Are Free Solar Panels Really Free? No, and Here's Why

If you’re reading this article, you’ve probably seen ads for free solar panels. That seems like a good deal considering a new solar panel system typically costs $16,000–$21,000.

So if solar panels cost so much, how could they be free?

Just like there's no such thing as a "free lunch," there is no such thing as “free solar panels.” Whether it’s the company or the homeowner, someone needs to pay for the panels, installation, warranty, and maintenance. 

The term “free solar” or “no cost solar” is a marketing tactic some solar companies use to talk you into a solar lease or power purchase agreement. These financing methods provide a new solar panel system with no upfront cost. However, just because it’s free to get started doesn’t mean it’s the most cost-effective or safest way to go solar. 

And in some cases, the phrase “free solar panels” can be a sign of a scam. 

Solar is a big decision. You want to get it right the first time instead of dealing with years of headaches and unexpected fees. In this article, we will cover 

• The real meaning of “free solar”  
• Why solar ownership might be the better option 
• How to avoid a solar scam
• Common questions about no-cost solar 

What does “free solar” really mean?

The term “free solar” often refers to $0 money down solar leases and power purchase agreements (PPAs). Customers using a lease or PPA can get solar installed and pay little to no money upfront. However, just because there is no upfront cost does not mean the solar panel system is free.

Below is a quick explanation of solar leases and power purchase agreements and why companies might use phrases like “free” or “no-cost” solar to describe these financing methods. 

Solar lease

A solar lease is a contract with a solar company to install solar panels on your roof for a fixed monthly payment. This is a third-party ownership model where you benefit from using a solar panel system but you don’t have to pay any startup costs.

Since the solar company owns your system, you can’t take advantage of any state or federal tax credits. But, the solar company is responsible for the installation and maintenance of the panels. Solar leases typically last 15–20 years.  

Is any part of a solar lease free? 

A solar lease requires no upfront cost, but it is not free. You still have to pay the solar company a monthly fee to rent the solar panels. 

What is a rate escalator in a solar lease? 

In many solar leases, the monthly lease payment is fixed for the duration of the lease term. However, some leases may include a rate escalator clause that allows for the lease payment to increase over time, typically on an annual basis.

The purpose of a rate escalator in a solar lease is to provide the solar company with a way to adjust the lease payments for inflation and to account for the increasing cost of living over time. 

So, even if a solar lease helps you save on your energy bill, that margin can be reduced over time. 

The rate escalator is typically based on a pre-determined percentage increase, which may be fixed or may be tied to an inflation index. For example, a solar lease with a rate escalator of 2 percent per year would result in a 2 percent increase in the monthly lease payment each year.

A higher rate escalator may result in significantly higher lease payments over the life of the lease, which could impact the overall financial benefit of the solar lease.

Can I end a solar lease? 

It's important to note that ending a solar lease early may impact any financial benefits you were receiving from the solar panels, such as energy savings. Therefore, it's important to carefully consider the financial implications before making a decision to enter into a lease or end a lease before the contract is up.

If you want to end a solar lease, the first step is to review the terms and conditions of the lease agreement to understand the termination clauses and any penalties or fees associated with early termination.

As mentioned, solar leases have a fixed term during which you are obligated to pay for the use of the solar panels. If you want to end the lease before the end of the term, you’ll either have to pay an early termination fee or buy out the solar panels.

You'll need to contact the solar company or leasing company that owns the solar panels and discuss your options. They may be able to provide you with a buyout price, which would allow you to own the solar panels outright and end the lease agreement.

Power purchase agreement (PPA)

Power purchase agreements do not require an initial payment. Instead, you pay the solar company for the energy used based on a per kilowatt-hour rate (kWh). Essentially, you are treating the solar company as a utility company, but now you are sourcing green energy. Just like a solar lease, a PPA puts the responsibility of panel maintenance and insurance on the solar company. 

Sometimes a PPA or solar lease contract includes an escalator clause that allows the solar company to increase the monthly payment or per kWh rate. 

PPAs became popular during the initial release of residential solar panels. This financing option gave customers an opportunity to use solar panels without paying the high upfront costs. Over time, the cost of solar panel technology has decreased, making it more affordable for customers to own their systems by taking out a loan or paying cash. 

Is any part of a power purchase agreement free?

A power purchase agreement does not mean free solar power. This financing method has no startup fees, but your monthly payment will vary depending on how much energy you use and how much your system produces. 

If you are interested in learning more about solar financing options, check out this in-depth guide to solar financing.

Can I terminate a PPA? 

Just like ending a solar lease, terminating a PPA early may result in significant financial penalties or fees, potentially undermining any monthly energy savings you've racked up.

For example, you may be required to pay the remaining balance of the PPA contract or buy out the solar panels at market value. It's important to carefully consider the financial implications of terminating a PPA before making a decision to do so.

First, review the terms and conditions of the agreement to understand the termination clauses and any penalties or fees associated with early termination. You may need to provide written notice of your intention to terminate the agreement, and there may be a notice period required before the termination takes effect.

It may be helpful to consult with an attorney or a financial advisor to understand the full implications of ending either a solar lease or a PPA to help you negotiate any penalties or fees. 

Why solar ownership might be the better option 

Another popular financing option is buying a solar panel system with cash or getting a solar loan. Solar ownership has the highest financial savings and return on investment. Some lenders even offer a $0 down solar loan so you can get your solar panel system installed with no major upfront costs. 

A personal loan, home equity loan, or HELOC (home equity line of credit) are other financing options to look into.

A solar purchase or loan also gives you the best tax benefits. As of August 2022, you are entitled to a 30 percent federal tax credit on the total price of your system.

A paid-off solar panel system can also increase the value of your home by a few percentage points, whereas a home with a leased solar system can actually dissuade prospective buyers who either don’t like the solar lease arrangement or don’t understand how it works. 

Keep in mind that if you own your solar panel system, you are in charge of maintenance and upkeep. However, if you purchase a system from a reputable company, you should have a good warranty that will keep your system running efficiently for the majority of its life. 

Understanding common solar scams

Fake online solar advertisements

Some fraudulent companies use deceptive ads to generate solar leads. If you are seeing ads for a special solar government program or utility program, it’s almost certainly fake. The government only offers the 30 percent federal tax credit to help lower the total cost to go solar. There are currently no other government programs that give you free solar. 

What to watch out for: 

Beware of ads that exaggerate the cost of a solar panel system. You can check the typical cost in your state by looking at one of our state pages (bestcompany.com/solar/[state]). 

Watch out for any ad that highlights a special government solar program. Ads that claim deals are only available in your area are almost always misleading. 

Be careful when handing out personal information online or in person. Only click on ads from legitimate companies and websites. And if it looks suspicious, it probably is. When in doubt, don’t click on the ad and instead type the company name into Google to do some preliminary research.

Aggressive sales tactics

We’ve all dealt with a pushy salesperson, but when it comes to purchasing solar, there shouldn’t be any rush to purchase. Some salespeople will make it sound like a deal is going away soon or exaggerate the numbers to calculate your potential savings. This is just an aggressive tactic to get you to quickly close the deal and sign the agreement. 

Salespeople might also claim that the solar system will pay for itself within a few years. While this may be true for some people, payback periods are tricky and variable. Make sure to check the numbers used to calculate the payback period so you have a realistic expectation of when you’ll start seeing the savings.

What to watch out for: 

If you are working with a solar salesperson, don’t be afraid to ask for more time, ask more questions, or seek out comparable quotes. Don’t let a solar rep pressure you into signing a contract without reading all the fine print. Read online solar reviews on the company and the solar rep before making a final decision. 

Most of the time, a company is not offering a price you can’t find elsewhere, so be cautious if the rep talks about a limited-time deal. 

PACE solar financing 

In California, Missouri, and Florida, homeowners can use PACE financing for home energy upgrades. PACE stands for Property Assessed Clean Energy. This type of financing was intended to give low-income homeowners a chance to make energy upgrades by putting a tax lien on their houses. 

A tax lien means the lender uses your house as collateral if you default on the payment. The payment usually comes in the form of additional property taxes. If you can’t pay the property taxes, you will lose your home and the PACE lenders get to collect their portion of the payout first. 

Other major issues with this type of financing are contractors are not obligated to check if the person can pay, and they don’t have to conduct an independent energy audit. The average PACE loan is $25,000, and the payback period is 5–25 years. Putting a tax lien on your house can also make it extremely difficult to sell. 

What to watch out for: 

PACE financing can be offered by any contractor and is not overseen by a typical financial institution. Often these contractors will go door-to-door offering home upgrades or solar panels for no cost. The contractor may also present the loan as part of a government program (even though it’s not.) 

They won’t be working with one of the major solar companies. Before ever signing a contract, be sure to read through all the terms and conditions and conduct background research on the contractor. Never be afraid to get a second opinion or get some outside financial advice. 

Common questions about no-cost solar 

Can I qualify for free solar panels?

Qualifying for “free” or “no upfront cost” solar panels requires a good credit score similar to what you need if you were applying for a solar loan. A solar lease or PPA will usually require a credit score of at least 640. 

Is it possible to get free solar panels?

There are currently no programs that provide 100 percent free solar panel systems and energy. You can go solar for no upfront cost, but you will still have a monthly payment to maintain. 

Are free solar panels a good idea?

“Free solar panels,” or a solar lease or PPA, are often not the best options when financing a solar panel system. These options are available for those who can’t qualify for a solar loan or pay for a system with cash. People with a fixed income may benefit most from these financing options. 

However, if you make enough to take advantage of the solar tax credit, you are better off owning your solar panel system. 

Is free solar a scam? 

Use caution when responding to an ad or claim offering free solar because it could be a scam. If it’s an online ad, you could be dealing with a third-party site trying to gather and sell your data to solar companies. 

Some solar companies use the term “free solar” to refer to a solar lease or PPA. Always get several quotes, read online customer reviews, and read through all contract terms and conditions before making a final decision. 

Does the government offer free solar panels?

The government does not offer any free solar panel programs. The federal government currently offers a 30 percent tax credit for those who purchase their solar panels with a loan or cash. Look out for anyone claiming they are part of a solar government program because they are most likely a scammer. 

Get a free solar quote 

We can’t offer you a free solar panel system, but we can offer you a free solar quote from some of the top-rated companies in the industry.