Homeowners tired of paying high utility bills may have hope on the horizon for lower power costs. Solar city, a major solar provider in the United States, has implemented a new solar loan program, allowing its clients to pay off the cost of their solar equipment with the energy they produce from their home.
Yes, solar power has been around for a decently long period of time, so why is this system different from all the other models from other solar companies? Well, Solar City really hit the crux of the solar issue—its high upfront costs compared to traditional utilities. For a long period of time, homeowners needed to buy every piece of equipment, install and permit them. According to SunRun.com, a solar leasing company, an owner can expect to pay anywhere from $4,000 to $12,000 for panels, $1,000 to $3,000 for an inverter, $800 to $2,000 for mounting hardware, $2,000 to $4,000 to install them, and around $2,500 dollars or more for additional fees and permits. If a homeowner wanted the highest quality panels, with all the bells and whistles, he/she may expect to pay up to $23,500 for their new solar system.
Of course, with those kind of costs, not many people would be “solar panel eligible.” In order to get more customers through the door, solar companies offered a solar loan program called a power purchase agreement. In this agreement, home owners are provided all the equipment necessary with no cost to them. In exchange, they pay the company money for the power produced from their panels, just like they would pay a standard power company. Because the power is coming from their own home, the rate is markedly lower than standard electricity rates. Unfortunately, anyone within this pay structure will never own the panels placed on their own homes and they will have to pay a solar company for the power their own home is producing.
But now, Solar City is offering a new loan program, that shifts ownership of the equipment over to the buyer, under a 30-year loan program. A homeowner pays a fixed monthly rate (eerily similar to a 30-year fixed rate mortgage on a home, but a lot cheaper!) and that money pays off the remaining principal and 4.5% interest rate. After the loan is up, they now own the solar panels and have access to a free source of energy that can drastically lower their costs. Homes that produce extra solar power can even see lower rates if Solar City sells the excess power from their home to another.
More often than not, even while paying off the loan, homeowners will still pay less than they would in a power purchase agreement and one day, they will own the panels. Customers can also pay off a piece or all of the remaining balance on their panels to lower their monthly costs. Anyone hoping for loan approval will need a 680 credit score.
Solar city hopes to explode an already growing Solar market. Over the first half of 2014, 2,700 megawatts were produced from residential homes, compared to only 1,144 megawatts produced in the same period of 2013. States that haven’t offered any benefits for solar power have put roadblocks in the way for national solar expansion, but with Solar City’s new loan program they now may be competitive. In the first year, customers may see their utility costs rise, but once they can write off the 30% federal tax credit in the following years, solar usually becomes the cheaper option.
The new solar loan program does have one drawback, or at least something to note. Solar panels have yet to be tested over a 30 year period and by loan’s end they may not be productive anymore. Because nobody really has data on solar panels going thirty years back, it’s very hard to know the full life span of solar panels. In general, solar panels weaken as they age, so after thirty years, customers may have to cross their fingers that the panels they now “officially” own are operational. However, if the loan is less than what they would have paid in utilities anyways, concerns over panel functionality thirty years down the line may be a null point.
Any homeowner looking to lower their utility costs should keep their eyes and ears open for local solar options. Currently, solar city is only offering their loan program to states that already have an established solar clientele, but they plan on expanding into most of the United States eventually.