Going solar is a noble idea because of its potential benefits. In the past going solar was out of reach for many businesses and homeowners since the payment options that were available were not flexible. This has since changed. For the last 10 years, solar installation has become more affordable because of the flexible payment options available. Solar companies and solar financing institutions have come up with many innovative solar power financing options you can use to pay and conveniently switch to solar power. Solar energy financing options are flexible and can accommodate different budgets.
What’s more, federal and state incentives have also contributed to making going solar more affordable. Actually, going solar in 2019 makes even more sense before the expiration of the 30% ITC solar subsidy. The subsidy will reduce in 2020 and 2021 to 26% and 22% respectively. Thereafter, the subsidy will be eliminated for residential installations while commercial installations will continue to enjoy a 10% subsidy.
To get the most out of solar energy, it is advisable to install a solar system that can generate enough power to meet your daily energy needs. As such, you will not pay a penny to your utility company when the panels are working efficiently. And then, you will pay little amount when the weather is not favorable, either cloudy or too hot which affects the solar generation capacity of your solar panels.
Comparison of Solar Energy Program Financing Options
There are three main ways of financing your solar energy, namely self-financing, solar leases and solar loans. If you are a homeowner going solar, ask for residential solar financing options and if you are a firm ask for commercial solar financing options.
Self-Financing Solar Financing Option
If you are in a position to pay for the solar panel system without the help of a financial institution, then you won’t have a loan to service. As such, you will not pay any interest amount to your financial institution. This option will give you the best ROI in comparison to solar leases and solar loans. In this case, you will pay the solar company the cost of the solar system and onward you won’t pay any other amount. You will only need to maintain the solar system which is cheap. Henceforth, you will enjoy free electricity from your solar system. With this system, you will take advantage of the federal and state solar subsidy if the solar panel system is installed before it expires.
Solar Leases or PPA (Power Purchase Agreements)
You will opt to take a solar lease if you do not wish to take responsibility for the solar system. It is similar to renting a house or leasing a car. The solar power company will install the solar system on the roof of your property then you will sign a lease agreement with the solar company. Some leases may require you to pay an upfront amount while others have a zero-down payment option. The advantage of a lease is that the solar company will maintain the solar system, although the maintenance is minimal anyway.
Solar loans are one of the solar system financing options available. One of the reasons for switching to solar energy is to cut down on your monthly electricity bill or better still getting a ROI. Solar financing companies offer flexible loan plans and as such, you can choose what is most suitable to you. Some loans are secured while others are unsecured. Since this is like a traditional loan, find out if you can offset the principal amounts in future to reduce the duration of the loan period. Additionally, you can choose to have a zero down payment option or choose to make an upfront payment.
When you choose a zero-down financing option, you will not be required to make an initial upfront payment before the solar system is installed on your property. In this payment option, your loan will be repaid in monthly installments only. This loan payment option is very convenient; however, the loan period can be longer than if you had made an initial payment.
Alternatively, you can choose to make an upfront payment on your solar loan. This option reduces your principal loan amount. actually. Also, your loan period may be shorter than when you do not make any upfront payment. You will also pay less interest to the solar financing company.
Assessing Monthly Solar Installments
Because solar energy is an alternative to your utility company’s power, solar leases or solar loan monthly installments are compared to your average monthly utility bill. There are three possible scenarios when making solar loan monthly installments.
Higher Monthly Payments than your average monthly utility bill
With this payment system, you will get a faster ROI because you will be able to clear the loan principal amount in a short period of time. After paying off the loan, you can enjoy free solar energy for the rest of the lifespan of the solar panels. The financial institution will give you a loan that is equivalent to a traditional loan. The higher the installment amount you pay every month, the less interest will accrue to the bank and the faster you will also clear the loan. In this case, if your average electricity bill is about $150, then you can decide to pay the bank $200.
Equal Payment Amounts to your Average Electricity Bill
In this scenario, you will choose to pay an amount that is equivalent to your average utility bill. If for example, your average utility bill is $150, then you will ask to pay such an amount or slightly lower. So that when it is combined with your reduced utility bill, the amount should not exceed your average utility bill of $150. This scenario is ideal if you do not wish to incur more costs on your energy than your current average monthly utility bills.
Lower Amounts in Comparison to Your Average Monthly Energy Bill
Alternatively, you can also choose the option of paying lower amounts than your current average electricity bill. This option will work for you if you want relief from your utility bills and at the same time you want to insure yourself against rising energy bills in the future.
This option is not very advisable if you want a fast ROI because it may take longer for you to clear the loan. This is because the ROI you would have made from switching to solar may end up paying loan interests because the loan will be extended for a longer period. If for example, your average energy bill is $150, then you can request to pay the financial institution only $100 per month.
Why Solar Energy is a Worthy Investment
Solar energy has both environmental and financial benefits.
Solar energy is a renewable energy source and an alternative to the non-renewable fossil fuel energy. Fossil fuels are hazardous to the environment because when they are burnt to generate electricity, they emit greenhouse gases. As such, solar energy is one of the ways of combating climate change.
Financial Benefits of Solar Energy
Worthy to mention, solar energy is a long-term investment that can give both businesses and homeowners a ROI in the long run. A business that uses solar energy is regarded as a green business which boosts it’s corporate and brand image. Solar homes, on the other hand, attract a higher market value than non-solar homes. Also, whichever option you choose, your monthly savings will keep increasing as utility bills continue to rise over the years. Besides that, solar panels have a lifespan of at least 20 years. Also, solar panels are low-risk investments because they are usually covered by the manufacturer’s long term warranty.