Your Guide to Zero Down Solar Panel Installations and Free Solar Panels

As Americans jump on the solar panel bandwagon, they see that solar panels can cost a pretty penny. With all state and federal incentives now available, you can get your solar panels supposedly 100% free. Is this myth or fact? Let’s break down how zero down solar panels work, how you can pay close to nothing to install them on your property, and what your financing and payment options look like.

Learn more about the ins and outs of zero down solar panels and the myth behind free solar panels.

Free Solar Panels: Can You Get Solar Panels For Free?

The truth is no, you can’t get solar panels 100% FREE, but there is such a thing as a zero down solar installation where you don’t pay anything out of pocket to install them. So how does this work, and what are your options for free solar panels?

What Do They Mean When They Say Free Solar Panels?

When a solar company offers free solar panels or a no-cost solar program, they refer to solar leases and power purchase agreements (PPAs). With solar financing arrangements, a solar company will install a solar system on your roof at no up-front cost.

But the truth is that you don’t yet own the solar system. The solar company will still retain solar lease agreements and ownership, and you’ll pay for the electricity it produces.

What Are My Zero Down Solar Options?

Zero-down solar options allow you to move towards solar energy projects without worrying about upfront costs ($0 down). Solar leases, power purchase agreements (PPAs), and solar loans are all financing options that won’t require paying a large lump sum out of pocket. Let’s take a quick look at your solar panel financing options, so you can decide which option is best for you.

Solar Leases:

One way to finance solar panels is a zero down solar lease. With a zero down solar lease, you agree with a leasing company for the energy your solar panels generate. In exchange, you pay a fixed monthly rate based on your system's estimated electrical production.

In a solar lease agreement, the company you lease from will be entitled to rebates, tax breaks, or other incentives. Solar leases are an excellent option for homeowners needing more tax liability to claim the full 30% tax credit. The company can pass the savings to you.

Most solar leasing options don’t require money upfront when you sign your agreement. Once your solar panels are installed and functioning, you begin to pay the monthly rate for your solar system, which can be anywhere from 15% to 45% lower than your usual utility power rates. Some solar lease agreements offer a fixed rate for power, but most require a rate increase of 1-3 percent each year based on your expected power rate hike. Solar leases last around 20-25 years, which is about the average solar panel's lifespan.

Power Purchase Agreements (PPAs):

Zero down solar PPAs, or power purchase agreements, work similarly to solar leases. You agree on a set price for your electricity with your solar provider and receive the full power benefits from your solar energy system. Your PPA provider technically owns the system and receives financial benefits like solar rebates, tax breaks, and other state or federal solar incentives. Similarly to a solar lease, a PPA can be an excellent option for homeowners that can’t take full advantage of the 30% solar tax credit.

The difference between a PPA and a solar lease is how your payment will be calculated. In a PPA, you agree to purchase the power generated by your solar system at a set per-kWh rate rather than the fixed monthly rate you would pay during a solar lease.

With a zero-down solar PPA, you won’t pay anything upfront to the solar provider and agree to pay for the power your solar system produces at a set rate. Like solar leases, your rate is likely between 20% and 30% lower than the usual utility power rates, and it can increase by one to three percent per year.

Solar Loans:

A solar loan is another way to take advantage of zero down solar. If you finance through a solar loan, you will simply borrow money from a lender to purchase your solar energy system and pay it back in monthly installments with interest. If you choose a solar loan to finance your solar panels, you will be the solar system owner (the big difference between leases or PPAs). This will allow you to utilize financial benefits such as the solar investment tax credit (ITC). ITC is a 30 percent tax credit for individuals installing solar systems on residential property.

There are currently many solar loans that come with zero-down options. You still repay your loan monthly, even if you put zero cash down. The amount you pay monthly depends on how much your system costs to install, your interest rate, your loan term, and the type of loan you choose.

Here are a few solar loan options available:

Secured Solar Loans: Some solar providers offer point-of-sale (POS) financing that requires you to put the solar panels up as collateral. This means that the lender can take your solar panels away. They may come with lower rates because of the nature of secured loans.

Residential Property Assessed Clean Energy Program (R-PACE) Solar Loans: This solar loan allows you to attach your loan to your house and pay it back over 10-20 years with your property tax payments.

Green Mortgages: Green mortgages allow you to use a mortgage to pay for a solar system, which means you can borrow to pay for energy-efficient upgrades. You may qualify for a green refinance, which could allow you to refinance for a lower rate and get solar panels.

Utility or Local Government Solar Loans: Some states and governments also offer solar loans. Check the Database of State Incentives for more information about what you can use based on your ZIP code.

Comparing Solar Purchase Options: Cash Purchase Vs. Solar Loans and Solar Leases:

Now that you understand the difference between solar leases, power purchase agreements, and solar loans, figuring out the return on investment on each option is essential. Here’s a comparison of which payment offers the most return to the least possible return varying on the payment plan you choose between cash purchase, personal loan, solar leases, and PPAs:

Cash Purchase:

Buying your rooftop solar panel system outright is usually the best value over 25 years. Although the initial cost may seem steep, you can take advantage of all the long-term financial benefits and savings by going solar. These savings could include federal solar tax credits, state solar tax credits, solar panel rebates, net metering, Solar Renewable Energy Credits (SRECs), and more.

Another upside of a solar system cash purchase is that it will allow you to calculate home energy costs years in advance, avoiding interest rates, fees, and utility rate hikes.

Personal Loan:

Applying for a solar loan is the next best option regarding a return on investment. The initial cost is zero down on solar installation, but interest rates can take away energy savings for the first seven years until the loan is paid in full. The payback period will ultimately depend on upfront cost, size, energy efficiency, and interest rates associated with your solar panel system. After that, you’ll keep 100% of your energy savings.

Solar Leases and PPAs:

Solar lease or PPA is a great low-risk way for homeowners to use clean energy with minimal commitment. Since the homeowner does not own the solar system in these arrangements, they typically are not responsible for any maintenance or repairs that may be required throughout the system's lifetime. These are also great options for homeowners that need more tax liability to take full advantage of the 30% ITC; instead, the company they are contracting with will take the write-off and package it into the solar lease or PPA. Last but not least, the most significant selling point here is that there is no upfront cost, but please note that the value is decreased by the solar company, which takes the cut of your savings through your monthly payments. By the end of your warranty period, the lease or PPA could take up more than half of your potential savings as profits for the solar installer.

Alternative Solar Panel Financing Options to Consider:

Home Equity Loan

You can use a home equity loan to install a solar system. A home equity loan is a second mortgage you receive in a lump sum. You will receive a loan based on a portion of the equity building in your home. You repay it with monthly payments and a fixed interest rate, just like your primary mortgage. You make both your primary and secondary mortgage payments at the same time.

Home Equity Line Of Credit (HELOC)

You can install solar panels with a home equity line of credit (HELOC). A HELOC allows you to tap into the existing equity in your home, just like a home equity loan. A HELOC works similarly to a credit card in that it's similar to a line of credit. You can withdraw cash when needed, offering a flexible way to pay for your solar panels and solar installation.

Compare solar quotes and meet with a solar provider on your options at Energybillcruncher

Although solar panels aren’t 100% free, you can still take advantage of $0 down solar installation and receive customized quotes from the highest-rated solar providers through EBC. Shopping around and seeing your options before you tie the knot is critical, and we want to help match you with the right solar provider so you can land a fantastic deal on your solar panel system. Ready to see how much you could save with solar?