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“Free” Solar Panels: Are They Really Free?

November 9, 2021
Solar panels on a tan roof made of ceramic tiles with "FREE!" in green text covering everything, showing how free solar panels are often advertised.

If you’ve shopped for home solar, you’ve probably seen solar companies advertising “free” solar panels. These offers sound enticing, but most people are cautious about anything that promises something for free. How can those solar installers get away with making that claim? Can you really get solar panels for free? What’s the catch?

Luckily, the old adages remain true: Not only is there no such thing as a free lunch, but if it sounds too good to be true, it probably is. Especially when it comes to solar power!

This article will help you understand what these companies mean by “free” solar panels, what options you have for solar energy, and how you can make the right choice for your home.

The Offer Of Free Solar Panels Is Not What It Seems

Let’s be clear: Anything advertising “free” solar panels typically refers to what's known as third-party ownership, either a solar lease or power purchasing agreement (PPA).

  • Solar Lease: You pay a flat monthly fee to lease your solar equipment, and you get to use the electricity those panels generate.
  • Power Purchasing Agreement: You pay a flat rate per kWh for the power generated by solar equipment on your roof, so you only pay for the electricity you use.

Some residential solar companies try to deceive customers by calling their panels “free” because they don’t charge any upfront costs for the solar panel installation. Instead, you will be charged later for the electricity produced, and the cost of the equipment will be rolled into the overall system agreement. You don’t pay for the solar power equipment, but you definitely pay for the power it produces.

With solar leases and PPAs, you do not own the solar panels, you simply pay each month to use the electricity they generate, and that fee is usually lower than what you would pay to your local utility company on your utility bills.

Important Facts About Solar Lease and PPA Options

One common response is: “I get the solar panels for free, I pay less for electricity, and I still enjoy the benefits of solar energy. Why wouldn't I want to use third-party ownership?”

Sure, it sounds great to not have to worry about ownership, while also helping the planet by using renewable energy. Just keep in mind that choosing a lease or PPA instead of ownership can limit the full benefits you could be enjoying from your home solar panels.

1. Lower Long-Term Savings

To stay in business, the third-party owner takes a cut of your potential savings each month. They receive the full savings from the energy generated by your panels, and pass some of that savings onto you in the reduced rate you pay them for your panels, but you would be saving more in the long run by owning the panels yourself.

When you purchase solar panels via cash or loan, you will eventually pay off the system. Once your system is paid off, all of the savings after that point are yours to keep.

2. The Energy The Panels Produce Is Not Yours

With a solar lease or PPA, you are still paying someone else for electricity, you’re just paying the third-party owner instead of the utility company. You’re renting the equipment and paying for the electricity, even though the panels on your roof are connected to the house you own.

3. Any Tax Credits Go To The Solar Company, Not You

One of the main perks of owning your system comes from the tax break you get from the Solar Tax Credit and any relevant state-level incentives. If you’re leasing, that money goes to the solar installer instead. They may use some of that money to lower your monthly payments, but they’re going to keep some of it for themselves as well.

(Note: This is one of the main reasons to use a solar lease or PPA. If you don't have enough tax liability, you can still benefit from tax-based incentives, even if you don't qualify for them yourself.)

The same idea applies to any Solar Renewable Energy Certificates (SREC) you might generate at your home. You get some of the value, but the solar company is going to keep some of it as well.

4. It Can Be More Difficult To Sell Your Home

Any lease agreement applies directly to the house where you currently live. You cannot simply remove the panels and move them to a new home. That means you have to transfer the lease agreement to the new homeowner, and they might not want to do that.

If you want to move and the new owner doesn’t want to take over the lease, you would then have to break the lease, and that could be expensive, depending upon the terms you agreed to.

The Perks of Owning Your System with a Solar Loan

As the cost of installing a solar power system continues to drop, it makes more sense to purchase your solar power system. By owning your solar power equipment, you get a much higher return on investment over the life of your system.

If you’re trying to keep your up front cost as low as possible, you should consider purchasing your solar panels through financing with a zero-down solar loan.

Solar loans are similar to home improvement loans, in that when you borrow money from a lender, you agree to pay it back monthly, with interest, over the loan’s term.

Many solar panel companies offer loan options, along with credit unions, and national lending institutions. Some utilities even offer financing programs that allow homeowners to finance solar power systems through them, and repay the borrowed amount through their electric bills.

These loans combine the best aspect of a solar lease or PPA (paying little to no money up front for your panels) with the benefits of system ownership (more lifetime savings). Since this financing option is more affordable than ever, you’ll be getting the best of both worlds.

Going Solar Doesn’t Have To Be Expensive

At Palmetto, we believe that everyone should get involved in the clean energy revolution, but we also want people to make informed choices about solar panel installation. We believe you should only consider leasing a home solar panel system if you don’t qualify for a solar loan, or you don’t have enough liability for the Residential Clean Energy Credit.

“Free” sounds good in an advertisement, and a solar lease or PPA seems like an easier route for getting solar panels on your home. You save some money compared to paying your utility company, and you get to help the environment.

However, the most substantial long-term financial benefits come from owning your solar power system. Owning your own solar panels gives you more options, more control, and more long-term potential to maximize your energy savings. Thus, if you’re thinking about getting “free” solar panels, you should consider all of your options so that you can make the best financial decision for your family and home.

Ready to see how much it would take to go solar? Get started today with a Free Solar Estimate, and find out how much you could save!

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