Like all strong technological industries, solar survives by adapting, and thrives on innovation. Few would have predicted, for instance, that solar would stay strong in a tumultuous year like 2020 was, but utility-scale solar installations continued apace and residential providers showed flexibility by virtualizing the interaction between reps and customers. Video walkthroughs, web conferences, and quick online simulations of installation day are among the successful ways that home solar adapted to customers.

Another way solar adapts to customers is offering levels to match any homeowner's commitment. Whether you dip your toe in or take the plunge is totally up to you, and your decision will depend greatly on the incentives in your state and your personal finance.

For this article we have distilled the levels of participation down to three. Let's take a look at them.

Level 1: Little or No Upfront Costs; Modest Savings

How: PPA
Avg. savings: 20%-30%
Owner: Leasing company

At this level your savings will be modest, but the level offers something the others can't match: a potential price tag of $0 up front. You enter into a power purchase agreement (PPA) with a solar company. You agree to buy the power, while the company pays for the system, the installation, and the maintenance.

The rate you pay for electricity will be set lower than you currently pay; that's the benefit to you. The company gets to generate the power using your rooftop; that's the benefit to it.

The PPA level of solar participation overcomes the main hurdle that people face when their primary reason for adopting solar energy at home is to save money, as opposed to obtaining energy independence or helping the environment. They don't want to open their wallet, and they don't mind hosting solar panels on their roof. So long as they can lower their energy bill, they're happy.

What you get with a PPA:

  • Little to no upfront cost
  • Lower energy bills
  • A long-term contract with the solar provider
  • Someone else takes care of maintenance

What you don't get with a PPA:

  • Tax credits and other incentives
  • Income generated by excess power
  • Definite property value boost
  • A breakeven point when your system is paid off and its electricity is essentially free

Level 2: Low Upfront Costs; Decent Savings

How: Lease
Avg. savings: 20%-50%
Owner: Leasing company

This middle level appeals to a lot of people, just as leasing a car does. The system is yours to use for the length of the contract, generally 20-25 years, but you don't own it. You make lease payments monthly while enjoying lower energy bills, and you still come out ahead of where you'd be if you had to buy all your electricity from the utility.

Plus, you're helping the environment.

Most home solar energy systems are leased. A lease gives you "the opportunity to run on sun without having to pay the $11,000-$14,000 that it costs to install panels in one fell swoop," says the real estate site HomeLight to explain why leasing is a popular level of solar commitment. "You’ve saved energy, lowered your utility bills, and felt the undeniable pleasure of sharing these perks when the topic of solar came up with anyone who would listen."

But leasing is not without its drawbacks. First, as with a power purchase agreement, the solar company gets the Federal tax credit for the cost of the system (currently 26%) as well as most other incentives, like local/state rebates and manufacturer rebates. (In some arrangements, the homeowner does get the renewable energy credits, or RECs, if available.) Second, a leased solar energy system doesn't increase your home's value, whereas owned systems can bump up property values 3%-4%. Third, if you sell your home, you must either find a buyer willing to take on the lease or break it and pay to have the system uninstalled.

So why do so many people lease?

More people lease a home solar energy system than buy one. The four biggest reasons:

  • It's either a lease or no system at all. When cash, a home equity loan, or a solar loan aren't feasible to buy a system, leasing becomes the next best option.
  • Helping the environment, not saving big money, is your primary motivation. After all, the planet doesn't care whether panels are owned or leased.
  • You want immediate benefits. As with most investments, time must pass before panel buyers see a return. However, when you lease, you make a small down payment and then start saving on energy costs right after installation and activation.
  • The maintenance contract with the lease means if something breaks, you aren't responsible for fixing it.

Level 3: Buy Your System; Maximum Savings

How: Cash on hand; solar loan
Avg. savings: 70%; potentially 100% and beyond
Owner: You

At last we come to the solar goldmine, if you can swing the upfront costs. In the beginning it's a case of, "You gotta spend money to save money." As the owner of the system:

  • You reap the benefits of all incentives and rebates.
  • Your home enjoys a bump in property value.
  • You can sell your excess electricity (if your state has net metering).

Financing is readily available for going solar, so you don't need cash on hand. You can repay a solar loan while saving on every energy bill and still come out ahead.

What is net metering?

Available in many states, these rules provide a fair, two-way street between solar homes and the power grid. Homeowners buy electricity when they need it (such as at night) and sell to the power company the excess that their panels produce (such as at midday). On their bill, they see charges and credits and only pay the difference, or net. Read our full article on net metering for more details.

Look up your state's incentives fast here.

Thanks to net metering, it is possible to get your energy bill below $0, as our solar success story on the Neumanns attested. The California couple was able to drop their bill to pennies and finally into negative territory. They carried a credit balance month to month, never paying a cent.

How Long Do Solar Panels Last?

Most panels are warrantied for 10 years but built to last 20-25 easily, barring damage. A 2014 analysis by the National Renewable Energy Laboratory, the federal government’s renewable energy think tank, found that today’s panels are likely to be producing at more than 90% of their original capacity after 20 years.

Conclusion

Where you live, and the solar companies you deal with, have a lot to do with the drawbacks and benefits of these levels. Everyone's math will be different. If you don't want to open your wallet, a PPA (Level 1) should appeal to you, while if your state has net metering, solar ownership (Level 3) is financially compelling. Most homeowners with solar land in the middle, with leasing (Level 2).