Solar photovoltaic (PV) technology has gained worldwide popularity in recent years. Many products are available on the market. Prices have come down. There are still federal and state incentives for solar PV installations.
Solar PV systems offer great money and energy savings opportunities. Nevertheless, solar PV systems are still big-ticket items. The good news is that there are many different ways to pay for the energy generated by solar PV systems at your home.
- Purchase – Installed Solar PV systems now cost $5 – $6 a watt depending on the technology and product. For a typical home requiring a 3 KW system, this amounts to $15K to $18K. Subtracting the 30% that can be taken as federal tax credit, the cost is reduced to $10.5K – $12.6K. There may be other local incentives and rebates that can be used to lower the cost (note that the 30% federal tax credit applies after the other incentives are taken). Another cost to keep in mind is maintenance. Solar PV systems are reliable so this cost tends to be small. Owning a solar PV system has been the most common. For most people, purchasing a system is likely to be most economical in the long run. There are also energy efficiency loans available for solar PV purchases. One of these loans was the PACE (Property Assessed Clean Energy) program which, unfortunately, Fannie Mae and Freddie Mac found not acceptable in 2010. However, the concept is making a comeback. Stay tuned.
- Lease – Quite a few solar installation companies have decided to go big in leasing. They install and maintain solar PV systems at your home and charge a monthly leasing fee. At the end of the lease agreement, there is usually a buy out option. All federal and local incentives are factored in figuring out the lease terms. The homeowner operates the solar PV system the same way as if it is a purchased system. He will pay the electric utility company for any additional electricity used but not generated by the solar PV system. Leasing helps the homeowner manage cash flow by spreading the upfront purchase cost over the lease agreement.
- Power Purchase Agreement (PPA) – In this option, the homeowner actually buys electric service from the solar installation company. The solar company offers an electric rate plan that is lower than that from the electric utility, knowing that they can generate the energy in a more cost effective way via solar PV systems. They may have to buy energy beyond the solar system can generate from another source, such as the local utility. But the homeowner does not have to worry about it. They install solar panels at the home and perform all maintenance. Similar to leasing, no upfront cost is required, and all local and federal incentives are factored into the rate plan. Another advantage of the PPA is that the homeowner deals only with the solar company for electric service.
The leasing and PPA options grew a lot in the past 2 years, likely because of the upfront cost avoidance and maintenance. These instruments have been well-known in the commercial sector. They are now readily available for the homeowners. In 2011, more residential solar panels were installed under the leasing/PPA options than purchase. But the choice really depends on the situation of the individual homeowner. The different financing options are truly helpful in getting more of renewable energy generators deployed.
