Need Help Paying for Solar Power?
Greentips: March 2011
Sunshine may be free, but photovoltaic (PV) systems that convert solar energy into electricity are not. Residential systems can range anywhere from $16,000 to $45,000 installed, depending on the system size. Fortunately, several financing options can significantly lower these up-front costs and reduce payback time:
Federal tax credits. You can receive a 30 percent income tax credit, with no upper limit, for the purchase and installation of a PV system that provides electricity to a new or existing home (rentals do not qualify). The system must be installed by December 31, 2016.
Energy-efficient mortgages (EEMs). EEMs allow you to finance renewable-energy or energy-efficiency upgrades in new or existing homes by rolling the costs into your primary mortgage (so you continue to make one monthly payment). Applicants may qualify for reduced closing costs or lower interest rates compared with a standard home equity loan. An energy professional must assess the home to calculate the potential energy savings associated with the upgrades.
- Federally insured EEMs are available to all homeowners through the Federal Housing Authority and cover $4,000 to $8,000 worth of improvements; loans of $3,000 to $6,000 are available to military personnel through the Veterans Administration.
- Energy Star EEMs are offered through certified lenders for the purchase of Energy Star-qualified homes or improvements that will reduce energy use 20 percent or more.
- Conventional EEMs that will cover up to 15 percent of a home’s value are available through lenders that sell their loans to Fannie Mae and Freddie Mac.
State programs. Many states have financial incentives and policies that encourage the use of renewable energy (see the Related Resources for programs in your state). Net metering, for example, lets you sell surplus electricity generated by a PV system back to your utility; the amount is credited on your next bill.
Equipment leasing. Similar to car leasing, many companies “rent” PV systems to homeowners who cannot or do not want to pay for the system up front. With a typical 10- to 20-year PV lease you pay a monthly fee to cover all installation and maintenance costs. At the end of the term, you can renew your lease, purchase the system, or have it removed. Under a power purchase agreement (PPA), instead of paying equipment-related costs you pay the solar company a fixed rate for the power generated by the system, which will reduce the amount you pay your utility. Note: PV leases and PPAs do not qualify for state or federal incentive programs.
