Is solar free?
No, solar energy is not free. It may take hundreds of years for any form of electricity to ever be free. Regardless of the method, cooling your home in the summer and lighting it at night will always incur a cost.
What about off-grid living?
Living off the grid and not relying on a single utility provider is possible, depending on your location. However, even in an off-grid scenario, you will still have to pay for solar panels and batteries, which are not free.
Why Do Companies Claim Solar is Free?
Misleading Ads
If you have ever typed in “solar” in your Google search bar, chances are you have been bombarded with solar ads not only on your web browser but most likely on your social media news feeds like Instagram, Facebook, Youtube and possibly even TikTok.
These ads without fail all sound the same. “Free solar”, “zero down solar”, “state funded”, ‘no cost state programs”, or, “if you live in one of these states, the state can pay you to go solar” and many more claims. I’ve even seen videos talking about having certain meters installed in a certain state mean i’m eligible to have my state pay for my solar.
These solar companies get very creative in their marketing and it is actually doing more harm to the industry than good.
The Truth About Solar Costs
No Upfront Costs for Qualified Homeowners
For most solar programs, homeowners with good credit do not need to pay any money upfront. However, this does not mean solar is free.
Understanding Solar Financing Options
Four Ways to Acquire Solar
There are really only 4 ways to acquire solar: Purchase in full (cash), Finance, Lease or PPA (power purchase agreement).
Every option besides the cash option allows for the homeowner to acquire solar without having to shell out any cash whatsoever. Let’s look at all 4 one by one.
1. Purchase Outright (Cash):
This means no loan, no financing, no monthly payments. You are purchasing your entire solar system in cash including the installation and everything involved to get it on your roof and activated.
Before any incentives, a solar system ranges from $20,000 to over $100,000 depending of course on the size of the home and how much power the home uses. Average home ranges in the $40,000-$50,000 range.
The payment installment schedule differs for every installer but would usually look something like:
60% of the total amount due at installation and 40% due at activation.
Installation usually takes 1-3 months after signing and activation usually takes another 1-3 months after installation. All depends on the town you’re in.
It also isn’t uncommon for a company to ask for a deposit due at signing. Typically a pretty small amount compared to the entire cost, $2,000 deposit is quite normal.
Clearly, there is nothing “free” here in this scenario. So not let’s look at Financing.
2. Finance:
Financing solar is just like financing anything. A home, a house, another home improvement project, anything that you plan on paying down over time.
The way it works is the solar company you are working with will determine the total cost of the entire solar project. This includes: All the equipment (panels, inverters, racking), and labor to get it installed. This line item would usually be titled “Total Project Cost”, or “Total Investment” on the proposal.
Total Project Amount: $50,000
With a financed solar project, the homeowner would be able to claim the solar federal tax credit which as of right now is 30% of the total project cost. So if the total solar project cost is $50,000, that would be a $15,000 tax credit or discount on the solar system. This would be titled on the proposal, “Federal Tax Credit”.
Federal Tax Credit: – $15,000
Also, depending on the state you are in, there may be some state money (state incentives) that you can receive. Whatever incentives you are qualified for will be also stated on a separate line item on the proposal usually in the total dollar sum even if the state incentive is paid out monthly like in the state of NJ. This would be titled “State and Local Incentives”.
State and Local Incentives: -$10,000
The last line item would be the “Total Net Investment” or “Net Cost”. This is the Total Project Amount minus all federal and state incentives. So in this example, that would be $25,000. $50,000 – $15,000 – $10,000 = $25,000
Net Cost: $25,000
What the monthly payment would then be is the Total Project Amount plus whatever the interest rate is for the loan and whatever you decided for your loan length. Typical loan length is 20 years. That is you monthly payment. You would then receive your state and federal incentives afterwards. There are some companies that give you the federal tax credit upfront. Just consult with your local installer about that.
So in short, if you are credit worthy, you got approved for a solar loan with zero down or $0 co-payment. You don’t start making monthly payments until your system is activated which those monthly solar payments would replace a portion of your electric bill. Hence, no “new money being spent”. It is money you were already using to pay your utility provider. Here is an example of what a solar proposal for finance looks like:
So in this case, zero down is absolutely true. You do have the option to put money down to reduce your monthly payment, but it is not necessary if you are approved credit wise.
Now let’s look at Lease/PPA option.
3 and 4: Lease / PPA:
Very straightforward option to getting solar. With this program, if the homeowner passes a credit application, the equipment and installation is provided at no cost. So there is no money being parted with whatsoever for the homeowner upfront.
There will be a monthly payment like a finance option, except there is no loan or debt. With a lease, you are basically renting the equipment and each monthly payment is just going towards the rental of the solar equipment, similar to a car lease. At the end of the lease, you do not own the system but you saved money on electric bills.
A PPA is essentially the same thing, except what determines the monthly payment is the cost of the solar energy pre-determined at the time you meet with the solar company. That pre-determined solar rate is based on a number of factors but is less than your utility providers pre-determined electric rate. To learn exactly how a PPA works, please read here: What Exactly is a PPA?
So it’s the same thing with a lease and PPA. No down payment but certainly not “FREE”.
Bottom line:
The bottom line here is that with all solar options aside from a cash purchase, under most circumstances, it is zero down. However, it is not free. There is no such thing as “state funded” or, “if you live in one of these states, the state can pay you to go solar”. None of this stuff exists.
There are incentives provided by the federal government, state government and sometimes utility, that help bring down the cost of solar, however for the majority of the general population, this is the extent of the programs that help subsidize the cost. Do not believe the hype or the marketing gimmicks just to collect your information.
Many solar companies tout “free solar” to get you to submit your info so they can try their hardest to sell you.
The fact that you are not spending any new money on solar when you finance or lease is fantastic, but these companies should not be promoting that it is free. This should be considered deceptive marketing practices because it truly does get people to believe solar is free and overall slowly tarnishes the general populations outlook on the solar industry. I hope this sheds some light on the topic.
CURIOUS ABOUT SOLAR?
It’s a lot simpler than you think!