Solar Loans & Solar Financing | EmPower Solar

Solar loans have become the most popular way for people to take advantage of solar energy in the US and are helping to catalyze rapid solar power adoption.  The reason for this growth is straightforward: homeowners finance solar systems for $0 down and start saving from day one, while also building equity in the system and owning it outright at the end of the loan term.  Approximately 70% of SunPower by EmPower Solar’s customers finance solar with some form of loan(with terms comparable to other home improvement loans).  30% use the lease (learn more about the lease here).  Following are some details about how the solar loan works and some of the benefits.

SunPower by EmPower Solar offers its own dedicated solar loan through a financing partner.  This solar financing product is comprised of two loan components; a bridge and a term. The bridge loan covers the amount of the solar tax credit, and is paid back within 12 – 18 months once the tax credits are received.  The term loan covers the net project cost after the tax credits, with 10, 12 and 15 year term options.

The net result is that the term loan monthly payments are usually lower than the pre-solar utility bill, generating immediate savings.  This means that customers start paying to own their solar power system by paying less than the utility bill from day one.  So homeowners begin building equity in this clean power generating asset with zero down, and save right away. Because the solar payment is fixed, as electric rates rise, the monthly savings will increase.  Then, at the end of the loan term, solar generates free electricity.

Using a home equity line of credit or loan to finance a solar installation can make a lot of financial sense. First, home equity interest rates are low and most likely the best available rate to fund any home improvement project.  Second, the home equity would be one loan for the total project cost.  Once the solar tax credits are received, the line is paid down.  Then, the homeowner can pay down the home equity line as they choose.  Following the principle of monthly savings, customers often decide to make monthly payments at an amount lower than the pre-solar utility bill, resulting in immediate monthly savings.  Another benefit of home equity is that interest on the loan payments is tax deductible.

According to the S&P CoreLogic Case-Shiller Home Price Index, home values have shown a 38 percent rise in the national index since its low point in February 2012.  This means that homeowners are realizing increasing wealth and building equity.

Solar Loan Example:

Before solar, a homeowner uses 12,000 kWh per year and pays $2,400 annually: an average of $200 per month. The homeowner installs a 10 kilowatt SunPower solar system that off-sets 12,000 kWh per year of usage and the utility bill decreases from $200 to $10 per month (considering standard connection charges). The monthly solar loan payment is $170, resulting in $30 per month savings.  Because the solar payment is fixed, as electricity prices rise, solar savings increase. After 15 years, the homeowner pays off the loan and owns the solar system with 10 years still left on the system warranty!

To think of this another way:

Year 1 utility price: $0.20 per kilowatt hour (kWh), on average, increases 3% per year

Year 15 utility price: $0.35 per kWh

Year 1 – 15 year solar loan cost per kWh: $0.17, fixed rate

Year 16 – solar system cost: $0.00 / kWh

Twenty year savings: $30,000 – $70,000 (depending on system size)

Home Value Increase

A key benefit of the solar loan is that the solar system adds to home value.

Studies from the Lawrence Berkeley National Laboratory and The National Bureau of Economic Research have shown that homes with solar energy systems can command a 3 – 4% premium over homes without solar energy systems.  Using either home equity or the solar loan enables homeowners to realize the benefits from increasing home value.

We find that the solar loan makes sense for homeowners that have the ability to use the solar incentives including the federal solar tax credit and New York State solar tax credit. It allows people to go solar with no money down, save money from day one and ultimately own their system outright. Given the rapid growth of solar loans, it is clear that they are proving to be a very smart and economical way to go solar. That said, you may want to learn more about solar leases and PPAs.

Schedule your free solar assessment with one of our solar experts today.