Getting your electricity from a renewable source like solar panels has some great benefits. Not only are you helping the planet but you can save money on your electricity bills. However, purchasing a solar system outright can get pretty pricey, $15,000 to $30,000 for residential pricey. For larger commercial applications, it could be millions of dollars. So today, I want to talk about the options of how to “greenify” the source of your electricity.
If you got the cash, the easiest way is to outright purchase a solar system for your building. This will give you the best Return On Investment (ROI). Once hooked up, you will begin to see savings on your bill as soon as the sun comes out. The payback, or time it will take to break even on your purchase ranges widely. The average payback range in the US for solar system purchase is 8 to 12 years, while the low and high range can be between 5 to 15 years. The differences in cost and savings come from a handful of variables, including the types of solar panels, efficiency differences, electricity rate, installation costs, and tax credits, rebates, or incentives. On top of all that you’ll of course want to make sure it performing it’s best, check out my blog about all the factors that affect solar performance.
Solar panels have a typical Effective Useful Life (EUL) of about 20 to 25 years, but can last even longer. So once the purchase breaks even, you will just see the savings!
Loan
There are two main types of loans you can get for a solar system, a Secured Loan or an Unsecured Loan. The difference between the two is collateral. A Secured Loan is back by an asset which is usually your home and typically has a lower rate.
Property Assessed Clean Energy model (PACE) is a type of Secured Loan specifically for renewable assets on private properties. C-PACE for Commercial properties, R-PACE for Residential. The basic structure for this type of loan is that is allows the property owner to finance the energy improvements upfront and paid off over time through voluntary assessments. What makes this loan a bit different is that it is tied to the property instead of the owner.
An Unsecured Loan is financial assistance without any collateral. To get this type of loan you typically need a good credit score and the rate will depend on what you credit score is. Better credit score would equal a better rate.
Lease
If you don’t have the financial means to buy a system or take a loan, there is a leasing option; however, it’s not typically the most recommended option.
Leasing a solar system means a third party owns the system so there are two major drawbacks for this option: 1. Ineligable for rebates and incentives.; 2. The property can be hard to sell, causing a complicated real estate transaction and trouble with transferring ownership. If Ownership cannot be transferred than more money would have to be paid to break the lease agreement.
Nonetheless, there are situation where a lease makes sense. There are low or no upfront capital costs, the developer is responsible for performance and operation, and finally energy costs are more predictable.
Power Purchasing Agreement (PPA) is a specific type of lease for solar panels. You can read more about them in the link, however, I want to highlight an aspect that I think is missed by a lot of people. When you purchase solar under a PPA, the third party company is paying you for your electricity at a fixed rate over the entire period of the loan. Initially, this sounds appealing; however, as you know price of electricity consistently increases, even more so in the past few years. What may be happening by year 5, for example, is you begin losing out on potential saving you could have had because the fixed rate is lower than the utility rate you could have received if you owned the solar panel system. Let me know in the comments if that makes sense.
So while there are benefits to a PPA, it wouldn’t be my first choice.
CCA
Community Choice Aggregator (CCA)
The reason I made the title of this article “Making Electricity Green” and not something about solar panels is because of this option. If you do not want to purchase solar panels or simply can’t afford it, this is another great option to do your part in “greenifying” the source of your energy. A CCA is group purchasing of renewable energy. A community comes together to purchase a large renewable energy plant, sometimes a combination of renewable sources and then distributed to the people in that community. This is great because they also provides customer better rates. Often if you live in a community that is part of a CCA, you don’t have to do anything to belong. However, to date, January 2022, there are only 10 states in the US that have CCA programs. You can do your part to help start one in your community.