We’ve all seen ads on YouTube or Facebook saying “if your electricity meter looks like this,” you can get free solar panels or that the government will pay you to go solar. If your BS-o-meter is calibrated accurately, these ads should set off alarm bells.
At best, advertising free solar panels is misleading. At worst, it’s a total scam. So, let’s take a closer look at what companies advertising free solar panels are really offering so you can confidently hit the skip button and get right to the cats reacting to cucumbers videos.
The Truth Behind “Free Solar Panels” Ads
So, who are these people telling us that free solar panels are just a few clicks away? In many cases, these advertisements are for solar leases or power purchase agreements (PPAs). And this marketing tactic is sketchy for two reasons:
- You don’t own your panels in a solar lease or PPA
- You still make payments to the solar company
Marketing a solar lease as “free solar panels” is like advertising a round of bowling as “free bowling shoes.” If you still have to pay for the lane and return the shoes when you’re done, are they really free?
Let’s take a closer look at how solar leases and PPAs work to better understand why they should hardly be considered free solar.
Solar leases and PPAs
The simplest way to think of solar lease or PPA is renting a solar system. In a solar lease, a company installs a solar system on your property and then charges you a flat monthly fee that replaces your utility electricity bill.
A PPA is very similar, except your monthly fee is based on how much electricity the solar system produces. Most leases and PPAs include an escalator, which raises the monthly fee by 1-5% each year for the 20- to 25-year duration of the contract. Over time, the escalator often makes leases and PPAs more expensive than buying a solar system with a cash or loan.
Owning versus renting solar panels
Leases and PPAs were common in previous decades when solar panels were too expensive for most people to own. But between the plummeting costs and incentives, buying solar panels is much more feasible and beneficial for most homeowners.
Image courtesy Electrum
It’s also worth noting that since you don’t own your solar system:
- It doesn’t add value to your home
- Your lease/PPA contract can actually complicate your home sale if you decide to move
- The installer claims any tax credits and rebates, instead of you
- You have no control over monitoring and maintenance of the system
Today, solar leases and PPAs are typically seen as a last resort option for going solar, and marketing these arrangements as “free solar” is misleading and hurtful to the reputation of the solar industry as a whole.
Free Solar Panels From the Government
The other hook you’ll hear in solar ads is: “If you’re a homeowner in [insert state], the government is paying people like you to go solar.” This is usually referring to the federal solar tax credit and, again, is misleading at best.
It’s true that there is a federal tax credit for going solar, but it’s a stretch to say the “government will pay you to go solar” – that’s just not how tax credits work. Homeowners that purchase solar panels qualify for the Residential Clean Energy Credit worth 30% of the gross cost of their solar and/or battery storage system.
So, if you spent $25,000 on a solar system, you can claim a tax credit worth $7,500 when you file your federal tax return. This credit can be used to lower your tax liability to increase your refund or decrease the total tax you owe. It is not a check that automatically comes in the mail when your solar panels get turned on.
If you don’t have enough tax liability, the credit can be carried over into multiple tax returns. However, there are some cases – especially with retired homeowners with little-to-no tax liability – in which the tax credit can’t be used at all.
So, while the solar tax credit is an amazing incentive, it’s irresponsible to say the government is paying people to go solar.
“Zero Down” Solar
The other buzzword you’ll see in solar advertising is “zero down solar” or “no upfront costs.” While this is typically used to make solar leases and PPAs seem more attractive, it’s important to note that there are zero-down options for purchasing a solar system too.
Actually, it’s quite common for homeowners to use a zero-down solar loan to finance their system. Unlike a lease or PPA, a solar loan provides steady monthly payments that won’t increase each year. Better yet, you own the system, which means you collect the tax credit and benefit from increased home value.
So, while advertising “zero down solar” is technically accurate for leases and PPAs, it’s not unique to those arrangements. You can buy a solar system with no money down using a solar loan and enjoy the added benefits of ownership.
The Bottom Line
As you probably expected, there is no such thing as a free solar system. And if a solar company is relying on misleading marketing tactics, it should make you question where else they are doing questionable work.
When you are ready to invest in a solar system, skip the sales pitches and use solar.com to compare multiple quotes from vetted installers.
This article is supported by Electrum and Solar.com.
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