In this podcast, Brian Sadler from Solaris Renewables and Richie Bonney from Sungage Financial talk with John Maher about financing solar panels. They explain that the monthly bill to finance equipment is usually less than people’s current electric bills — in other words, financing allows you to start saving immediately.
John Maher: Hi, I am John Maher. I’m here today with Brian Sadler, Vice President at Solaris Renewables, a solar company in Massachusetts, providing premium solar and storage technologies with exceptional customer service and designing, installing, and servicing solar systems in Massachusetts, Southern New Hampshire, and Maine. Welcome, Brian.
Brian Sadler: Thanks, John. I appreciate you having us in.
John: Sure. And our special guest today is Richard Bonney, regional sales manager at Sungage Financial. Welcome, Richie Bonney.
Richie Bonney: Thanks for having us, John. Appreciate it.
Financing Options for Solar Power Installations
John: Absolutely. So, Richie, today we’re talking about the basics of solar financing, and I know that by working with Sungage Financial, you have a lot of experience with that. Can you provide a little bit of an overview of the various financing options that are available for solar power installations in homes?
Richie: Sure, yeah. There’s a few ways that folks can go solar. You can buy the system outright, just pay cash for it. There’s a lease or a power purchase agreement, which is typically no money down, and you’re actually paying for the energy that the system produces, and then there’s the financing option where you can own the system but take out a loan to make lower monthly payments over time. So, it kind of depends on each person’s tax situation, what they’re looking for in terms of their short-term versus long-term savings, there’s quite a few options that are out there.
How to Choose the Right Option for Financing Solar
John: And what are some of the key factors that are involved that influence the choice of solar power financing and which option you might take?
Richie: Yeah, I think for most folks, it generally comes down to whether or not they can realize the benefit of the federal tax credit. If you can take that tax credit, then typically owning the system is going to be the best option for you, and if you can’t, then typically leasing or doing a power purchase agreement may be a better choice because you won’t be able to realize those incentives, and I think more broadly, if folks are looking to save as much money upfront as they can, typically solar financing is going to be the best choice, and we have a lot of flexible options all the way out to a 25-year term, which allows people to really lower their monthly payment relative to what they’re paying the utility and save right away.
Brian: I think one of key things, too, with the tax credit is that everyone qualifies and everyone can take it, it’s just a matter of how it works for you, right? So having the tax liability to cover it, to take it as soon as possible, as much as possible, makes the solar financing even more attractive as well, so that’s the most upfront savings and best overall total cost of ownership as well, so you can save, so what we tell lot of folks is if you can realize the tax credit in year one, you’re going to pay less for less time and maximize the benefit to the homeowner and the property by owning the system.
How Do Solar Tax Credits Work?
John: Now what happens, Brian, in the case of a lease? Does that tax credit still go to the homeowner or does that tax credit go to the company that’s paying for the system through that lease?
Brian: Yeah, that’s a great question. It’s basically the PPA or power purchase agreement and lease options are grouped under an umbrella called third-party ownership, so it is a third party, it’s a financial entity that’s going to own the solar system on the customer’s property, and they’re going to realize the tax credit and any other local incentives as well, so there’s different…
Depends on what state you’re in and what region. Here in New England and in Massachusetts specifically, we have an income stream that can be realized has changed over the years. There are rebates as well, depending on what utility you’re in, so a lot of those generally are collected by that third-party ownership group.
They have huge tax equity firms that realize these tax credits, and they also now have a revenue stream on top of that, and the idea is they pass those through cheaper cost of electricity, but at the end, if you looked at your stream of payments with those models, you generally are paying significantly more for the system than you would if you were to buy the system out or if you were to finance it.
So that’s why we generally tell folks looking at the whole picture and it’s getting into the weeds a little bit, but if you show them what that stream of payments looks like, it’s always going to be significantly less for customers to own the system, and that’s why financing makes a ton of sense because we’re buying our electricity on a monthly basis, so let’s look at buying solar on a monthly basis, right? Then in all cases, you’re going to be paying less by financing solar than you were from just paying the utility.
How Financing Affects the Cost of Solar
John: Right. Richie, how does the cost of solar panel technology impact financing solutions and decisions and maybe how has that changed over time?
Richie: Sure, yeah, so we’ve seen even in the last year and a half, two years, we’ve been on quite a ride. There was a lot of fallout from COVID supply chain issues where we saw solar equipment panels, inverters, all that stuff increase pretty significantly.
Fortunately, during that time, a lot of the financing rates were really low, and so people could still make those monthly payments look really, really attractive.
Now that we’re kind of on the other side of that, we’re seeing the equipment costs fall, which is making, again, owning solar through financing or outright a lot more attractive. We’re kind of in a weird spot right now where the Fed has increased interest rates, and so a lot of the solar finance rates have also increased. But, fortunately, again, the combination of utility prices increasing and solar equipment costs coming down, it still is a really, really attractive option for homeowners.
Advantages of Solar Installation Loans
John: Maybe talk a little bit about some of the advantages and disadvantages of using loans to finance solar installations.
1. Owning Your Own Equipment
Richie: Yeah, I think the biggest advantage is not having to come out of pocket to be able to own your solar system, so being able to really save right away I think is what most people are looking to do. I think Brian touched on this earlier, but most people when they’re looking at their electric bill as a monthly expense, and so if folks are looking at a system cost that is in their eyes a lot more than what they’d be paying their utility bill just for writing a check, that may not be as attractive to some people.
2. Reducing Monthly Bills
But if you’re able to finance that out over 10, 15, 20, 25 years and turn that expense into a monthly number, that monthly number is again almost always going to be much more attractive than what you were paying the utility, so I think most customers that are looking to go solar are hoping to save right away, and financing allows them to achieve that goal.
Brian: I think a lot of folks, too, ask when they’re navigating the options of solar, “Well, what’s my payback? When do I break even? Or when do I achieve my win?” With solar financing, it’s generally month one, right? So you really don’t talk about payback years in finance because you’re not outlaying that lump sum payment like you would be if you did buy the system outright, so I think that’s one big piece that helps keep it easier and digestible for folks as you’re paying your electric bill monthly. Looking at solar monthly, you’re saving right away. It’s a tremendous win, right?
3. Avoiding a Lump Sum Up-Front Payment
Separately, the landscape now is that folks might have the funds to buy the system outright, but do they want to take all of their funds currently and put that towards this investment? Or are there other things? Some folks with the current economic landscape are a little weary to part with a big chunk of their bank account or cash out some investments, so that’s where solar financing gives a tremendous amount of financial flexibility and allows them to still hold on to savings investments, still save money right away, and make their monthly costs lower than it was just yesterday.
4. Fixing Monthly Costs
Richie: I think one more thing, too, is just the ability to fix your costs, right?
Richie: In today’s world where we saw last winter utility rates went up at an incredible rate for a variety of factors, people weren’t expecting that major jump in their monthly expenses, and so being able to finance a system over time and know exactly what your monthly payment is going to be every single month, that just brings a lot of peace of mind to customers where they don’t have to subject themselves to the volatility of the utility company.
Brian: You see that all over social media. I know when new kits went up and everyone’s looking for a solution and on some of the local groups that I’m on, I was offering, “Well, did it go up? I didn’t notice because I’ve had solar for seven years.” Sarcastically, of course, but really, the only solution if you do want to fix or eliminate that monthly payment is by going solar as well.
Energy Savings Can Cover the Cost of Financing Equipment
John: So Brian, are you saying that you’re going to actually save enough generally on your monthly electric bill by having solar panels that you’re actually able to pay for the financing of the solar panels and still save money on your monthly bill?
Brian: Absolutely. I mean, it’s all relative to what your monthly electric costs and usage is and what your site conditions are for your solar system, how productive it’s going to be.
Brian: But generally speaking, any site that we’d be talking to anyone and recommending solar for is good and it’s going to save money, so if we use an example of you have a $200 a month electric bill and you finance a solar system and it’s going to cost you $150 a month for that monthly payments, including basically going into how it all works, but essentially your monthly cost goes down $50. You’re fixing your cost at a $50-a-month instant savings and flatlining your electricity cost until you pay off that loan, whereas the utility bill is 200.
Well, next year it’s going to be 220 and then it’s going to be 250 and then it’s going to… You’re like three years away from a $300 bill and now you’re saving $150 a month, so I would say, yeah, anyone that we’re talking and guiding that solar is going to be a good solution and that solar financing is going to be the best program for them. Then they will be saving money right away and saving more year over year.
Government Incentives and Tax Credits for Solar
John: Okay. We talked a little bit about the government incentives and tax credits, but Richie, maybe talk a little bit more about that and how those programs affect the financial aspects of solar panel projects.
Richie: Sure. Yeah, so what’s great is that you’re able to get a 30% federal tax credit on the entire cost of the system, and again, Brian had mentioned some of this earlier, but there are also some local incentives that are available depending on where you live.
Fortunately, in Massachusetts there’s a $1,000 state tax credit that’s available to folks as well, and what’s great about how Sungage treats those tax credits is that we’ll actually take the 30% federal tax credit plus the $1,000 state tax credit and defer that for a tax season so the customer’s initial monthly payment is going to be a lot lower than it might be if they were to just start making payments on the entire cost of the system, and so that’s really our goal is to help customers save as much money as they can from day one, and so we’ll defer that entire tax credit amount, and that amount is also at 0% interest, which is really attractive for a lot of our customers.
0% Solar Loans From Sungage
Brian: I think that’s huge. I mean, there’s a variety of solar lending platforms and our industry has matured a ton and what I think is unique about Sungage, aside from some of their other benefits, which I’m sure Rich will talk about, outstanding customer service, they have a great platform, it’s really transparent and easy for the installer for the homeowner as well.
But having that 0% loan, it’s truly for that tax season, it really takes that portion of the solar costs out of the equation that basically they’re paying on the net cost of the system and then that, like Richie said, really reduces their monthly payment.
Then on top of that, if there’s other local incentives that Sungage doesn’t necessarily have a tax treatment for renewable energy, credit income or something like that, now their monthly payment is further offset by that income stream as well, so it even increases the delta between their utility bill and their new solar system. So, I know if there’s some local rebates, I know New York I think has a rebate and some other states do as well that Sungage does have a treatment for, and that can be included in it as well, which is really significant and really sweetens the pot for homeowners to be saving right away.
Residential Vs. Commercial Solar Financing
John: Is there a difference between residential and commercial solar financing models?
Brian: Yeah, I would say it’s solar and the setup and the mechanisms for how the system works are very similar, but the scale and then some of the economics are different in that with being a commercial application, that the business can also realize depreciation on that asset and that depreciation can be accelerated and there’s different ways to go about it, but it really depends on that particular business’s tax situation and kind of financial situation.
So without going into all the gory details, there is another huge piece there that businesses can look at that homeowners cannot. Similarly, businesses can’t take the state tax credit here in Massachusetts as residents can, so there’s another piece there, so generally speaking, there’s financial platforms are either residential or commercial, and there are businesses similar to Sungage on the commercial side, so there’s a whole industry revolving around lending for commercial installations as well, and they work same but different. They have different mechanisms in place to treat that market as well.
Does Location Affect Financing Options?
John: What about your geographic location? Does that affect financing options, Richie?
Richie: Yeah, so fortunately as far as states go, we’re in I think, Sungage is in 45 different states, and most folks in the US can gain access to financing, which is great. Geographically as well, that will impact the number of sun hours each house gets, so folks in New England definitely get enough sun to make solar really attractive.
If you’re down in Florida, you get a little bit more sun. Differences, circumstances down there, but again, you can still make it attractive down there. So yeah, so we’re offering financing really across the US and pretty much anybody in the US, as long as their home is as well situated for it, there’s usually a path forward to make solar attractive.
John: Then Brian, you said that there’s some differences from state to state as well with certain states might give different tax credits or things like that, so you just have to talk to somebody who’s familiar with the tax credits and the situation in your state, right?
Brian: Yeah, absolutely. I think obviously Sungage is a great resource for that and if you’re looking for solar in the area you want to talk to, we recommend a local installer, and Sungage is an excellent resource as well. They have a network of local installers that they work with, so they’re always an option to reach out to directly and understand how the parameters in your geographical location work.
And like we talked about before, it works this certain way here in Massachusetts and in New England, for instance, right? New Hampshire does have a state tax rebate as well. It works in a certain way and then other states do. New York has a large rebate. Others, some have some type of REC or performance-based incentive that work.
Then Sungage has, for stable understandable incentives, Sungage has a solution, generally speaking, in their loan where they know exactly what it is, they can predict that then they, they’re basically willing to front the homeowner that money, essentially, by including that in the loan, and that way for an installer, right, it’s really convenient ’cause we know we’re going to get paid for the work that we do, and then for the homeowner, it means that there is some relief to coming out of pocket.
It’s a fairly significant investment if you’re just paying for it outright, right, so they’re able to have a finance mechanism to save money immediately and also help them understand and navigate some of those incentives.
Advantages of Working With Sungage for Solar Financing
John: Then, Richie, I know that Sungage is obviously a financing company specifically for solar installations. What are some of the differences or advantages in working with a company like Sungage for your financing as opposed to just going to a bank or another lending institution?
Richie: Sure. So I think for the customer, the major advantage is going to be just the level of customer service. We have a dedicated team that is well-trained in talking about solar loans. They’ve received all the questions about tax credits and how the system works and all those different things, whereas working with a local bank or a credit union, typically they only have a couple of folks that are trying to handle the entire process, both with customers and with their installers, and so those folks a lot of times are just stretched really thin.
In addition to that, again, we have talked about the way that Sungage acknowledges the federal tax credit and any local state incentives. Typically, credit unions or banks are not going to recognize those incentives, or at least certainly not the state incentives, and so in most cases, their monthly payments are going to start out a little bit higher because that entity, that credit union or whoever it might be is not going to factor in those local incentives.
But I think the biggest difference is really on the service side, both for the customer, and then also for the installer. The installer has a lot of really great visibility into where their customers are in the process, so it’s very clear what the next steps are to help that customer get to where their system is ready to be installed. Again, we have a whole kind of platform and portal that’s built out for that, and a lot of those banks and credit unions just don’t. That’s not their primary focus, so that’s why they haven’t kind of dedicated the resources to doing that.
Working With Sungage Vs. Traditional Lender
Brian: Yeah, I mean Sungage has a tremendous advantage there, I would say, right, in that difference. So banks, like Richie pointed out, they lend on a variety of products. They could be doing homes, cars, home equity, lines of credit, and everything else you can think of, and they have… They’re traditional, right, so they’ve been around a long time and they work in that respect, right?
They’re used to that model, that’s how they operate, and it’s all customer-driven. So if the customer wants to take a HELOC or refinance their home, that is on the customer, and us as the installer and kind of guiding light for them in their installation, in their process, we can’t help at all. So a platform like Sungage, right, it’s clear, transparent. If they want to get a credit approval, it’s a soft credit check and they get an instant approval and instant decision, they know right away.
Then on the other side of the installer, we can see, like Richie said, there’s a kind of lifecycle through that journey. The customer gets a very transparent look at it. They can always go into their portal and see where things are at. The Sungage team, I think they are open until midnight. They have tremendous hours.
Brian: They always have someone on and they really make it simple and it’s a tremendous boost to the customer experience and the customers know where they stand and it’s easy-to-understand process, whereas if it’s a bank, they’re like, “Okay, let us know, right? Let us know when you get your financing sorted out.” Then usually what that means is projects drag on, there’s a lot more questions, there’s other things that come up in customers’ personal lives or situations that might be a roadblock to them accessing financing.
Richie: I think Brian, too, what you’re saying, too, really what it means for the customer is they’re going to get their system installed and turned on faster, going through a smoother process as opposed to trying to navigate all those waters by themselves.
Contact Solaris Renewables to Talk About Solar Power
John: Bingo. All right, well, that’s really great information, Richie Bonney, thanks again for speaking with me today.
Richie: Of course. Yeah, thanks for having us, John.
John: And as always, Brian, thanks again for speaking with me as well.
Brian: Great, John. Thanks for having us in.
John: And for more information, you can visit the website at solarisrenewables.com or call (781) 270-6555.