Free solar panels sound great. Too good to be true, even. If you’re thinking about going solar, you’re right to want to know the real deal here. What’s the catch?
Free may mean no upfront cost to a lease or a power purchase agreement. These aren’t free, but they are legitimate plans and, for many looking to go solar at home, the best way to go solar. Here’s what to look for when buying or leasing a solar energy system for your home.
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Free Solar Panels Might Just Mean a Lease
Anything advertising free solar panels typically refers to 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. While installation might be free, a lease or power purchase agreement comes with ongoing monthly payments.
With solar leases and PPAs, you do not own the solar panels. You simply pay each month to use the electricity they generate. That fee is usually designed to be lower than what you would pay to your local utility company on your utility bills.
Important Facts About Solar Leases and PPAs
Solar leases and PPAs can come with real benefits: Lower electric bills and lower barriers to entry. They can also help you avoid a loan when interest rates are particularly high. There are some tradeoffs, though.
Lower long-term savings
Third party ownership typically returns lower savings over the lifetime of your agreement.
When you purchase solar panels via cash or loan, you will eventually pay off the system. Once your system is paid off, all the savings after that point are yours to keep.
Owning your panels means owning the energy
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.
On the other hand, because the leasing company owns the panels, they typically handle all maintenance and service, something you’d be on the hook for as the owner.
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Tax credits go to the solar company, not you
One perk of owning your system is the tax break you get from the solar tax credit. If you’re leasing, that money goes to the solar installer instead. They may use some of that money to lower your monthly payments.
This can also be a compelling reason to choose 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 (SRECs) you might generate at your home. You get some of the value, but the solar company is likely to keep some of it as well.
Extra steps to selling your home
Any lease agreement applies directly to the house where you currently live. You can’t move the panels to a new home. You have to transfer the lease agreement to the new homeowner, and they might not want to do that.
Another option is buying out your lease before moving, so pay attention to the terms of your agreement.
Owned solar panels often increase the value of your home, so buying out the lease could be a good thing when it comes time to sell.
Going Solar Can Save You Money
Going solar is part of the clean energy revolution. It can save you money and make a difference against climate change and your carbon footprint. It’s important there are multiple ways to get a new system installed.
A lease or PPA, for instance, may be best if you don’t qualify for a solar loan or you don’t have enough tax liability to claim the full Residential Clean Energy Credit.
On the other hand, owning your own solar panels can give you more control and more long-term potential to maximize your energy savings. Considering all of your options can help you make the best decision for you.
Ready to see how going solar makes sense? Get started today with a free solar estimate or by contacting a Palmetto solar advisor today.
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Frequently Asked Questions
Does the Inflation Reduction Act give you free solar panels?
No, the Inflation Reduction Act extended federal tax credits for new solar power installations, including home solar panels and batteries, to those who qualify. This can reduce the cost of a solar system and make the short- and long-term finances more beneficial for more owners.
Is the government giving away free solar panels?
No. There are federal, state, or local tax credits, rebates, or incentives which may be available in your area. Understanding solar incentives in your area is a valuable part of getting the best deal for yourself.
Is a solar lease free?
A solar lease likely has no upfront cost, but it isn’t free. The leasee will make monthly payments to the solar company.
Andrew GiermakWriter and EditorAndrew joined Palmetto in Charlotte in August 2024. He’s been a writer in journalism, then in business, going back to almost the 20th century. He’s lived in Indiana, Virginia, Pennsylvania, Virginia again, and now North Carolina for the last 12 years. He likes golf. Is he good at it? Not so much.
