Are "free solar panels" really free?

If you've been shopping for a solar panel system, you've probably heard at least one company advertise "free solar panels." Sound too good to be true? It is.

Just as there's no such thing as a free lunch, there's no such thing as free solar panels. Going solar through a company making "free solar" claims could instead reduce your long-term return on solar panels and perhaps worse, sour you on the idea of clean energy altogether. 

"No-cost solar" offers usually refer to solar leases or power purchase agreements (PPAs). Under these agreements, you can get solar panels on your roof for no out-of-pocket costs–but you also won't own the system or be eligible for most solar incentives. If you don't want to spend any money upfront, financing your system with a $0-down solar loan is usually your best option.

When companies advertise "free solar panels" or "no-cost solar programs," they're often referring to solar leases or solar PPAs. Under these solar financing arrangements, a solar company will put a solar panel system on your roof at no up-front cost for installation, enrollment, or maintenance. This sounds great. You get to power your home with clean energy and you can even point to the solar panels on your roof to prove it.

The reality is that you don't technically own the system. Under solar lease agreements, the solar company retains ownership of the system, and you pay them for the electricity it produces. The company has built a small power plant on your roof and is selling you the electricity. They're essentially another utility company.

Most offers will save you some money on energy bills, but less than if you own your system. If you don't pay attention to the details, you could wind up paying more than you currently do for electricity.

Some companies advertise free solar so they can sell your information. Check out these sponsored Google ads offering "no cost solar," "free solar," and "government funded solar energy." They're all misleading. When you click on any of these ads, they bring you to pages where you need to provide personal information, including your phone number, before you can learn what the offer includes.

If you're looking for free solar panels, or at least solar panels with less cost upfront, solar leases, solar loans, and community solar are good options. Regardless of its "do-good" image, the solar industry is a for-profit enterprise like any other. So, even if financial gain is secondary to environmental considerations, you should still shop around to get the best deal.

Sign a solar lease

Solar lease providers make money by selling you electricity, usually at a lower rate than what you pay your utility. Companies like SolarCity once dominated the market for solar leases. Today, countless new players compete with each other while SolarCity is no longer around. Some solar leases will save you more money on your electric bills than others. You can now pick your company based on its offer. 

The revolutionary thing about solar leases was that they made it possible for virtually anyone with a roof to go solar, regardless of whether they had cash in the bank to purchase a system. Solar leases were crucial in removing barriers to entry when solar system prices were prohibitively high.

Take out a zero-down solar loan

Times have changed substantially since solar leases arose. Solar systems are more affordable, and many different financing options are available. The most important is the solar loan, which combines the "zero-down" aspect of the solar lease with the benefits of system ownership. Solar loans can come with high interest rates but offer much greater savings potential than leases. 

Subscribe to a community solar farm

Subscribing to a community solar farm typically guarantees 5-20% savings on electric bills. It's also usually free to sign up and free to cancel. You pay for the electricity your share of the farm generates, but at a lower rate than you pay for electricity from your utility company. The savings are lower than owning or leasing your system, but you don't have to install any equipment on your property, making it an excellent option for renters.

The top reasons for going solar are saving money, eliminating utility bills, and reducing your carbon footprint. The environmental benefits of going solar are more or less the same regardless of who installs your system, so it's critical to focus on the financial benefits. 

Solar financing is not a "one-size-fits-all" solution. A cash purchase will offer the highest return on investment, while a lease will include more peace of mind and no upfront cost. A loan can be the best of both worlds. Here's a breakdown of how they compare.

1. Cash purchase

Buying your rooftop solar panel system outright is the best value over your system's 25-30-year lifetime. Even though your initial cost could be steep, you can reap all the financial benefits and savings associated with going solar (incentives, tax credits, and more). Owning your system can also increase your home value. 

2. Personal loan

Applying for a solar loan is the next best option for a return on investment. The initial cost is often $0; however, interest payments chip away at your energy savings until you repay the loan. The payback period is usually about seven or eight years but will ultimately depend on your system's size, cost of electricity, and interest rates. Once you break even on your investment, you pocket 100% of your energy savings.

3. Solar leases and PPAs

Your solar energy savings will be lowest with a solar lease or PPA. Most agreements are structured to heavily benefit the solar installer, allowing them to claim incentives and take a cut of your savings through monthly payments. By the end of your lease, you'll have paid them anywhere from a third to over half of your potential savings.

The most significant selling point for a lease or PPA is that there is no upfront cost and no maintenance. Keep in mind that solar panel systems generally require very little maintenance anyway, so you likely won't benefit from choosing a lease over a $0-down solar loan. Also, be on the lookout for escalators, which can increase your monthly payment by a preset rate over your term length and really eat into your savings. 

Take a deeper dive into the different solar financing options.

You can't get free solar panels from the government–but the government does offer many great incentives to make them more affordable. Most government incentives, like the Federal Solar Investment Tax Credit (ITC), go to the owner of the solar panel system. The main takeaway when considering a "no-cost" solar program or PPA is that you don't own the solar panel system on your roof—the installer does. 

Here are some of the best solar incentives the government offers right now: 

Solar Investment Tax Credit

If you've been on the fence about switching to solar energy, the ITC (the best solar incentive) may seal the deal. As of 2023, this federal incentive allows you to claim 30% of your equipment and installation costs as a credit toward your federal tax bill. The tax credit value applies to any systems installed and operating before December 31, 2032.

As we've mentioned, if you choose a "no-cost" solar program or PPA, your installer will get this credit instead of you. For example, if the system on your roof costs $10,000, the ITC would award $3,000 to the system owner. Because the installer would technically own the system, they'd receive that money. You'd miss out on one of the key financial benefits of investing in renewable energy.

SRECs and performance-based incentives

Two other programs include Solar Renewable Energy Credits (SRECs) and performance-based incentives. Some states have solar carve-outs, which mandate that a set amount of electricity generation come solar specifically. In these states, SREC markets facilitate the sale of solar certificates. You'll earn one SREC for every megawatt-hour (MWh) your system generates. An aggregator or broker (like SRECTrade or SolSystems) will help you sell your SRECs in exchange for cash. 

Performance-based incentives are rewards for producing a certain amount of solar energy. For example, if you're eligible for performance-based incentives, your utility would pay you to produce a set quantity of electricity from your solar system, whether you use it or send it back to the grid.

State and local incentives

Many states offer incentive programs like tax credits, but they vary from state to state. Depending on where you live, you may also be able to take advantage of state net metering programs in which your utility company compensates you for excess kilowatt-hours (kWh) of electricity you generate and send to the grid. Some local cities and counties also offer direct rebates to help with the upfront costs of solar panel installations.

Solar panels may not be free, but you can get free, custom quotes from pre-vetted solar installers when you sign up on the EnergySage Marketplace. Comparing quotes allows you to see more options and ultimately get a great deal on your solar panel system. To get a quick estimate of how much you'll save with solar – whether you pay upfront, use a $0-down loan, or go with a solar lease/PPA – check out our solar calculator.