Maybe you’ve heard from a friend about a free solar panel offer.
Your electricity company normally charges you for every kWh of electricity that you use plus a service charge. You’ll receive a regular bill for that service from your energy retailer.
Power prices are rising every single year and it can seem like there’s nothing you can do about it. Even if you change supplier, you’re going to face the same problem. So it can be tempting to go straight for that free solar panel offer, whether it’s a No-Interest Repayment Plan, PPA or other financing option.
Is it too good to be true?
The options for getting ‘free’ solar panels
Let’s break the illusion quickly. You will not be able to install a solar power system completely free of charge. There is always a cost. When installers offer ‘free’ solar systems, they’re usually offering one of four things:
- Green Loans
- No-Interest Repayment Plans
- A Solar Power Purchase Agreement (PPA)
- A Solar Lease (for commercial customers)
What is a Green Loan?
Put simply, this is a standard loan, but usually at a reduced interest rate, where your loan repayments can often be smaller than the benefit of the solar system. Nearly all of our systems can be set-up this way and it is a popular way to make solar power more affordable.
Typically, it involves a longer-term period. Repayments are spread out across a longer period of time (say 3 to 7 years), reducing the monthly payments ideally to less than your normal electricity bill. Once you’ve paid off the system, you’ll own the panels for the lifetime of the system.
The downside of this arrangement is that the total interest payments on the loan can add up over time, so it is often better to look at paying off the loan as fast as you can afford to.
Of the no-down-payment options, this is the only one we recommend for residential customers.
What is a No-Interest Payment Plan?
With a No-Interest Payment Plan, the cost of the system is repaid in equal instalments over the term of the Plan.
However, No-Interest does NOT mean No-Cost!
The cost of the Repayment Plan is paid by the supplier to the Finance Company so is built into your original price. This is why most suppliers that offer No-Interest Payment Plans will also offer a discount for cash.
Because Repayment Plans are legally not technically loans, they are not subject to the same rules and laws as loans so are often easier to apply for and get approved.
The downside is that the fees charged to the supplier are often higher than the nominal interest you would pay on a Green Loan. Also, if you pay the Plan off early, you don’t get a reduction in the fees paid (because the supplier paid it, not you).
What is a Power Purchase Agreement (PPA)?
You enter into an agreement with a solar panel company (or more usually their financier) to get panels on your roof for no down payments. Another company now owns those panels on your roof.
You won’t get a government subsidy for the system, because you don’t own the system. The benefit is that the company who owns the system on your roof will do all the maintenance, and will monitor output. If they installed the panels well, there shouldn’t be much in the way of maintenance.
You then pay for every single kW that gets produced from that panel regardless of how much you use.
You’ll be charged for that energy regardless of whether you use that electricity or not. That rate for energy per kW can be fixed or you can agree to a variable rate.
At the end of the Agreement, you won’t own the system but will usually be offered an option to buy it.
If you decide to sell your house, you would have to pay out the financier for the full value of the remaining contract.
What is a Solar Lease?
A solar lease has most of the same elements as a PPA. There’s no down payment, however, you generally own the system with the finance company having a declared interest in it.
The key difference is you’ll pay a monthly dollar figure every month no matter how much electricity is generated from your panels. So if it’s a high or low amount you generate in the month, you’ll pay the same amount.
At the end of the Lease period, you would normally own the system, sometimes requiring a final ‘balloon’ payment.
Solar Leases are normally only provided to businesses (including home businesses) and commercial premises and often make good sense for these customers.
Generate your own electricity
As a general rule, the best way to pay for your solar system is to pay for it from your own resources.
If this is not practical, then a Green Loan may be a good option as it is relatively inexpensive and can be paid down quickly (saving interest).
Remember that the average Australian spends $2,299.50 per year on electricity. With these figures, you’ll have repaid the investment for a 5kW system in around 3-5 years.
Please note that nothing in this post or web site is intended to be financial advice and you should always consider your own circumstances and, where appropriate, obtain independent advice.
Can I really get free solar panels?
The offer of free solar panels is not always what it seems. You can end up locked into a long term contract making repayments that don’t reduce. And over time, you’ll pay many times more for electricity than the system would cost to install.
But that isn’t to say that you can’t get free energy from a solar power system you’ve bought. After the initial investment for installation, you get to use the electricity you generate with no restrictions. It’s free energy that can save you a lot of money on your bills and you can repay the cost of the system in just 3-5 years.
Take a long-term approach when it comes to solar power. The right investment today could lead to you enjoying free electricity for years to come.
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