Although solar energy is getting extremely popular around the world, financing a solar rooftop installation is an expensive endeavour. Homeowners are often stuck in a situation where they want to set up a rooftop solar plant but don’t have the financial means to invest in it. To facilitate owners with the provision of producing electricity from a solar rooftop installation without any or low upfront costs, currently there are 3 popular options available:

  • Solar Leasing
  • Solar Power Purchase Agreement (PPA)
  • Solar Loans

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    1. Solar Leasing Agreement

In the case of a solar leasing agreement, you pay a fixed monthly payment for leasing the solar panels on your rooftop. It is just like leasing a car or a house where you pay a monthly instalment for using it.
Features

      • You typically do not make any down payment
      • Once you sign the agreement, you are locked into it for 10-20 years. So ensure that you stay in the house for a long period of time. Depending on the installer, you may also have the option of transferring the agreement to the new owner or shifting the panels to your new home
      • They protect you against rising electricity prices from utilities
      • No tax benefits or other incentives for the customer
      • The company or installer takes care of operation, maintenance and monitoring
    1. Solar PPAs

A solar PPA requires you to pay for the every unit (KWh) of electricity that is generated by the solar panels at rates that are competitive with the local utility.
Features

      • There is usually is no or low down payment
      • The agreement is usually for a period of 10-20 years
      • They protect you against rising electricity prices from utilities
      • No tax benefits or other incentives for the customer
      • The company or installer takes care of operation, maintenance and monitoring
    1. Solar Loans

Solar energy loans are a recent option with regard to solar financing with no or low upfront costs involved. Unlike PPAs and leasing agreements, solar energy loans come with 2 benefits:

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    • Allows the customer or homeowner to retain ownership of the solar installation
    • Homeowner enjoys the tax benefits and government incentives which normally only benefits the solar developers or leasing companies

With increasing popularity of solar PV technology and decreasing prices of PV panels, banks and utilities are warming up to this option. This is proving out to be the best option available now. The downside to this arrangement is that it puts more responsibility on the homeowner who installs the solar system. The homeowner has to bear the responsibility for operation & maintenance and covering insurance expenses.
It is important to note that before the purchase is made, a thorough comparison of the 3 available financing options has to be carried out to ensure that it suits your needs and financial constraints.