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Paying for solar: tips for financing a residential system

Elaine Ulrich, program manager, Department of Energy | 7/28/2016 11:08:57 AM


Editor's note: Just like a renovated kitchen increases a home’s value, solar can do the same. The U.S. Department of Energy SunShot Initiative’s spotlight on solar and real estate highlights a variety of resources on the subject, including this blog post with useful information for anyone who is considering residential solar or is counseling someone who is. There also is information specific to homebuilders.

After you’ve made the decision to go solar, the next step is figuring out how to pay for it. Assuming you don’t have the cash to buy your solar energy system upfront, like the vast majority of Americans, there are a variety of financing options to help you hitch onto the solar bandwagon and start increasing the value of your home.

The simplest way to get capital to go solar is through a loan, which can save you anywhere from 40% to 70 percent over the lifetime of your solar panels. These loans are similar to most home improvement loans used to complete upgrades or renovations, such as finishing a basement or re-doing your kitchen. A variety of sources offer loans, including banks and solar installers.

HomeStyle Fannie Mae mortgage

A new type of loan is making solar energy accessible to even more people. Fannie Mae’s HomeStyle® Energy mortgage gives borrowers the ability to complete clean energy upgrades up to 15 percent of the as-completed appraised property value of the home. Borrowers are able to finance energy-efficient upgrades when purchasing or refinancing a home, eliminating the need for a subordinate lien, home equity line of credit, Property Assessed Clean Energy (PACE) loan, or unsecured loan. The mortgage requires homeowners to attain a home energy report in order to show the value gained through energy savings over time is greater than the installation price tag.

The HomeStyle Energy mortgage changes the solar loan landscape. It will encourage solar installation companies to revisit their loan practices, allowing for more competition within the industry and reducing soft costs—such as permitting and installation—for consumers. People buying homes or refinancing mortgages now can have the cost of a solar array wrapped into their mortgages without worrying about higher interest rates.

Regardless of the type of loan you secure, the solar on your roof is going to add value to your home. A recent study found that home buyers across the country have been willing to pay a premium of about $15,000 for a home with an average-sized solar array. Another study found homes with solar panels sell faster than those without.

Other options

If you’re unable to secure a loan to purchase a solar energy system, you still have other options. You can obtain a third-party owned system through a lease or power purchase agreement (PPA) offered by some solar installers, whereby the installer owns and maintains your system. Solar leases require consumers to pay a fixed monthly payment that is calculated by assessing the amount of electricity the system is expected to produce. With solar PPAs, consumers buy the electricity generated by their rooftop system back from the installer at a set rate per kilowatt-hour. Although these arrangements are often offered with no money down, consumers don’t benefit from the rebates, tax breaks, and other incentives available to system owners. When the time comes to sell one of these homes, data shows that even though third-party owned systems add some complexity to the real estate transaction, the overall impacts are mostly neutral.

Financing is a big part of going solar, and several SunShot Initiative awardees are working to lower these costs. Incubator awardee Sungage Financial created a marketplace that provides homeowners with easy, online access to low-cost financing for solar equipment. Pilot programs in the Northeast have helped the company understand how to meet the needs of consumers, installers, and capital providers in order to successfully and efficiently deliver financing solutions. Additionally, work under kWh Analytics’ Incubator award uses data analytics to help investors understand the perceived technical and financial risks associated with solar, which will build investor confidence and enable more capital to enter the market for residential systems.

Consumers have a lot to consider when it comes to solar financing, but the end result is worth it: cleaner, more affordable energy that has the potential to greatly increase your home’s value.

The U.S. Department of Energy SunShot Initiative is a collaborative national effort formed to aggressively drives innovation to make solar energy fully cost-competitive with traditional energy sources before the end of the decade. Through SunShot, the Energy Department supports efforts by private companies, universities and national laboratories to drive down the cost of solar electricity to $0.06 per kilowatt hour. Learn more at

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