It’s not surprising that homeowners in Maine are increasingly investing in solar electric systems. The cost of solar has significantly decreased over the last decade, making solar electric systems more affordable and attainable for Mainers.
If you’ve decided that installing solar panels on your home is right for you, your next big question might be: “How do I pay for a solar electric installation?”
This guide covers the primary ways to pay for solar in Maine: direct purchase, loan, and third-party ownership. It also includes some helpful contractual terms to know before signing any financing agreements.
Financing Options for Solar Panels
1. Solar Loans: A Flexible Alternative to Cash
Another way to own a solar panel system is to finance the purchase. There are three common options to finance the purchase of a solar panel system:
- Standard Solar Loans: Maine Solar Solutions offers various solar loan options, including no-money-down loans. Each loan option has a consumer-friendly process and a fixed interest rate, providing the opportunity to replace or reduce your monthly electric bill.
- Home Equity Line of Credit: This type of loan uses home equity for low-interest financing.
- Mortgage Refinancing and Cash Out: Many homeowners take advantage of lower mortgage rates to refinance their mortgages and pull cash out to purchase their solar array.
Ideal for you if:
- You don’t have the cash on hand required to pay for a solar panel system upfront;
- You want to invest your cash on hand to earn a lower interest rate;
- You want to enjoy solar’s financial and environmental benefits on a budget.
2. Third-Party Solar Ownership: Leases and PPAs
Leases and Power Purchase Agreements (PPAs) involve a third party owning the system, with the homeowner paying either a fixed monthly lease or an amount based on the electricity produced. These arrangements offer no tax credit to the homeowner and can pose potential issues during property resale. Please note that Maine Solar Solutions does not offer third-party ownership options.
Ideal for you if:
- You want low upfront costs and no maintenance worries. However, third-party ownership offers no tax credit benefits for the homeowner and could cause potential issues during property resale.
3. Paying in Cash
If you can afford to pay for your system with cash, it will give you the highest return on your investment. You’ll never have to worry about paying interest or any other fees. You’ll own your solar electric system outright and immediately enjoy energy savings costs.
We like to think of it this way: Our solar panels have 30-year warranties. This means that if your solar array produces 100% of your electricity needs, you have just paid for at least 30 years’ worth of electricity. By paying up-front, you are protected from any future electricity rate hikes, and as the cost of electricity increases, you will see an even greater return on investment.
Ideal for you if:
- You’re looking to maximize your savings from solar with the shortest return on investment (currently 7-12 years for solar);
- You prefer not to pay interest by financing the purchase;
- You want to enjoy solar’s financial and environmental benefits at the lowest cost available.
Paying for Solar in New Home Construction
Adding a solar electric system to your newly built home is a big win all around! By bundling the cost of a solar panel system in the construction of your new home, you will replace an ever-increasing electric bill with the fixed monthly cost of your mortgage. And with many new homeowners choosing all-electric homes (by adding heat pumps and hybrid water heaters), adding solar could eliminate any utility bill for the lifetime of your home!
Key Contractual Considerations and Key Terms in Solar Financing Contracts
It is important to clearly understand the terms and contractual considerations when exploring solar financing options. In the following section, you will find a detailed overview of what you can expect and some considerations to keep in mind in solar financing agreements. A thorough understanding of these key terms will help you make more informed decisions if you choose to finance your solar electric system.
Buyout Options
- Definition: Ability to pay off the remaining balance of the solar system before the end of the contract.
- Considerations: It’s important to know under what circumstances you can purchase your solar array outright, how the buyout price is calculated, and whether any penalties or fees are associated with an early buyout.
Contract Term
- Definition: Duration of the solar financing agreement or lease.
- Considerations: Assess contract length, alignment with system lifespan, and terms for end-of-contract scenarios.
Credit Requirements
- Definition: Credit score and financial criteria for solar financing qualification.
- Considerations: Ensure compliance with lender’s credit requirements, as lower scores may lead to higher interest rates or disqualification.
Dealer Fees
- Definition: The solar electric system dealer/installer charges for sale and installation-related services.
- Considerations: Request a breakdown of fees; compare with industry standards; understand their necessity.
Down Payment Options
- Definition: Initial payment made at the start of a solar financing agreement.
- Considerations: Evaluate the impact of down payment size on monthly payments and total cost. Buyers have the option to deposit an amount equal to the value of the tax credit, knowing they will reap that amount from the government to offset taxes.
Escalation Clauses
- Definition: Provisions for annual increases in payment under a solar lease or PPA.
- Considerations: Understand increase rates and their impact over the contract term. While the initial benefit may be substantial, this is subject to change over time.
Financing Fees
- Definition: Costs associated with the financial arrangement for solar system purchase or lease.
- Considerations: Review all financing-related fees; assess their impact on total cost; explore different financing options.
Home Ownership Transfer Provisions
- Definition: Terms for transferring the solar agreement upon selling the home.
- Considerations: Check the ease of transfer to a new homeowner and any related fees or credit requirements.
Investment Tax Credit (ITC)
- Definition: Federal tax credit allowing homeowners to deduct a portion of solar system costs.
- Considerations: Currently at 26%, it significantly reduces the overall solar system installation cost.
Junk Fees
- Definition: Unnecessary or excessive charges in a solar financing agreement, often for vague services.
- Considerations: Be vigilant about vague fees; compare with other providers; question their legitimacy.
Kilowatt (kW)
- Definition: Unit of power measurement (1,000 watts) for solar system capacity.
- Considerations: Helps determine energy production capability and solar electric system size.
Minimum Production Guarantees
- Definition: Guarantees for specified electricity production levels from the solar system.
- Considerations: Understand compensation for underperformance and related terms.
Net Metering Policies
- Definition: Rules for crediting excess electricity generated by solar electric systems back to the grid.
- Considerations: Ensure clarity on the net metering agreement between the customer and utility company, credit rates for excess generation, and policy changes.
Operations and Maintenance Responsibilities
- Definition: Terms defining maintenance and repair responsibilities of the solar system.
- Considerations: Third-party owners often handle this in leases or PPAs; otherwise, it’s the owner’s responsibility.
Power Purchase Agreement (PPA)
- Definition: Contract where a third party installs, owns, and operates a solar system on a homeowner’s property.
- Considerations: Homeowners purchase generated power at a predetermined rate.
Pre-Payment Options
- Definition: Options to pay off part or all of the solar electric system costs in advance.
- Considerations: Assess benefits, restrictions, and penalties of pre-paying.
Production Estimates
- Definition: Expected electricity output of a solar system.
- Considerations: Ensure realistic estimates and understand the implications of underperformance or overproduction.
Secured Loan
- Definition: Loan backed by collateral, typically the borrower’s home.
- Considerations: Often have lower interest rates and risk of collateral seizure in case of non-payment.
Solar Lease
- Definition: Agreement to lease a solar system with fixed monthly payments.
- Considerations: Understand lease terms, duration, and costs compared to utility bills.
Solar Photovoltaic (PV) System
- Definition: Technology converting sunlight directly into electricity.
- Considerations: Clean, renewable energy source; system size measured in kW.
Solar Renewable Energy Certificates (SRECs)
- Definition: Tradable certificates representing the environmental value of solar-generated electricity.
- Considerations: It can be an additional revenue stream for system owners.
Unsecured Loan
- Definition: Loan not protected by collateral, often with higher interest rates.
- Considerations: This option is riskier for lenders and is an option for borrowers who do not want to use their home as collateral.
Getting Started On Financing Your Solar Array
Choosing the right solar financing option in Maine requires careful consideration of your financial situation, personal preferences, and long-term goals. Whether you purchase solar panels directly, obtain a loan, or explore third-party ownership, each option offers specific benefits catering to different needs and goals. When in doubt, speak with financial and tax professionals.
At Maine Solar Solutions, our professional solar consultants will help you explore financing options that work best for you. Contact us today to learn more about your options and start saving on your electric bills.
*Maine Solar Solutions, LLC does not provide financial, legal, or tax advice. Please consult a professional.
