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Financing your Rooftop Solar Power System in San Jose - Silicon Valley




Let’s face it, a rooftop solar power system isn’t cheap. But two recent developments have completely changed the economics for buying a home solar power system in San Jose and the surrounding communities.

The first development is that solar panel prices have declined dramatically. When we started installing solar on Silicon Valley homes in 2001, a typical system would be about $40,000 before state and federal incentives. With the plummeting cost of solar panels, that same system today is about $20,000 — and with the 30% federal tax credit about $14,000. Annual savings for such a system depends on your electrical usage; for medium or high electricity users, savings are in the range of $2,000 to $4,000 per year (4-7 year payback).

But $14,000 is still a lot of cash for people to invest. So if you want solar and don’t have the cash handy, what can you do? Over the past five years, leasing has been a tremendously popular way of acquiring a rooftop solar system. Basically, a third party company owns the system on your roof, and you make monthly payments to them for 15-20 years as you “rent” the system. Your net savings (including the lease payment) are about $10-30/month. You get solar and you save a little money every month — a good thing. But you never save a lot of money. The leasing companies do quite well, but for homeowners it’s not a particularly good investment.

The second development is the availability of new solar loan programs by major banks. These are loans, just like a car loan, that are optimized for homeowners who want to buy a solar power system. Interest rates are low (4-7%), credit score requirements are reasonable, interest is tax deductible (lease payments are not) and loan terms range from 5 to 15 years. From a homeowner’s perspective, these loans are a terrific way to finance a residential solar power system because after the 4-7 year payback for the system, you get ALL the economic benefits of the system. Totally free electricity for 20+ years — plus the ability to sell your home without the encumbrance of a lease.

Solar leasing is a good way to acquire a solar power system. A solar loan is a good way to invest in a solar power system. Both options are available for no money down and both options have maintenance included. But unlike with a lease, when you buy a system you get the federal tax credit, you get the interest tax deduction, you get to add an asset to your house that usually makes it easier to sell, and you get a great ROI (typically 10-20%).

To learn a bit more about the “dark side” of solar leases, see:

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