Before installing solar panels, know the financial realities

by | Jun 13, 2017 | Blog, Buying a Home

With our many sunny days, Denver is the perfect place to install solar panels and reap the benefits. Not only can you potentially save on energy bills, but you will reduce your carbon footprint at the same time.

Still, this isn’t a simple project. Installing solar panels presents some tricky financial transactions, and if you don’t fully understand the costs involved, your expenditures can end up being greater than any savings you will enjoy.

When buying solar panels, you will choose from two options: purchasing them outright, or signing a Power Purchase Agreement (PPA)—essentially leasing them from a company that owns the equipment.

Purchasing allows you to take advantage of tax credits equal to 30% of the system’s cost, as well as monthly incentive credits from Xcel of about ½ cent per kWh. The equipment is easily transferrable to new owners when selling the home, and if financing is necessary, solar installation companies and third party lenders often offer special programs.

The PPA option can be trickier. It doesn’t allow for tax/credit incentives, and the rate you pay to purchase the solar power can vary; sometimes it’s fixed, sometimes adjustable. Finally, when you sell your home, the new owner must agree to your leasing contract and pass any credit requirements, which can complicate your ability to close on the sale.

Once you’ve decided between these acquisition options, there are other considerations:

• The solar system will need to be removed should your roof ever require replacing. As a result, it’s best to replace the current roof with high quality shingles before installing the solar panels.

• Solar systems have intricate parts, even aside from the panels. Be sure and read the fine print on any warranty or PPA to learn who is responsible should any part of the system fail.

• Banks and appraisers don’t add substantial value for solar systems, so for the investment to pay off, you will need to live in your home long enough to hit a break-even point.

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