Buying a solar system should be looked at through the lens of long-term and short-term gains. Short-term is easy, instant power generation and electricity bills gone. What are the long-term financial benefits? Well, there are several, but it only makes sense if you lock in that fixed payment. What does that mean? Well, it’s getting into solar either out-of-pocket or an excellent financing option with a low-interest rate.
Does that sound familiar to you? It should because it’s the same scenario as locking in a fixed mortgage rate vs. an adjustable-rate mortgage (ARM). Let’s talk about the correlation between the two.
ARM, Rent, PPA, and Solar Leasing
Solar PPA and leasing agreements are similar to an ARM or rental agreement. What do we know about these two types of contracts? Well, the rates can increase on you annually. With ARMs you have a set number of years before they start adjusting on you, but after that your mortgage interest rate can easily double. Renting has the same risk because the landlord can easily change your monthly payments or tack on fees every year when you renew your contract. There is no financial stability with these two. That’s the same for your energy costs if you choose solar PPA or leasing.
Solar PPA and leasing may get you into the benefits of solar energy at a lower price, but they are not good long-term investments. What they do is:
- Trap you in long-term contracts where you still pay for your energy instead of being energy independent.
- Give your solar company freedom to escalate your rates just like a traditional utility company.
- Take away any tax or rebate incentives from you and give them to your new energy collectors.
When you get into these agreements you lose all of the decision power and freedom that solar is meant to provide, just like getting a place to live that you don’t own, or your mortgage company can change the conditions when it suits them. Your “partners” are making the profits and reaping all the rewards, not you.
Fixed-Rate Mortgages and Solar Financing
Fixed-rate mortgages are the recommendation you get for that long-term financial security. With these mortgages, you own your home with a locked-in interest rate that never changes. You have the security to know your payment for the next 15 to 30 years. That is the security that gives you peace of mind and allows you to plan for the future. That is what solar financing or buying solar with cash provides you. We’ll focus on the financing aspect.
Locking into a financing agreement with your solar company gives you:
- A definitive payback period
- No rate fluctuations
- All the incentives and rebates to lower installation costs
- Ownership of your energy
These four attributes provide you long-term security. For one, you know when your payment period is over, and you own your system entirely. Second, your system will be a source of residual income for the next 20 years, not a constant bill. Finally, your solar system is a source of increased home value and not a hurdle if you decide to sell your home. For these reasons, you must get locked in with a low payment financing agreement and not a solar PPA or leasing contract.
Solar is one-third of all new electricity generation and continues to rise as governments worldwide seek cleaner and renewable solutions to our energy needs. The financial fruits will be plentiful as long as they are yours and not a new energy master. Don’t trade the utility economic instability with all its rate fluctuations to a solar company doing the same thing. Get into a low payment situation that provides excellent financial longevity.
Solar investments can give you at least 26% off your installation via the federal solar investment tax credit, SITC, that you will receive on your next tax filings. Not to mention the benefits of sizing your system well to make your home net-zero. Solar technology is tough, providing durable energy able to withstand elements as severe as hail up to one inch in diameter, moving at 50 mph. Its dependability overcomes the frequent brownouts or blackouts that plague California, keeping your home running the entire time. As technology improves, solar will continue to get better and cheaper, as it has since 2015 dropping over 20% in installation costs.
All these benefits only make sense, though, if you get into a low-payment financing agreement to own your system just like would a fixed-rate mortgage. That’s the path you should take and get started with today.