Are Free Solar Panels Really Free?
Written by
Solar power is something everyone on the planet gets for free. However, the process of turning it into usable energy is expensive. While the cost of solar panels is slowly decreasing, many homeowners still can’t afford them. That’s why some companies are advertising “free solar panels.”
In reality, there is no such thing as free solar panels. Solar panel installation always comes at a price—but you might be able to take advantage of this equipment without paying a large sum upfront. In this guide, you’ll learn the truth about “free” solar panels and determine your solar panel financing options.
What Do Companies Mean When They Refer to Free Solar Panels?
A “free solar panel” offer doesn’t mean you will get solar panels for free. Instead, this usually refers to an agreement that allows you to start using solar panels without incurring upfront costs. However, you will have to make payments in the future.
The most popular ways to do this are through solar leases, power purchase agreements (PPAs), or zero-down financing (also known as solar loans).
With a solar lease or a PPA, a third party installs and maintains solar panels on your property for free. You’ll later have to pay them a monthly fee or a certain price per kilowatt-hour (kWh) of the generated power.
If you choose zero-down financing, you’ll instead take out a loan to purchase the solar equipment. Once you do, you’ll have to make monthly payments to the lender as you would with any other loan.
Whatever option you choose, you still have to pay for the solar panels themselves or the energy they generate.
Will Free Solar Panels Save You Money?
While you won’t get solar panels for free, the above options can save you money. Here is how:
- PPA: When you pay per kilowatt with a PPA, the payments are lower than your utility company.
- Solar lease: As with a PPA, the amount you are currently paying for electricity is likely higher than the fees you pay when taking out a solar lease.
- Zero-down financing: With zero-down financing, monthly payments often match your previous electricity bills. But once you’ve paid off the loan, you can enjoy nearly free electricity during the solar panel’s lifespan (around 20 years).
The upfront cost of purchasing solar panels outright is high, but the long-term savings can be significant since you own the system and all the electricity it produces. You avoid ongoing payments to a third party, and after recouping your initial investment, your electricity becomes almost free.
Elements that can impact your savings with these “free” solar panel options are:
- Electricity rates: The higher your current electricity rates, the more you save with any solar option.
- Financing terms: Your lease, PPA, or loan terms will affect your savings. Favorable terms with low-interest rates or fixed-rate agreements provide greater financial benefits.
- Incentives: Federal, state, and local incentives, such as federal tax credits and rebates, can reduce solar installation costs. Some leases and PPAs incorporate these savings, while zero-down financing options might let you claim them directly.
A solar calculator can help you estimate the savings from each option based on your location and electricity usage.
Are Free Solar Panels a Scam?
PPAs, zero-down financing, and solar leases aren’t scams. Legitimate solar companies offer these opportunities to homeowners to help them take advantage of renewable energy.
When you see “free solar panel” ads, remember that you aren’t getting any equipment for free. It’s a popular marketing tactic that brings you to the company, after which you’ll have to pay in some capacity. However, it’s still a good opportunity to start using solar energy without making a large upfront investment.
The most important part of signing a contract with a solar company is reading the fine print. You must ensure you understand all the nuances of using solar equipment on your property.
PPAs, Solar Leases, and Zero-Down Financing: How Do They Compare?
PPAs, solar leases, and zero-down financing allow you to use solar panels without a high upfront investment. While all these options achieve the same result, their differences are substantial. Studying each one in detail is key to avoiding surprises after installation.
Power Purchase Agreements (PPAs)
With a PPA, you pay for the electricity the solar panels generate rather than for using the equipment. Your chosen solar company installs and maintains the system on your property free of charge, and you just pay for the energy it produces.
Pros of PPAs
- Lower rates than utility prices
- Maintenance included
- No upfront cost
- Pay only for electricity generated
Cons of PPAs
- Long-term contracts
- Potential complications if you sell your home
- No ownership of the system
- Savings depend on the amount of electricity generated
PPAs can be great for homeowners who want to use solar energy without upfront costs. With a PPA, you’ll pay lower rates to the solar company instead of high rates to the utility company.
Solar Leases
With a solar lease, the leasing company owns the solar panel system, and you pay a fixed monthly fee for using it. The company installs and maintains the panels without any charge.The contract terms for leased solar panels range from 15–25 years on average, with the option to buy out the system at a depreciated value after a certain period.
Pros of Solar Leases
- Lower monthly electricity bills
- Maintenance and monitoring included
- No upfront cost
- Potential to buy the system at a reduced cost
Cons of Solar Leases
- Long-term contracts
- No ownership of the system
- Potential complications you sell your home
- Savings may be lower compared to other options
Solar leases are ideal for homeowners who want to reduce their electricity costs without the high initial investment. They can be great if you don’t want to deal with solar panel maintenance but plan to stay in your home for the lease.
Zero-Down Solar Loans
With zero-down solar loans, you borrow the funds to purchase and install the solar panels without making a down payment. Then, you’ll make monthly payments on the loan instead of paying a lease fee or a PPA rate. After the loan ends, you become the system’s legitimate owner.
Pros of Zero-Down Financing
- Eligibility for incentives and tax credits
- Ownership of the system after loan repayment
- No upfront cost
- Potentially lower monthly payments than utility bills
Cons of Zero-Down Financing
- Loan approval required
- Long-term financial commitment
- Responsibility for maintenance
- Savings depend on the interest rate and loan terms
Zero-down solar loans are great for homeowners who want to invest in solar ownership without a large upfront cost.
Other Ways To Reduce the Cost of Going Solar
If you don’t want to take advantage of solar leases, PPAs, or loans, you can still reduce solar energy expenses for your home. Here is how:
Community Solar
Community solar programs allow homeowners to benefit from solar energy without installing panels on your property. You can purchase a subscription to a local solar farm (a large concentration of solar panels in your area) and use their energy cheaply.
Pros
- Access for renters or those with unsuitable roofs
- No need for rooftop installation
- Simple enrollment and participation
Cons
- Limited availability
- May involve subscription fees
- Potentially lower savings compared to rooftop solar
Community solar is available in many states, including New York, California, and Colorado. Check local availability to see if it’s an option in your area.
Federal and State Incentives
The federal solar investment tax credit (ITC) allows you to deduct a portion of your solar costs from federal taxes. Many states offer additional incentives, such as state tax credits, rebates, and Solar Renewable Energy Certificates (SRECs).
Check the Database of State Incentives for Renewables & Efficiency (DSIRE) for current solar incentives available in your area.
Solar Financing Options
Besides leases, PPAs, and zero-down loans, other solar financing options include cash purchases, traditional loans, and Home Equity Lines of Credit (HELOCs).
- Cash purchases: The pros of cash purchases include full ownership, no interest payments over time, and maximum savings. If you can afford it, this is the way to go.
- HELOCs: HELOCs can potentially lower interest rates and provide tax-deductible interest, but they can also put your home equity at risk and are a long-term commitment.
- Traditional loans: Traditional loans allow you to spread solar panel costs over time, and offer lower monthly payment options. But traditional loans also require you to make interest payments, and you’ll need to get loan approval first.
Take a closer look at these options to see whether they are better for you than PPAs, solar loans, and leases. Most of them allow you to take advantage of incentives and offer ownership.
How To Choose the Right Solar Option for You
The right solar option for you depends on your needs, budget, and ownership plans. Here are several things to think about:
Comparing Upfront and Long-Term Costs
When choosing a solar option, consider how upfront costs, monthly payments, and long-term savings vary between leases, PPAs, and zero-down financing. Solar leases and PPAs don’t usually have upfront costs but involve monthly payments. Zero-down loans also avoid upfront costs, but once you have repaid the loan, you’ll own the system and enjoy free electricity.
To make an informed decision, create a table comparing key factors such as upfront costs, monthly payments, lifetime costs, and total savings for each option.
Choosing a Solar Installer
No matter what option you choose, you must find a reputable solar installer. Otherwise, “free” solar panels will turn into never-ending expenses. Start by comparing quotes from multiple installers to get the best deal.Read customer reviews and check for certifications from recognized organizations like the North American Board of Certified Energy Practitioners (NABCEP). Once you narrow down the choice of the best solar companies, ask each candidate questions about their experience, warranties, and the quality of their equipment.
Our Conclusion
While free solar panels are a myth, you can take advantage of several options that help you avoid upfront payments. With solar loans, leases, and PPAs, you can take advantage of solar energy without purchasing the solar system with cash.
To decide which option is best for you, you must consider your budget, plans for solar system ownership, and electricity consumption. Whatever your needs are, you will likely find a way to save on solar panels and enjoy the benefits of renewable energy.
FAQ About Free Solar Panels
Can you get solar panels installed for free?
Solar panels can be installed for free only if you choose one of the options in this guide, such as PPAs, zero-down financing, or solar leases. Each requires ongoing payments after installation.
Do you really save money with solar panels?
Yes, you can save money with solar panels because solar energy costs less than the energy you get from your utility company. To get the most out of solar panels, you must ensure they’re installed properly.
What are the two main disadvantages of solar energy?
The main disadvantages of solar energy are the high upfront costs of installing the panel and its dependence on sunlight. However, you can mitigate these issues with the right financing options and the right type of panels.
What is the catch with free solar panels?
The catch with free solar panels is that while you get installation for free, you have to pay to use the panels or the electricity they provide.
Why is my electric bill so high with solar panels?
Even with solar panels, your electric bill can be high if the system is incorrectly installed. Make sure you are following the best practices for orienting, tilting, and maintaining the solar panels. Even the most efficient solar panels can lead to high energy bills if not installed and maintained properly.
To share feedback or ask a question about this article, send a note to our Reviews Team at reviews@thisoldhousereviews.com.
