Financing Options

You can finance your home solar PV system two ways. You can purchase it outright with cash or through loans, making you the system owner. Or, you can obtain a lease or power purchase agreement (PPA) held by a third-party owner.

What loans are available to finance a solar PV system?

If you decide to purchase a system, you may use one or a combination of options: cash, a home equity loan, property assessed clean energy (PACE) loan or a bank low-interest energy efficiency and renewable energy loan.

  • Home equity loan – Bank loan secured with equity from the house.
  • Property assessed clean energy (PACE) loan – This loan is approved based on the property, and not on personal credit. The loan stays with the property and ownership transfers to the new homeowner. There are 5-, 10- and 20-year payback periods and the interest will be based on the length of the loan. Check for PACE availability in your county or city. In California, use the CSE PACE Map.
  • Low-interest energy efficiency and renewable energy loan – Typically offered by credit unions or banks, these loans are a secured loan with low interest rates.

What is a lease or a PPA?

Other financing options include leasing a system or entering into a power purchase agreement (PPA). Both mean the system is third-party owned, and you pay per month. In a lease, you pay a fixed monthly rate no matter what your system produces. With a PPA, you pay a fixed amount for each kWh the system produces.

Both leases and PPAs have long contracts (20+ pages), so be sure to read and understand the entire agreement before you sign. The terms for a lease or PPA are usually 20 years. If you do not plan to stay in your home for 20 years, check with the lease or PPA provider to understand the process when selling your home, which most often entails transferring the agreement to the new owner.

What are the advantages and disadvantages of purchased vs. third-party owned systems?

Purchased Third-Party Owned
What are you buying?
Buying an asset Buying a service, usually with a purchase option
What is included in the purchase?
Generally will not include inverter replacement, operation and maintenance or insurance, may include monitoring Generally includes operation and maintenance, inverter replacement, insurance and monitoring
What are the tax implications?
Need to have the tax liability to make use of the federal investment tax credit (ITC). If financed through home equity loan, you may be eligible for a tax deduction. Solar services provider has the tax liability for the 30% ITC AND can make use of commercial depreciation tax benefits.
What are the risks?
Responsible for operation and maintenance Longevity of the solar services provider
What happens if I move?
New homeowner buys the asset Can transfer lease/PPA to new homeowner or must buy out the remainder of the contract at fair market value
What are the financial benefits?
Return on investment in the form of lower electricity bills and increased home value No or little upfront cost, usually cash positive or neutral in first year


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