The world is slowly moving towards renewable energy and there are incredible benefits in supporting this move — both financially and environmentally. While you may not be able to commit to an entire roof of solar panels, a few could still be a great investment.
Here’s what to look for when comparing solar panel financing options and what you might expect to pay to go green in a big way.
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Solar projects are typically funded one of several ways. Depending on what you’re looking to get out of your new energy source, funding can be chunked into two categories: leasing and buying.
Leasing solar panels means that you never actually own the equipment, but you may not have to put any money down for it or maintain it. Buying the system generally requires that you put down money upfront, but you’re also afforded flexibility when it comes to what you’re buying and what happens if you sell your home.
To buy a solar panel system outright, you’ll likely need financing. Luckily, there are a couple of options.
Home equity loan
A loan that’s backed by the amount of equity that you own in your home. In other words: What you’ve paid off so far on your mortgage is used as collateral. Lenders usually provide borrowing amounts up to 80% of your home equity. The downside is you must have equity built up beforehand.
A general purpose personal loan can be an effective financing option. Solar panels can be pricey, and personal loan rates and terms may not cut it unless you have good to excellent credit. Be sure to consider the cost of the monthly repayments against what you’re able to afford in addition to your other expenses.
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Representative example: Sally gets solar panels
Sally has just finished building her off-the-grid home in Southern Saskatchewan and is so excited to get solar panels. Unfortunately, she spent more than she budgeted for while building her home, so she will need to take out a loan to cover the cost of the solar panels. Including both installation and the solar panel system, she’s been told her total cost will come to $5,500.00. Since she needs the funds as soon as possible, Sally heads online to compare non-traditional lenders. She is offered a loan by a reputable online lender with a competitive interest rate, favourable terms and a quick turnaround time of just one day.
Cost of vacation
Origination fee of 3.00% ($165.00)
Total loan cost
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
How much does a solar energy project cost?
Your cost will vary based on the company you purchase through, your location and the size of the system that you get.
On average, a complete residential system usually costs anywhere between $15,000 and $30,000, including installation costs. This doesn’t factor in tax credits or rebates, or what you could save with your new solar panels generating some (or all) of your electricity.
Installation costs are usually charged per watt installed. Varying between provinces, you will likely pay between $2 to $4 per watt.
How you can get a return on your investment with solar panels
Find out how well your house is suited for solar energy. Climate, roof pitch and the direction your roof and house is facing will make a difference in how efficient your system is. Additionally, your location in Canada will make a huge difference in terms of hours of sunlight per year.
Research the companies that you’re thinking of buying from thoroughly. Ask if the installation is done in-house, look at reviews from other customers and find out if there’s any kind of warranty offered.
Maintain your panels properly. Follow the manufacturer’s recommendations for cleaning and maintenance. It’s difficult to get a return on a solar energy system when it’s not producing energy. Some companies include a maintenance plan with their products, while others will charge extra.
Consider the value it may add to your property. More people are looking to invest in renewable energy and cut their electricity costs, which leads to buyers who will pay more for homes that are already equipped with solar technology.
Solar energy production potential
Since hours of sunlight vary dramatically in Canada, here’s a look at some of the provinces and territories solar energy production potential. Keep in mind this will vary depending on your location in a province. If you live in northern Saskatchewan, your potential will be much lower than someone who lives in southern Saskatchewan.
Energy production potential
1,336 kWh/kW per year
1,301 kWh/kW per year
1,195 kWh/kW per year
1,064 kWh/kW per year
971 kWh/kW per year
Solar energy tax credits
As of 2018, Canada does not have a federal tax credit for solar energy. Incentives and rebates tend to come at the provincial and territorial levels, as well as local and municipal levels. Since credits and incentives vary drastically across the country, it is best to check the financial benefits for solar energy in your specific province or territory. You can do so here at SunMetrix or contact your local municipal office and speak to someone who deals with energy rebates.
Some examples of provincial tax credits include:
Alberta currently has 3 rebate programs in place. One such program provides funding to Albertan farms looking to harness solar energy, while another program offers incentives in the form of a rebate to residences and commercial businesses going green. With provincial rebates, you can often cover up to 30% of the total cost of your solar project.
British Columbia offers a $250 rebate to homeowners who install solar PV systems, however this rebate is only applicable in the Nanaimo area. In addition, the province waves any PST (provincial sales tax) payments on some solar materials and equipment, including wiring, controllers and solar photovoltaic collector panels.
Ontario is the leader in solar energy in Canada. At one time, the province did have 3 different programs in place to incentivize home and business owners to go green, however as of 2018, it appears that many of these programs have been temporarily suspended.
Since solar energy is relatively new on the scene, provincial and territorial regulations are constantly changing. Keep up-to-date with any tax credits and incentives offered in your province or territory in order to reap more financial rewards from going green.
Solar power can be a great investment for both your home and the environment. Tax credits, an increased house value and zero or low electricity bills can all lessen the financial burden in the future if you’re able to make the initial financial plunge now.
Your best financing option will depend on what you want out of your new system, how much equity you have in your home, your ability to make repayments and how long you need to repay the loan.
This depends entirely on how much energy you produce and how much energy you consume. If you consume less than you produce, you may be able to sell energy back to hydro companies or even your neighbours. Keep in mind not all provinces and territories allow you to sell energy to a hydro company. Saskatchewan, for example, allow you to reach “net zero” or the break-even point, while British Columbia will buy your excess energy. If you produce less than you consume, you’ll have to make up the difference by purchasing from a hydro company.
Your house is used as collateral when you take out a home equity loan. Defaulting on a home equity loan risks the loss of your home, since the lender has the right to seize it if you fail to make your repayments.
Your desires for your new energy system and your financial situation will dictate which is a better option for you. Purchasing a solar panel system affords many more freedoms than leasing, but it costs more money upfront. Leasing can cost as little as zero dollars upfront, but you don’t own the equipment and the cost can be slowly ramped up over time.
Rhys Subitch is a writer and editor at Finder who tackles topics across the site. With half a decade of experience researching, editing and writing for a Fortune 500 company, university and several independent publications, Rhys brings readers the most up-to-date and curated info on all things finance.
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