Ask an Expert: What Are Some Ways to Afford Solar Energy?

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Many homeowners who are new to solar energy don’t realize how many purchasing structures exist to help them afford solar panels. Leases, loans, and PPAs allow homeowners to install solar on their homes with little to no money down, and reap all the benefits of a reduced monthly utility bill without a costly upfront purchase.

There are subtle differences between the different pricing structures, though. To help us understand each one, we spoke to Lora Peretti, the Inside Sales Manager at CodeGreen Solar. CodeGreen is a well-established solar provider with five locations across the US and its territories, in New Jersey, Pennsylvania, South Carolina, California and Puerto Rico. They specialize in high-performing solar installations that are cost-efficient and aesthetically pleasing. Here’s what they had to say.

We’ve seen a lot of interest lately in alternative purchasing structures, such as PPAs or solar leasing. What are some of the advantages or disadvantages to using one of those payment methods, versus a tradition upfront cash payment or loan?

In the long run, a loan or financing is usually the least expensive method if you plan to stay in your home for a 20-year period of time. However, A lease or a PPA will save you a substantial amount of money over the years without the larger cash outlay for a purchase.

With a lease, it’s exactly that: you’re leasing the panels that are being put on your home. The way that a lease is structured is based on the size of your system, which is based on your average monthly bill. Let’s say, based on your average monthly bill, you use about 8,000 kilowatts a year. If your roof has enough space, we would put an 8kW system on your home. With the lease, you’ll pay a set amount every month based on lower price per kilowatt than your utility company will charge you.  One of the nice things about this is that it’s the same amount every month.

Since you don’t own the solar system with a lease or a PPA, you won’t get the tax credits or the incentives in NJ.  With a purchase or a loan, the owner of the solar system can get the incentives and the tax benefits. This will help defray the cost of the system over time.

With a PPA or Power Purchase Agreement, you’re agreeing to buy whatever power your panels produce at a discounted rate to what you would pay your electric company over a given time. Most solar companies offer both a lease and/or a PPA with a budget fixed monthly payment. 

There are some PPAs where the payment per month is based on the power the panels produce each month (still at a reduced rate).  For example, your panels normally produce more power over summer months. Since you’re paying for every kilowatt it produces each month, your bill for that month might be for a higher amount of energy than you actually used.  In the other months, when the solar system produces less, you have stored up credits that will offset the charges for that month. Over a twelve-month period, it still costs you less money, but sometimes, with PPA’s there could be peaks and valleys where you don’t get the even payment.

Home finances

So, one question about PPAs. Let’s say it’s wintertime and you’re producing less energy than you actually need. Do you have a separate bill with your utility for conventional power?

Yes, you’re always going to have a bill from your electric company whether it’s a lease, a PPA, or you purchase your system outright. Utility companies charge a small transmission fee for using the power lines. 

So my next question is about the eligibility requirements. I know for PPAs and leasing programs, you have to have your roof inspected for eligibility. Are there certain factors that you know that might make a roof qualify or not qualify for a PPA or leasing program?

The optimal solar system is going to be placed on the southernmost part of your roof. So, if you have a roof that’s pitched north-south—perfect north-south—that’s going to be the perfect part of the roof to put the solar system on.

It’s going to receive the optimal amount of sun from early sunrise to sunset.  Part of what makes that the most effective is that during winter, the rotation of the earth makes the sun lower in the sky. Therefore, from sun up to sun down, the northernmost part of your roof is getting even more direct sunlight as it moves across the sky.

The southernmost facing roofs are going to produce more solar energy because of the way the Earth rotates and the way the sun becomes lower in the sky. Solar panels can be placed on roofs that face east-west, or that are on a north-south angle that are partially east-west, rather than directly north-south.

That’s one of the things that you look at. The more energy you can produce with the least number of panels will make the system less expensive and produce more energy.

One of the other things to look for is tree shade—if there are trees that are going to shade too much of that southernmost part of the roof, they may have to be removed. Our company has partnerships with tree companies that will come take trees down at no upfront cost to the customer.

How long is the contract length usually for a PPA or a lease?

We do a twenty-five year contract.

Do you have options to eventually buy out the contract with either?

Yes. What happens is there’s a point into the agreement where you have the option to just outright purchase the system.

As I said earlier, if you plan on staying in your home long term, even purchasing the system a few years into the lease or PPA will save you money long-term. This is because you’re just paying for the system itself. You’re not paying for all the energy it produces for the rest of the 25 years.

Do the payments that you made before go towards the system purchase? Or do you just have to purchase it all outright?

Part of those payments will go toward it.

And how do you help customers decide between the different options, especially when it comes to payment method?

It really is all about the customer and their financial constraints. Most of the time when you do a purchase, you need about $27,000 to $30,000 to install the system. There are some people that do have $30,000 to install the system upfront, but for purchases, most people take a loan.

There are also companies like our partner, Dividend, who you can use to get a solar loan. That kind of loan is almost set up the same way your lease or your PPA is set up. This way it spreads the payments out over a long period of time so it doesn’t become too expensive.  Similar to any other type of loan, you can set your payment options for a longer or shorter loan period of time.

You can get your own financing to pay it off. When we go to the consultation at the home, we talk to them about all of their options and the costs involved in each. We can show them a number of proposals so they can make the best decision for their budget.

That’s helpful to know. I also have a question about selling your home. Say you do get into a lease, but you decide down the line that you do need to resell. Are there ever any issues with transferring the contract or anything like that?

We have not had any issues with transferring ownership. When you get a lease, a PPA, or a loan, you should have good credit. To get a loan or to buy a house, you also need to have good credit. Since the homeowner is the person who will also take over the lease, it works out fine.  There has never been a problem transferring from the person who owns the house to the person that’s buying the house.

The seller can also decide to buy out the system.  If you decide to buy the system out, you can add some of that to the value of the home.  Once you buy out the system, you are basically selling a home with no electricity bill. This is valuable to the purchaser because they are buying a home with a greatly reduced electricity bill.  Many people can add something to the price of the house for this added value.

Are there certain areas of the country where it’s harder to get a PPA or a solar lease? Because of regulation, etc.?

There are places that make it more difficult through regulation. I couldn’t give you a list of them, but there are states and townships that are able to. There are certain townships that make it very expensive to go through the permitting process. And there are townships that have municipal electric—and some of them are not really friendly to solar, and they make it really difficult or arduous to install solar.

New Jersey (where CodeGreen is located) is a perfect state for solar. Here, the electric companies are rather expensive and the bills are high. We help hundreds of people every month to go solar and reduce their electricity bills.

Investment in renewable energy. Business metaphor.

What would you say to a homeowner that is interested in solar but thinks it might be too expensive for them?

To go solar, there’s no money upfront. There’s no money out of pocket. We handle the entire process, from start to finish. We handle all of the permitting, all the inspections, and everything that we place on the home; we take care of everything. It’s guaranteed—if anything ever happens to it, because you don’t own it, we have to fix it. There literally is no cost to you except for paying a reduced electricity bill every month. That’s really all you end up having to pay.

Your home is one of the biggest investments that you’re going to make—it’s a big decision. And I think a lot of people aren’t sure about what’s going to happen if they move, and whether it’s going to add to the value of the home or take away from the value of the home. But we need to move toward cleaner energy. It’s going to have to happen.

The government has given us incentives and there are incentives still out there for us to be able to provide low-cost solar to people. The longer people wait to make that decision, the worse off they’ll be, because those incentives may go away somewhere down the line. And then it will become a little bit more expensive to do.

Right now, the electric companies are also being incentivized to allow people to put solar up because they’re required to make a certain percent of their energy that they produce has to come from clean energy. When we put these solar systems on people’s houses, it benefits us all.

The technology for solar panels has changed over the years, but it hasn’t changed a significant amount. The solar panel that you put on your house today will be producing at 80 percent of its original efficiency in 20 years. It’s really going to be producing at a very high level in 20 years. It’s not close to being obsolete in 25 or 30 years. It’s a very simple design, which is why they really haven’t changed much over the years.

Can you talk a little about solar storage and its future?

I can’t tell you when that will happen, but I can tell you that everyone in the solar industry is looking at some sort of storage. They are building smaller and more cost-effective units all the time. All of us in the industry are kind of watching it and looking at different companies that are doing it. I think that eventually, all solar providers will be hooked up with some way to help homeowners store their own power.

We sure hope so. Thanks for speaking with us today, Lora!

My pleasure.