So far in this 3-part series on solar financing, we’ve looked at solar leasing and Power Purchase Agreements. A third option exists--ownership. This post discusses the financing tools available to homeowners looking to put solar on their homes: namely, tax credits, local rebates and loans.
Home Solar Tax Credits
First and foremost, the Federal Government offers a 30% tax credit to homeowners who install solar. The 30% applies to the cost of purchasing and installing the solar equipment--either solar thermal or photovoltaic--and there is no cap. To qualify for the credit, however, the array must be installed on, and provide energy to, your primary or secondary residence. Also, be sure you don’t delay, as this credit is due to expire at the end of 2016.
Home Solar Installation Rebates
Rebates for installing solar are mostly instituted by states. The best resource for checking out your state’s rebate, if any, is the DSIRE database. Some of the most attractive state rebates for solar are in California, New Jersey, Arizona, Nevada, Florida, Pennsylvania, and New York.
Loans for Home Solar
If you can’t swing the initial expense, you can apply for a number of low-interest loans from both federal agencies and private lending institutions. In determining which loan best meets your needs, you’ll want to consider borrower eligibility, repayment terms, loan amount, loan length, interest rates, fees and whether the loan is secured vs. unsecured.
Here are some attributes of popular loans available for residential solar projects:
Energy Efficient Mortgage (EEM)
An EEM is like a traditional mortgage, but provides funds above and beyond what you would normally receive, which can be used to make your home more efficient or to install solar. A key benefit is that you don’t have to qualify for the extra loan amount, because your ability to repay comes not from personal income, but from decreased monthly energy expenses. However, you must be able to show that the present value of savings derived from the solar array exceeds the cost of the project.
Other Mortgage Loans
There are a number of other secured loans available to homeowners offered by private lenders and backed by the Federal Housing Authority through the PowerSaver Loan Program. For example, Sun West offers an attractive loan of up to $25,000 that can be used to finance solar projects--solar electric and solar hot water alike--with a 15 to 20 year repayment period. Unlike an EEM, an energy audit is not required to qualify for the loan. Other qualifications are required:
- Debt-to-income ratio can’t exceed 45%;
- Must have a credit score of at least 660; and
- Loan-to-value ratio can’t exceed 100%.
Benefits of Purchasing a Home Solar System
With solar leases and PPA's, the primary benefit is short term (i.e. no upfront cost for clean energy). But under the ownership model, the benefits are more long term, such as:
- Once the system pays for itself in savings, you get free energy for the remainder of the equipment’s useful life (well, except for maintenance); and
- If your utility allows net metering, you can sell electricity back to the grid, or, at least, wipe out some of your utility bill each month.
As always, if you have any experience with any of these solar financing options, or have any questions, comments, or concerns, feel free to chime in in the comments section.
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