you have a variety of options and companies to choose from. Take the time that is needed to shop around and find the best deal and the most forthright company for you. 

Can I Get Solar Panels For Free

A Solar Lease May Affect Your Home’s Value

Many buyers are looking for solar homes, but if your panels have been leased it doesn’t necessarily mean your home’s value sees an increase. Typically, a solar system will add upwards of a 4% increase to the value of a home, but leasing means the panels are not your personal property. 

Industry leaders suggest that leases or PPAs won’t always increase the value of a home. Buyers may shy away from homes that have a lease or PPA system, as they do not understand all the jargon involved with the lease or PPA.  This is why it is important to go with a reputable company that can help you navigate the transfer of your system.

Appraisers may mark solar leases as a liability rather than an asset (they are less tough on PPAs due to the buyout clause). A lease may give a buyer pause. It comes down to this, there can be challenges involved in selling a home that has solar panels on the roof that are not owned by the homeowner. Because of this, the new owner of the home will need to assume the lease or buy out the remaining payments.  In a PPA, the new owner can assume the PPA or buyout the system itself and own it as it’s rolled into the new mortgage. 

Sometimes, sellers will have to adjust asking price for their home to reflect the remainder of the lease term (monthly payments). This is rarer, but it can happen. 

Can I Break My Solar Lease?

Not in most cases, as it will be laid out in your agreement with the company you signed with. Most of the time you will be required to pay off the balance of your lease, which will turn into the full price of the panels. Plus, you have to remember, you will not have any state or federal credits to help you.  Better to go with a PPA in this case as there is a more palatable buyout clause.

Better Options For Financing A Solar System

While PPAs are appealing for the fact that you will get to go solar immediately, remember that you don’t own the system. The appealing part of leases and PPAs is being able to go solar without having to have any cash in hand, and also not putting any debt on your books. Leases were especially important during the time when solar system prices were very high, and PPAs are still very popular. 

However, times have changed since solar leases were first introduced. The price of going solar is more affordable than ever. Plus, there are solar financing options other than solar leases that are readily available to those looking to own a system. 

Solar loans allow you to invest in a system with zero-down. It differs from a lease in the fact that you will have ownership of the system. These types of loans tend to have low-interest rates. Alternatively, you can also seek a loan at your personal bank or from a 3rd-party lender. 

The attractiveness of a solar loan is the fact that you will still be able to get your system with zero down and you will truly own it. You may be able to claim the 26% tax credit for going solar, which you can use to apply to your loan balance. This will help accelerate the payback schedule. 

Can I Get Solar Panels For Free

Hidden Cost Involved With Leases and PPAs

To get an idea of how buying solar compared to leases and PPAs we have done a small comparison to show you how much you can financially save. We evaluated cash purchase, personal loan, solar lease, and solar PPA. 

For this demonstration, we have based the cost on a 5.2 kW system, while assuming the cost of electricity is $0.16/kWh and a gradual rise of 3% every year for 25 years (length of panel warranty). 

We included the value of the tax credit in the purchase and personal loan options. Also, we factored in a $1 per watt installation charge. 

Leases and PPAs do not include an installation charge as it would be included in your package. In addition, we left out the tax credit because this will go to the solar company. 

With all of these factors in place, buying your system outright appears to be the best option for over 25 years, but paying cash is not something everyone can do. You will be in the red upfront, but in the long run, you will save the most money by going with this option. 

The next best option may be a personal loan. The cost upfront is zero, and the interest payments will eat at the energy savings for the first few years, however, there is a quick rebound around 5 to 7 years when you begin to keep 100% of the energy savings from their system. 

Lease and PPA are less profitable, but the only option for some considering their tax situation (aka they cannot claim the tax credit) and for those who want simplicity. While you do not have any upfront cost, the cost that you have to pay the solar company each month will cut into your savings compared to a cash purchase or a loan.  The end of the panel’s warranty period is typically around 25 years. At this point, the lease and PPA will have saved you a significant amount compared to the utility but will have also consumed more than half of your potential energy savings compared to the other options. 

It is exciting to get a solar system, but you want to make sure that you are reaping all the benefits. Financing your system with a solar or personal loan may be better options than choosing a lease or PPA depending on your situation. 

Solar Advisor

If you are ready to invest in a solar system but do not know where to start, give Harness Power a call at 949-478-5597 or fill out our online contact form. We can help step you through all of your options so you can choose the best solution for your solar system goals.

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