What Do Companies Mean When They Say “Free Solar Panels” in 2023?

As we continue to grapple with the challenges of climate change and rising energy costs, the idea of harnessing the sun’s power to generate electricity has become increasingly attractive to many homeowners. The idea of “free solar panels” has floated around quite a bit, especially in 2023. But can installing solar panels really be free? In this article, we’ll answer these questions and explore the different financing options for solar panels, their benefits, and some frequently asked questions about free solar panels.

Are Solar Panels Really Free in 2023?

If you’ve done some research and shopped for a solar panel system, you’ve likely come across a company or two promoting ‘free solar panels,’ suggesting they’ll install a solar system on your rooftop at no cost. However, as with most things in life, it’s important to remember that nothing comes without a price – and this includes free solar panels.

This may sound appealing because you can proudly say your home is fueled by renewable energy and even show the solar panels on your roof as evidence. In reality, you don’t actually own the system and the solar energy the panels produce is not “free” or part of a “no cost” solar program. With solar lease contracts, the solar company maintains ownership of the system and you are billed for the electricity it generates. Essentially, the company has installed a micro power plant on your rooftop and is selling the electricity it produces to you.

While most offers will lead to savings on your electricity bills, not all will, so it’s crucial to carefully compare all your solar quotes and options (and consider purchasing your solar panels or financing them with a $0 down solar loan).

Understanding $0 Down Solar Loans

Solar leases were groundbreaking because they allowed virtually any homeowner to power their home with solar, regardless of their financial capacity to purchase a system outright. These leases played a pivotal role in eliminating entry barriers when the cost of solar systems was exorbitantly high.

However, the landscape has significantly changed since solar leases were introduced. Solar systems are now more affordable than ever and viable financing options to solar leases are available. Solar loans stand out because they merge the ‘$0 down’ feature of solar leases with the advantages of owning the system – a perfect blend of both worlds.

So, before you jump at the first ‘free solar panel’ or ‘no cost solar program’ offer you’re given, make sure you fully understand what’s being proposed and that you’ve weighed all other options.

Solar System Payment Options

Now that you know more about solar leases, power purchase agreements (PPAs), and solar loans, it’s important to evaluate the potential return on investment for each option. Here’s an analysis from the highest to lowest potential return based on the payment method you choose (cash purchase, personal loan, or solar leases and PPAs):

  1. Cash Purchase: Buying your rooftop solar panel system through an outright cash purchase typically offers the best value over a 25-year period. Despite the potentially high initial cost, you’ll reap all the financial benefits and savings that come with going solar (including incentives, tax credits, and more).
  2. Personal Loan: Securing a solar loan ranks as the second-best option in terms of return on investment. While the initial cost is $0, interest payments on the loan will gradually chip away at your energy savings for about the first seven years until it’s repaid in full. The payback period will ultimately hinge on factors such as the upfront cost, system size, energy efficiency, and interest rates tied to your solar photovoltaic (PV) system. After this period, you’ll retain 100% of your energy savings.
  3. Solar Leases and PPAs: Opting for a solar lease or solar power purchase agreement (PPA) might be a viable option for some homeowners. The primary advantage here is the absence of an upfront cost, but be aware that the value is somewhat diluted by the solar company because they extract a portion of your savings through your monthly payments. By the end of your warranty period, the lease or PPA would have actually taken up more than half of your savings as profits for the solar lease provider.

Lower the Upfront Cost with Federal and Local Solar Incentives

The key point to remember when thinking about a “no cost” solar program or PPA is that you’re not the owner of the solar panel system installed on your roof—the solar installer. Most of these agreements are designed in a way that significantly benefits the installer because they can claim the Federal Solar Investment Tax Credit (ITC), along with any local incentives, for adopting solar energy.

The Federal Tax Credit, also known as the ITC, is available to all homeowners in the U.S. As of 2023, this federal incentive lets you claim the credit when you purchase a solar energy system – you can currently deduct up to 30% of the purchase and associated installation costs as long as the system is installed and operational before December 31, 2032.

However, if you opt for a ‘no cost’ solar program or PPA, this credit will go to your installer instead of you. For instance, if the system installed on your roof costs $10,000, the ITC would grant $3,000 to the system owner – but since the installer would technically be the owner of the system, they would receive that money. As a result, you’d miss out on one of the primary financial benefits that comes with investing in renewable energy.

FAQs About Free Solar Panels

Whether you’re thinking about joining a no-cost solar program or you’re questioning the sales pitch, take a look at some frequently asked questions others have about this renewable energy trend:

Can you get free solar panels from the government?

In plain terms, the government does not provide free solar panels. What you’re actually looking at are solar leases or PPAs, which are no-cost upfront options that transfer ownership to the solar company or installer. You’re responsible for paying for the electricity generated by the system and you lose out on many of the financial benefits and incentives associated with renewable energy.

However, this doesn’t mean that PPAs or solar leases are bad because they can still lead to savings in the long run! They can still be a great option to replace high-cost electric bills through your utility to a more affordable energy solution with the solar provider. You are still paying for power, you are just paying for it differently. If you want to learn how federal and local governments can help reduce your installation costs, check out the Renewable Energy Tax Credit to see if you’re eligible for state and local programs.

What do companies mean when they say “free solar panels”?

When companies say “free solar panels,” they’re typically referring to solar leases or power purchase agreements (PPAs). Under these arrangements, a solar company will install a solar system with no initial out-of-pocket cost to you. However, you don’t own the system and you must pay for the electricity it produces.

Who’s eligible for free solar panels?

Since ‘free solar panels’ is a misleading term, it’s important to clarify this – nobody qualifies for ‘free solar panels.’ In recent times, certain people (particularly those in low-income communities) have been exploited because of these claims. However, solar leases have significantly simplified the process for anyone with a roof to adopt solar, regardless of their ability to bear the initial installation cost.

Are solar panels worth it in 2023?

Yes, solar panels are worth it in 2023. Despite the initial costs, the long-term savings, environmental benefits, protection against rising electric costs (especially in California) and potential for energy independence make solar panels a worthwhile investment.

Take Control of Your Electric Costs

While the concept of “free solar panels” may sound enticing, it’s important to read and understand the fine print. Solar panels can be a significant investment, but they offer substantial long-term benefits, both financially and environmentally.

If you’re ready to explore the benefits of solar for your home, our Bay Area team has more than 25 years of experience in designing and installing the right size of home solar system to reduce your monthly energy bills. Schedule an online appointment today to learn more.

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