REBATES & FINANCING

What are Rebates and Incentives?

REBATES AND INCENTIVES ARE FREE MONEY!!

Rebates and incentives are financing tools available to all U.S. homeowners to help offset the costs of and promote the adoption of energy efficiency home improvements. They come in a variety of flavors and types, but they all serve the same purpose - they reduce the price you pay for certain home improvements. In many cases, such as installing solar panels, the rebates and incentives are so high that you may end up saving nearly 50% on your system. A system that normally costs $30,000 may end up costing you $15,000 out of pocket.

Types of Rebates and Incentives

There are a number of different types of rebates and incentives that apply to energy efficiency home improvements. Unfortunately, things get a little complicated because rebates and incentives vary by product (i.e., solar system rebates and incentives are different from programmable thermostat rebates and incentives) and they change quite often. Regardless, below are some of the most common types of rebates and incentives:

Tax Credits

With federal tax credits, you receive some percentage or amount of your purchase back in the form of a reduced federal income tax liability. This amount is dependent on what type of energy efficient product you purchase but is eligible to all U.S. citizens.

With state tax credits, you receive some percentage or amount of your purchase back in the form of a reduced state income tax liability. Again, these amounts are determined by what you purchase but also where you live as they vary from state to state.

Rebates

In addition to tax incentives, the U.S. government, some states, and some municipalities offer rebates for energy efficient purchases where they will actually pay you some amount of cash back based on your purchase.

Many local utility companies also offer rebate programs where you receive cash back from your utility company for switching to or buying an energy efficient product that they sponsor.

Lastly, there are manufacturer rebates where you actually receive cash back from the manufacturer for purchasing their product.

Why are There Rebates and Incentives?

You may be asking yourself why our government is giving away money to help you make energy efficiency home improvements. The answer is complex and involves government policies, foreign relations and a variety of other factors. As far as we can tell, there are two likely reasons:

• The government wants to promote improved energy efficiency throughout society as it will give homeowners a better quality of life and provide significant savings over time. Consider the rebates and incentives a little nudge of encouragement to help homeowners take action and realize the benefits.
• By promoting energy efficiency, this may improve economical and political stability by reducing our dependence on foreign sources of energy.

Regardless of the reasons, the old idiom "don't look a gift horse in the mouth" makes a whole lot of sense in the world of energy efficiency rebates and incentives. There is a plethora of tax incentives and rebates for us to take advantage of and they may not be around forever... so act now!

FINANCING OPTIONS - Financing Your Renewable Energy System

Installing residential solar panels can be a significant investment. Typical costs for such systems may range from $10,000 to $50,000. If you want to purchase the system outright, there are a number of options: cash, home equity loans or personal/private loans. If purchasing a system is too significant of an investment, there are two other incredibly economic ways to install a system for your home: leasing and power purchase agreements. Read more to find out!

No matter what financing mechanism you end up choosing, adding a solar system is beneficial in so many different ways but what is most attractive is that over time, the implementing of a system can potentially cost you nothing. How is that possible? The benefit of installing a solar system for your home is that you produce your own energy and are no longer pay the increasing price from your utility provider. When you finance a renewable energy system, the cost is your monthly payment. Depending on where you live, the size of your electric bill and other factors, it is very possible that the amount you save on your electric bill is more than your monthly financing payment for the solar system. We're pretty sure you wouldn't mind paying $150/month if your system reduced your electric bill by $175/month.

DIRECT PURCHASE OPTIONS: CASH, FINANCING & LOANS

Cash - Since putting in a solar system can cost tens of thousands of dollars, a direct purchase using cash requires significant disposable income or savings. If you are able to pay cash or a portion of the system in cash and avoid interest payments, you will experience substantial and immediate savings on your new renewable energy system. If you do not have the upfront cash, don't worry, there are other options including financing & loans, leasing & power purchase agreements - which are described in more detail below.

Home Equity Loans

For many homeowners, a home equity loan, or borrowing against the equity of your home, is another option for financing a solar system. There are several benefits of a home equity loan which are applicable to most individuals:

• Lower rates than a personal loan.
• Tax deductible interest (in most cases, you should consult your tax advisor).
• Available to a wider range of credit scores.

Since you are borrowing against the equity of your home, you are essentially tacking the renewable energy system onto your existing mortgage. We recommend a home equity mortgage only if you have ample equity in your home and do not plan to sell for the next 12-24 months (or more). In addition, if you are struggling to make payments on your existing mortgage or have a credit score lower than 640, this is probably not the best option for you. However, please remember that adding a solar system to your home not only lowers your utility bill but can also increase the value of your home.

Personal/Private Loans

Personal loans are typically just private loans from either banks or other private entities. Personal loans are generally tougher to obtain and require a minimum of verification including residence, income, and employment and they also come with a higher interest rate than most other loans, including home equity loans. Like a home equity loan, you may be asked to put some form of collateral against a personal loan.

We recommend you stay away from using personal loans to finance renewable energy systems unless you really know what you are doing and can find the right deal to fit your financial situation. If you are struggling to finance the direct purchase of a renewable energy system, there are solar leasing and power purchase agreement (PPA) options that are probably much better suited for you. Just like leasing a car, you pay a monthly payment and have the option to renew, buy or return the system at the end of your lease term.

LEASING AND POWER PURCHASE AGREEMENT (PPA) OPTIONS (Leasing Overview)

- If you do not want to or do not have the money to purchase a solar system or other renewable energy system, homeowners have the option to lease a solar energy system just like you might lease a car. With a lease, there is typically no down payment. Instead, there are monthly payments for the lease term with annual increases of about 3%, an amount still lower than the average utility increases. Depending on the installer, the cost of maintaining the solar system may not always be included in the monthly fee. Lease terms typically last between 20-25 years. Similar to a car lease, at the end of the lease term, you have the option of renewing your lease, purchasing your system, upgrading the system or simply having the system removed.

So with a lease, while you are paying a monthly fee for the solar energy system, that system is producing energy for you for free. And depending on where you live, the size of your electric bill and other factors, it is very possible that the amount you save on your electric bill is more than your monthly lease payment for the renewable energy system.

 

Power Purchase Agreements (PPA)

A Power Purchase Agreement (PPA) is similar to a lease and has been a popular method of financing solar power systems for many years. In fact, major corporations often use PPAs to put solar systems on their buildings.

 

What is a Power Purchase Agreement?

Under the PPA model, the solar provider secures funding on their own for the solar project and then installs the solar system in your home/office building. Subsequently, the provider maintains and monitors the energy production from the solar system. You pay nothing for this installation and maintenance.

The solar provider then sells the electricity from the installed solar system to the home/building owner at a fixed contractual price for the term of the contract. So in essence, all you are paying for is clean energy produced on the top of your home.

PPAs generally last between 15-20 years. In some renewable energy contracts, the host has the option to purchase the generating equipment from the PPA provider at the end of the term, may renew the contract with different terms, or can request that the equipment be removed.

Lease or PPA: Which is Better For Me?

The honest answer is that both are excellent options for home/office building owners looking to lower their electric bills but it simply depends on each buyer.

With a lease, in order to qualify, you will need to have good credit. And with a lease, while there is typically no money down, you will be required to pay a monthly fee for the energy system which may go up a small percentage each year for the term of the lease. In the case of PPA, you do not pay a monthly fee but you will be purchasing your electricity from the solar provider. Both are excellent lower cost financing mechanisms and most installers have a leasing or PPA option for you to consider. We suggest you request a FREE solar consultation to learn more.

Just remember that with the lease or PPA model, you will not actually own your panels and as a result, will not be able to participate in the federal, state or local rebate or tax credit programs.

What if I Want to Move During My Lease/PPA Term?

If you decide to move during your lease or PPA term, under most leasing options and PPAs, they typically allow the new homeowner to assume the contract or buyout the system upon purchase. This is often an attractive option for the person buying your home. Recent studies have shown that homes with solar systems installed have higher resale values (approximately $20,000 for every $1,000 saved each year in electric costs) and sell more quickly. It is a tremendous selling tool offering a home for sale that is capable of significantly reduce energy consumption and bills.

Also, if you are moving to a new home within the service area of your solar installer, your lease or PPA may be transferable to that new address, although there may be a small fee for having your solar installer move your solar system to a new residence.

What if My System is Not Performing Well or Becomes Outdated?

Most people are concerned about entering into a contract for such a long period of time for a highly technical piece of equipment for the fear that it will break or become outdated. There is no reason to worry. In most leasing and PPA agreements, there is usually a clause that guarantees some level of system performance and if the system falls below that level, the installer is responsible for either fixing or replacing the system to get it up to specification. And in the case of a PPA, your electric rates are set contractually so regardless of whether the system is outdated or not, you are always contractually obligated to receive steady performance at a fixed price. However, before you sign any agreements, make sure you talk about performance guarantees with your installer and ensure all such guarantees are in your lease or PPA.

What if My Solar Company Goes Bankrupt?

If the solar installer you contracted with goes bankrupt, your home system will not be removed or repossessed. You are not responsible for your solar company's financial situation. We recommend you ask more about this as most companies offering leasing/PPA agreements are backed by major institutional investors and financing. In most instances, whatever entity purchases your solar contract continues to honor the terms of the contract in full.