Solar Purchasing Options Got You Confused?

Climate change, social responsibility, tax advantages, saving money—the reasons for going solar are as varied as the homes, families, and lifestyles of today’s solar shoppers. But regardless of the “who” or the “why” of home solar installation, confusion over which finance method to choose is nearly universal—should you buy a system, and if so, should you refinance or get a personal loan? Should you lease it instead? Should you enter into a power purchase agreement? What the heck is a power purchase agreement, anyway?

These are the questions and the decisions that stand in the way of many homeowners going forward with solar installation projects, but they don’t have to be. The solar industry is coming to terms with this market deterrent, and new businesses are cropping up specifically designed to help consumers make the best decision for their individual needs. Solar.com works with homeowners to navigate the choppy waters of solar bidding and financing.

“One of the biggest issues a homeowner confronts when purchasing solar is making apples-to-apples comparisons of bids that offer different finance options,” said Solar.com founder Max Aram. “Most homeowners are looking at the monthly payment number without really understanding the true cost over a period of 10 or 20 years. But the out-of-pocket difference between plans can be significant—to the tune of thousands of dollars.”

Before signing a contract, Aram suggests reviewing the literature regarding different finance plans. Reputable government and academic sites, like Go Solar California (www.gosolarcalifornia.ca.gov) or the National Renewable Energy Laboratory website (www.nrel.gov), feature unbiased guides to educate the public on solar financing options.

If pressed to make a recommendation, however, Aram does have a preference.

“Whenever possible and appropriate, we encourage our clients to purchase the system rather than lease or enter into a PPA. With a lease, while the per-month cost may be lower, at the end of the term, homeowners don’t own the system—they have the option to either buy it or give it back. For a few dollars more per month, that same homeowner on a purchase plan would own the system outright, and at that point, their energy use would truly be free.”

Leases do have their advantages, though. Go Solar California suggests, and Aram agrees, that leases are a suitable option for homeowners looking to be in a residence for five years or less. Aram cautions, though, that it’s important to review the transfer of ownership terms for the lease so that when you do move, you’re not confronted with any troublesome surprises.

Power Purchase Agreements, or PPA’s, are another option altogether. Here, a third-party provider owns and maintains the system and then sells the energy that the system produces back to the homeowner. “This option is appropriate,” said Aram, “for homeowners or landlords strictly looking to reduce their monthly overhead or create a situation where their utility cost is fixed year over year. It’s important to remember, however, that many of these agreements are based on preset pricing per kilowatt—which means, if the price of energy drops and homeowners are locked into a contract, theoretically, they could end up paying more than if they had kept their traditional utility-delivered energy plan.”

Even after learning the pros and cons of the various financing options, homeowners can still face uncertainty over what path to take. “That’s what a solar marketplace is for,” concluded Aram. “A good one knows the home solar installation business inside and out and should be transparent in its business operation. At Solar.com, we take the time to learn about our customers’ unique needs and make unbiased recommendations that are based on what’s best for them—not what’s best for the bank or the installer.”