Can you really get solar panels for free?

A salesperson knocks on your door and tells you that you can get solar panels installed on your home for free. Sounds too good to be true, doesn’t it?

It is. When a solar company pitches you on “free” solar panels for your home, they are referring to a solar lease or power purchase agreement (PPA) that requires no payment upfront. The company will install the solar array on your home, and you get to use the solar electricity it generates. It’s no-money-down but the deal is not free: you pay a monthly fee for the use of the solar system. Typically, the contract includes a fixed cost increase. In fact, after several years customers sometimes pay more for electricity than their utility rate.

Leases and PPAs are similar financing schemes, and which one you are offered depends on the state you live in. (Not every state allows leases or PPAs.) With a lease, you pay a fixed amount every month. With a PPA, you pay for the electricity that is generated by the solar panels. In both cases, you don’t own the solar array - the installer does. Essentially, you are renting the system.

How many people choose “free” solar panels?

Even though they aren’t actually free, a very large number of homeowners choose to go with a lease or PPA to get solar panels installed on their homes. According to Berkeley Lab, the most recent data shows that 37% of homeowners obtained their solar panels this way.

That’s a significant drop from when solar leases peaked at more than 50% of the residential market, but it’s still a very large number. Why do so many people choose this?

Mostly, it’s because there’s a ton of marketing dollars thrown at these financing models. For example Sunrun, the largest residential solar installer in the country, spent $352,299,000 on sales and marketing in 2020 according to their most recent financial statements.

Vivint Solar also liberally uses the word “free” with their offer of six months of free electricity.

What’s the (theoretical) advantage of a solar lease or PPA?

With a solar lease or PPA, the pitch to consumers is that you get all the benefits of solar electricity for your home with no maintenance worries or upfront expense. There’s no initial outlay because you are only billed monthly. The solar installer takes care of maintenance and repairs, so in theory the entire experience is worry-free.

The no-money-down aspect of the deal is usually the biggest draw. Even after rebates and tax credits, a home solar system will cost several thousand dollars. If you don’t have that kind of cash laying around, a solar lease or PPA can be an attractive alternative.

Which companies offer “free” solar panels?

This type of financing is almost exclusively offered by the largest solar companies in the country, who need a lot of financial clout to absorb the initial cost of the systems they install on homes and then slowly earn revenue from them over time.

Companies in this space include Momentum Solar, Sunrun, and Vivint Solar. However, Vivint is now owned by Sunrun. Much of the home solar market is consolidated in the hands of a few very large companies.

As described in our review of Sunrun, while these companies generally also let homeowners do a straight purchase of their systems, they don’t emphasize this because they make more money from their leasing business.

In contrast, smaller local installers make money on solar installations in the traditional way by adding a reasonable margin to their costs. These companies often offer loan financing, but that’s typically not a significant revenue stream for them. They may sometimes also offer lease and PPA deals through a third-party financing company, but this tends to be rarer.

What’s the problem with solar leases and PPAs?

While it’s an attractive pitch to get solar for no money down, there are several disadvantages to getting “free” solar panels.

These include higher long term costs, issues with selling your home, a track record of poor workmanship, and poor customer service.

In addition, some companies such as Vivint and Sunrun have a record of questionable marketing practices and have been the target of lawsuits. Vivint Solar, for example, was sued by the states of New Mexico and New Jersey for several issues, including the practices of their door-to-door salespeople.

Nearly everyone would be better off purchasing their solar panels, even if it means taking out a loan. If you’re not able to get a loan at a reasonable rate, you’re better off not going solar and instead spending your money on home energy efficiency retrofits, which can be done at a low cost.

What should you do if a company offers you free solar panels?

If a sales rep actually uses the term “free solar panels”, that’s a clear sign that you’re dealing with a low-quality company. Run away!

In fact, commission-based door-to-door solar panel scams that frequently use the “free” pitch to take advantage of unsuspecting consumers are so common that several states have issued warnings about these practices.

Consumers protect themselves by educating themselves on the financing options available to them. If you’re needing a loan to purchase your solar panels, treat it like any other product: comparison shop, and read the fine print to understand the terms of the deal you’re getting, especially fees and fixed or variable rates.

When you’re interviewing solar installers for your project, be sure to ask plenty of questions and use our tips to weed out the bad companies.