Solar Financing Options For Your Home
There are many ways to help finance the installation of a solar system for your home. Buying, leasing and Power Purchase Agreements (PPA) are the three most popular choices.
Leasing a solar system for your home means paying monthly to use it over a specified period of time and enjoying the benefit of electricity produced by the system. Ideally, you would pay less for the energy produced by the system over the term of the lease than you would have paid for the same amount of energy from SMUD.
PPAs are similar to leases because the homeowner pays for the energy produced by the system, but not for the system itself. The difference is that lease payments are about the same every month whereas PPAs vary each month based on the amount of energy produced by the system. Under a PPA, a customer pays only for what is produced during a given month, and will therefore pay more in summer than in winter.
Things you should expect from a leasing or PPA agreement
- Guarantee the amount of energy that will be delivered per year, and over the life of the contract, in exchange for the lease payment or PPA price. Since the amount of electricity a solar electricity system generates declines gradually over time, the power guarantee should take this into account.
- Specify that the vendor will operate, maintain, and repair the system in a way that ensures that you get the energy yield promised over the life of the contract.
- Provide a clear statement of what you will pay per kWh produced by the system. A PPA agreement will state the amount but the number needs to be calculated for leased systems.
- Estimate the value of net metering at your current level of electric use
- Specify the process and costs of removing the system and restoring your roof when the contract terminates.
- Specify what you will be required to pay if you move or decide to remove the system prior to termination of the contract.
The payback time on your solar system is determined by many factors, most importantly the amount of your current electricity bill. Customers with lower bill amounts typically have a 20-plus year payback period. Customers who have larger bills may see a return on their investment in as little as 7 to 10 years.