Solar FinancingAs much as prices for solar power have fallen dramatically in recent years, solar panels are still a major expense for a home or business.

Particularly for homeowners, where as often as not you will also need to replace your house’s roof, solar installations are likely to be one of the biggest investments you are likely to make, often reaching  between $20,000 and $30,000 before government incentives.

So the question becomes, once you’ve decided that you want to invest in sustainable energy solutions, how can you go about financing these projects?

Surprisingly, given the huge difference in scale from the average home solar installation to most commercial developments, many of the financing options are actually quite similar.

The most basic approach for homeowners and businesses that own their properties is to take out a mortgage to cover the costs of the project. There are a variety of different types of mortgages available for projects such as this, from traditional bank loans to what are known as energy efficiency mortgages – loans specifically designed to take efficiency improvements into account when considering the terms of the loan.

These EEMs are offered by a number of conventional lenders as well as several government agencies, such as the Federal Housing Authority, though not all of them cover solar installations.

More recently, solar installers have introduced a variety of innovative financing arrangements designed specifically for the solar market.

Chief among these are the power purchase agreement, which sets a fixed price that homeowners or businesses will pay in return for the electricity produced by a solar installation. Often these arrangements come with little or no payment up-front, making it much simpler to adopt the technology, and many allow customers to take ownership of the system at the end of the contract.

A separate but related option is known as a solar lease, which sets a fixed monthly payment rather than a price dependent upon power generation. These also often allow customers to own the equipment at the end of the lease.

There have been a variety of other approaches, including companies that arrange for multiple projects within a single neighborhood in order to reduce overall costs, but these are somewhat less common.

Almost all of these financing options are compatible with a variety of federal, state and local grants, each of which has its own application process. More often than not, however, solar installers will be happy to complete most of the paperwork for these incentives or, in some cases, take rebates themselves in exchange for lower prices.

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