When constructing a new home, you as a builder present consumers with several exterior options, including siding colors, brick patterns, and roofing options.
Now, we have a new (and popular!) kid on the block: solar panels.
While integrating solar panels into homes is a relatively recent phenomenon in the U.S., it became a requirement in California last year for new builds. Other states are encouraging home buyers to consider purchasing or leasing solar panels by offering tax credits and other financial incentives.
This article serves as a handy-dandy guide for homebuilders on the benefits of renting solar panels and tips for constructing a “solar-ready” home.
What Is Solar Panel Leasing? Well…It’s Not Good.
Instead of buying the solar panels at purchase, homeowners lease the equipment in the same way they would lease a car. The homeowner pays a monthly lease payment to the builder or the solar installer, as most builders partner with a solar energy provider.
In this case, the homeowners don’t own the panels and their agreement comes with terms and conditions that vary depending on the provider and location. Contracts are typically 20 years in length, which is no small commitment.
Be aware that there are several negatives with leasing solar panels and it should be avoided at all costs. This is because your buyer misses out on all the benefits of reduced solar costs over time and financial incentives.
In fact, third-party lease agreements come with 2% – 3% annual escalation rates that have your buyer paying more than twice as much as it would have cost them to purchase the system themselves and finance it.
At the end of the day, your buyer is giving the lender thousands upon thousands of dollars that should rightfully be in your buyer’s pocket or in their bank account.
Now, that’s completely insane and a con job.
What Is the Difference Between Solar Leases and Power Purchase Agreements (PPAs)?
Spoiler: Solar leases and PPAs are often used interchangeably, but there is an important difference between them.
Under a solar lease, the homeowner pays the lender a monthly lease amount during the life of the contract. The monthly payment is calculated using the amount of electricity the panels are expected to produce.
With a PPA, the homeowner doesn’t rent the system, but instead buys the system’s power.
In this scenario, there should be a few plusses for the buyer:
- Pay little to nothing upfront
- No maintenance/repairs
- Get a fixed rate on energy that should be lower than what local utility companies offer (or is it…?)
Oh no, it is not. Your buyer will get slapped with unexpected costs.
How the PPA Scam Works
Similar to the leasing scenario, the buyer is locked into a 20 to 25-year contract, and they’ll need the jaws of life to get out. The contract typically includes a 2% to 3% annual increase for power.
When they want to sell their home, the new buyer must be willing to take on the costly contract, which could hold up the sale.
If a new buyer doesn’t want to bear this financial burden, the seller could pay an arm and a leg to get out (think of the movie “Saw”).
If a new buyer foolishly takes on the PPA, they’re going to get the shock of a lifetime:
Long story short, avoid PPAs and third-party lease agreements like the plague! They screw both you and your buyer over financially and your buyer will come to despise you.
Check this out for more!:
Encourage your buyers to purchase their system, whether they need to roll the cost up in their mortgage or take out a loan.
Why Should Builders Offer Solar Panels on New Homes?
There are several benefits of incorporating solar panels into new home build projects.
A 2015 study by Berkeley Lab found that potential buyers are willing to pay more money for homes integrated with solar technology. If builders market their homes as equipped with solar technology, it will gin up more interest.
Buyers concerned with sustainability are willing to pay a premium price for a home that is eco-friendly. Offering solar could provide an advantage over builders who don’t.
Moreover, the bulk of buyers who want solar panels may also want electric furnaces rather than traditional gas furnaces. Offering both options may draw even more buyers, many of whom may be willing to pay a premium price for this solar technology.
Most homeowners are compelled to install solar panels because of the long-term savings on monthly utility bills. You can market these savings when selling homes to potential buyers, explaining that solar energy systems pay for themselves within a few years of installation.
Pros and Cons of Buying Solar Systems for Your Buyers
To go solar, your buyer has options. In no uncertain terms, we recommend your buyer purchase their system because of the incalculable financial benefits.
What Is a “Solar-Ready” Home?
Many builders are constructing solar-ready properties with features that give buyers the option to install solar panels down the road.
Having this option often attracts more potential buyers. This is because a buyer may not have the funds to complete the project during the initial construction process.
Solar-ready homes make it easier and less expensive for home buyers to expand their system in the future by installing low-effort material, like conduit and wire, right off the bat. Their home is now primed for a cost-effective solar installation.
What Should a Builder Consider When Designing a Solar-Ready Home?
Fun Fact: Adding solar technology during the initial construction process is easier and cheaper than adding the technology later on.
Whether your buyer wants an entire system installed or solar-ready design features, there are a few things you can do to simplify the process. When designing a solar home, pay attention to the following features:
- The roof’s steepness: Carefully consider the steepness and design of the roof. A south-facing roofing system built between 15 – 30 degrees is ideal for solar panels.
- The roof’s layout: Carefully plan where roof features, such as vents, dormers and chimneys, should be located. These features shouldn’t obstruct the panels or create a lot of shade during the day.
- The solar panel’s electrical source: Homebuilders must install an electrical source for the solar panels in a location that’s easy to access and won’t cause electrical hazard issues.
- The home’s electrical capabilities: Designers should align the home’s electrical breaker capabilities with the solar panels. The electrical system should be designed to equip a solar panel array.
You can learn more about design tips by visiting the U.S. Department of Energy’s Solar Energy Technologies Office.
The U.S. Department of Energy also has many resources on its website that are helpful for both builders and buyers during the solar panel purchasing process.
What Are the Financial Incentives for Builders?
Most people think the financial incentives for using renewable energy sources are limited to home buyers.
We come bearing good news! Some states offer incentives for builders, too.
Incentives available include tax credits and rebates worth several thousand dollars. You can locate the financial programs available in your area by searching the Database of State Incentives for Renewables and Efficiency website, or exploring our state solar incentives map.
Contact Unbound Solar Today!
Founded in 1992 with the vision to help provide do-it-yourself solutions to the clean energy market, Unbound Solar provides tailored solutions to businesses and communities.
Don’t wait to get the help you need! Contact us now to discuss our program designed specifically for you.