How Does Solar Panel Financing Work? Discover The 5 Critical Factors To Consider When Financing Your Solar Installation

Is Solar Panel Financing Worth It?

Are you considering installing a solar panel system for your home and anxious about what solar panel financing options are best for you?

Well, there’s a lot to think about when deciding to invest in solar energy. From navigating through the intricacies of solar loans and payback periods to choosing the best suppliers. With that in mind, we’ve put together this guide to take the pain away from investigating solar panel financing.

Key Takeaways:

How Does Solar Panel Financing Work?

Whatever your budget you’ll absolutely benefit from solar financing as ultimately solar panels pay for themselves. 5 things to consider when investing in solar energy:

How much do solar panels cost?
What is a solar panel payback period?
What is a solar power purchase agreement (PPAS)?
What is a solar lease?
What is a solar loan?

The Benefits Of Solar Panels

Before looking at how solar financing works, let’s quickly look at some advantages in installing solar energy. Other than generating your own cheap electricity and becoming either self-sufficient or partially sufficient (so you can run your major appliances), the other benefits of solar energy are especially strong, including:

Federal tax incentives and state schemes to install solar panels.
Savings on your utility bill.
Not being reliant on energy companies.
Earning from SREC and Net Meters as you offset the excess electricity you generate.
It increases your property’s value.Item
Reducing your carbon footprint and actively contributing to becoming more sustainable, which the planet desperately needs.

If you want to take a deep dive into this, check out our guide on Solar Energy Pros And Cons: What Are The Top 12 Advantages And Disadvantages Of Solar Energy In 2021?

Let’s now look at how solar panel financing works in more detail.

How Much Do Solar Panels Cost?

As with any investment, this will depend on the type, quality and number of solar panels you’ll need for your sustainable energy plan. Also, whether you want to reduce or eliminate your electricity bill completely. Before we look at costs here’s a quick review on solar panels.

What Is A Solar Panel?

They collect sunlight and turn it into electricity. A solar cell panel, also known as a solar electric panel or photo-voltaic (PV) panel is made up of photo-voltaic cells which generate electrical power by using sunlight as a source of energy. These PV modules or cells makeup PV panels, and are mounted in a framework for installation either on roofs, walls or on the ground.

For a fuller description, check out The U.S. Department Of Energy article on how solar energy works.

Not all solar panels are created equal. There are advantages and disadvantages to each type of solar panel. Here’s a summary.

Are The 4 Types Of Solar Panels?

Factors To Consider In Solar Panels

Thin Film Solar Panels And cells

Polycrystalline Solar Panels

Monocrystalline Solar Panels

Solar Shingles And Solar Roofs

What Are Solar Panel Installation Costs?

Costs can vary dramatically based not just on your budget, goals and property size but also with the supplier you choose. On average, you can see costs from $12000 – $45000 depending on the type of solar panel you choose.

To compare installation costs, and see how much you can save, check out our savings calculator and Get A Free Solar Estimate customized to your unique situation.

What Is A Solar Panel Payback Period?

6 Factors To COnsider

This is how long it takes to get your investment back from installing a solar panel system for your home. When calculating the solar panel payback period, consider 6 factors.

How much you spend on electricity annually
Your solar panel set-up costs
Cost of a solar loan
The Federal Tax Break and state incentives you received
Your estimated Net Meterage and SRECs earnings
Your annual savings

With this information, you’ll be able to work out the time it takes for the savings on your utility bill to pay for the installation costs.

What Is The Average Payback Time Of Your Investment In Solar Panels?

So how long will it be before you get your investment back?

The US Department Of Energy estimates that the average payback time is 4 years. However, this depends on your state and the incentives you have received, plus the average cost of your electricity bill from your utility company.

Essentially, to work out your breakeven time you need the:

Total Set Up Cost E.g. $18 000 minus Incentives received E.g. $10000
= $8000
Total savings per year, E.g. $1000 plus what you sell back to the electricity company through an SREC E.g. $1200
= $2200
Set-up costs $8000 divided by the total saving $2200
= 6.5 years to breakeven

To quickly work this out, and see how much you can save, check out our savings calculator and Get A Free Solar Estimate customized to your unique situation.

What Is A Solar Power Purchase Agreement (PPA’s)?

With this type of funding, the solar finance company owns the system. They install it and make sure it’s maintained. The energy that’s generated is then sold back to the homeowner. It’s great for getting cheaper electricity, with no upfront costs. With this solution, you’re aware of how much the solar electricity will cost for the duration of the PPA.

What Is A Solar Lease?

Similar to the PPA, this is a way of installing a system with no or limited upfront costs. Again, the solar panels are owned by the leasing company and you have to pay a monthly fee. The requirements and savings depend on the contract you sign and often it’s difficult t o work out what your actual savings will be.

What Is A Solar Loan?

Solar power loans are considered to be the best way for solar panel financing. Not only do you own the solar panel system but you get the Federal and State Incentives, and if applicable, you can earn money on generating electricity through Net Metering and SRECS.

Solar loans can be both secured and unsecured, offering different credit terms. As they are highly competitive you need to search for solar loan companies near me and see their different solar loan interest rates, loan inducements and monthly payments. The best solar companies will offer great terms and if you click here you’ll see which is best for you.

Summary Of How Does Solar Panel Financing Work?

As we’ve seen there are various options for solar financing to suit every budget. The 5 things to consider when investing in solar energy include looking at:

How much do solar panels cost?
What is a solar panel payback period?
What is a solar power purchase agreement (PPAS)?
What is a solar lease?
What is a solar loan?

To see how much you can save, check out our savings calculator at the bottom of the page and Get A Free Solar Estimate customized to your unique situation.