What You Should Know About Free Solar Panels
7 - Minute Read
PUBLISHED: Sep 9, 2022
Are Free Solar Panels Really Free?
Offers for free solar actually involve leasing a solar system or entering into a power purchase agreement (PPA) with a solar provider. If you read the fine print, you need to make ongoing payments, often for around twenty years.
A solar lease involves renting the equipment and making monthly payments for its use. However, having solar panels will typically significantly reduce the home electric bills so the savings might cover the rent for the panels. Although solar leases might be a good opportunity for some households, the panels really aren’t free.
Other times, free solar offers involve entering into a power purchase agreement (PPA) with a company. This means that you agree to pay for the solar electricity produced by the system. Often, the rate for the power is less than the price of grid power, so it can result in energy savings.
Although the solar panels aren’t free because the household doesn’t own them, these arrangements typically involve no upfront investment. That means that homeowners can go solar for no money down.
Energy Bills Stink
Are Solar Leases And PPAs A Good Way To Get Free Solar Panels?
Just like there are advantages and disadvantages of leasing a car vs. owning one, the same is true for solar leases and PPAs. Typically, it is more advantageous to own a solar system over the long run, but this does depend a bit on your situation.
Free Solar Panel Pros
You’ll power your home with clean energy and reduce your reliance on fossil fuels. Most power grids contain a mix of electricity from coal, natural gas, nuclear, and renewable energy. However, many homeowners really want to decrease their reliance on fossil fuels to reduce their greenhouse gas emissions. Solar leases will mean you power your home with clean, solar energy.
You will likely save money on your electricity bills. The rates solar leasing companies charge are almost always less per unit of electricity than the utility company. Electricity bills measure electricity in kilowatt-hours (kWh), and the exact rate varies widely across the country. The average cost per kWh in the United States is about $0.14 according to the U.S. Energy Information Administration. With solar leases and PPAs, you will almost always pay a lower rate per kWh of power than you pay to the electric company.
There are many players in the solar power leasing and PPA market, so you can shop around for the best companies. You have at least two options to choose from in most areas, so do some research and find a company with a good reputation. If no installers with strong customer service offer solar leases in your area, you might want to reconsider.
Solar leases and PPAs enable you to install solar panels for no money down. Although the price of a solar energy system has fallen dramatically in the last decade, a solar system is still a major investment. Some homeowners don’t have the money to go solar on their own, making this option appealing.
Although there is a federal tax credit available for installing solar panels, some households don’t qualify if they owe no money to the IRS. In these cases, a solar lease or PPA may be a better deal financially. This is especially true for installations for non-profit organizations.
Because you don’t own the solar system, you aren’t responsible for its upkeep and maintenance either. If the solar system needs a repair, the owner is supposed to complete it. If you are working with a reputable company, this is a nice arrangement.
Free Solar Panel Cons
The solar panels aren’t really free because you don’t own them. Although the solar company installs the equipment on your home, a third party is the actual owner.
Because you don’t own the panels, they don’t add to your home's value. Studies show that solar systems significantly increase the sales price of a home, yet this is not necessarily true for solar leases and PPAs.
If you move and have to break the lease or PPA, you may face significant fees. Read the fine print and understand the terms of your contract. Even if you might not plan to move when you enter the agreement, your plans may change.
If you sell your home, having the solar system on the home can complicate the sale. You might be able to have the new owner take over responsibility for the lease or PPA, but they would need to meet certain requirements and be willing. For example, they may need a good credit score to qualify for taking over the contract.
You may save some money compared to your current electric bills, but you’ll still save more if you own your solar panels. If you compare your energy savings over the life of the system, they are greater if you own it.
There are other ways to buy a solar system for no money down. For example, a home equity line of credit or a solar loan might be a better option financially and can simplify things if you sell your home.
You won’t get the government incentives available for installing a photovoltaic system. There is a federal solar tax credit available for systems installed through 2034, and some states or utilities offer solar rebates. However, if you don’t own your system, you can’t claim the solar tax credit with the IRS or local rebates.
You’ll need to carefully study the warranty and agreement terms to make sure the installer delivers. If the company doesn’t have good customer service, you may not be happy with the arrangement.
You have less control if you want to modify your solar panel system. For example, if you wish to add more solar panels or a solar battery, you probably need permission from the solar company. If you owned the solar system, you could more easily make changes.
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How Can I Get Free Solar Panels From The Government?
Unfortunately, there really aren’t any ways to get free solar panels through the government. In some cases, non-profit organizations can get grants for solar panels, but these don’t apply to most households. There is also a grant through the United States Department of Agriculture for farmers and small rural businesses, but most homeowners don’t qualify.
However, many residential projects may qualify for the Federal Solar Tax Credit with the IRS. A tax credit is a dollar-for-dollar reduction in federal income taxes and is more valuable to the taxpayer than a write-off for the same amount.
If a qualifying solar power system is installed from 2022 – 2032, there is a tax credit for 30% of the total system cost. For systems installed in 2033 and 2034, the tax credit available will be 26% and 22%, respectively. The federal solar tax credit applies to the total system cost, including the equipment and installation expenses. Speak with a tax expert to determine if you can take advantage of this tax credit.
Also, some local governments or utility companies offer incentives for installing renewable energy systems or solar batteries. In some cases, these programs involve cash rebates for installing a solar PV system or a state tax credit. Also, in some states, solar homeowners can earn money for selling Solar Renewable Energy Certificates (SRECs), in addition to the utility savings.
Note that these state and local programs vary by location, so it is critical to determine if there are incentives in your area and if you qualify. Refer to the DSIRE database for information on local incentives and programs through utility companies.
How Can I Get Solar Panels For Less Money Up-Front?
Solar loans are a way for homeowners to go solar for little or no money down. Solar financing options commonly cover the entire cost of the project, including the equipment, labor, interconnection, and permitting expenses. Often, solar installers partner with financing companies that offer products specifically designed for residential solar systems. Sometimes, monthly payments for the loans are less than utility bill savings unless the loan has a really short term.
Another option is obtaining a loan through a bank, such as a home equity line of credit. One benefit of this arrangement is that the interest is usually tax-deductible. According to the IRS, you must “buy, build or substantially renovate your home.” Because a solar system is a major home improvement, the IRS allows homeowners to deduct the mortgage interest on their federal income taxes. Again, be sure to contact a tax professional to uncover what you might qualify for.
The Bottom Line: The No-Cost Solar Program Has Strings Attached
Unfortunately, the offers for free solar panels are not as good as they appear. Although leasing a solar system or entering a PPA will reduce your electricity bills, there are disadvantages to these arrangements.
You will need to make monthly payments, and it can make it challenging to sell your home. Also, you will not get all the benefits of owning a solar system, such as claiming the federal tax credit, qualifying for local incentives, or increasing your property value. Often, either purchasing the system or taking out a solar loan is a better deal for most homeowners over the long run, especially if they can take advantage of the federal solar tax credit.