This is always is going to be the fastest payback and greatest bang for your buck.

Say a homeowner that has $20,000 currently invested in a money market account earning relatively little (if any) interest, redirects that same amount into a solar electric system for their residence or business.

Their expected payback is between 5-7 years (that translates 15%-20% return on their redirected investment-not bad!). The PV system life expectancy usually exceeds 30 years. Equipment warranties and online reporting services are an eye-popping 25 years!

But the most amazing aspect about owning your own PV system is that when utility electric rates rise, so does the value of your solar kW-hrs! Solar PV is a true hedge on future inflation AND utility rate hikes which are estimated to rise an average of 6% annually.

This is the next best option.  

Homeowners don’t have to come up with cash for the solar system. The federal tax credit still applies.
The payback is often equal to the term of the loan. After the payback, the electricity is free except for utility interconnection charges and true-ups.
The return on investment varies however it approaches the numbers stated above over time.

There usually is no loan prepayment penalty. Equipment warranties and online reporting are still 25 years.

Publicly Assessed Clean Energy (PACE) Funding was developed as a way for qualifying homeowners in approved California jurisdictions to take advantage of a statewide zero down solar financing program.

Personal credit is not considered but rather the home’s value.  The site location is “pre-qualified” through the physical address input via a smart device and/or web portal. The solar loan payments are divided into fixed monthly increments that are typically lower than the historical monthly utility bills. This frees up positive monthly cash flow when the term of loan of sufficient duration.

The homeowners can still take advantage of the federal tax credit. There is no prepayment penalty associated with this loan product. The interest part of the loan is likely tax deductible. Check with your tax professional for clarification. One downside is that there is a tax lien against your property in the event of payment default. 

http://www.renewfinancial.com/

There are many different types of renewable loan products and instruments. Be aware of variable or escalating interest rates, non-refundable down payment, hidden loan or administrative fees, prepayment triggers, forfeiture of tax credit, etc. (see Leases and PPA’s below).

FRESH Energy Loan Example (FICO >640)

• Amount Financed: $20,000 (Estimated payment is approximately $120/month).
• ZERO DOWN, first (12) months are interest free (designed to use the federal tax credit savings to pay-off 26% of principal).
• No Prepayment Penalty
• 20-year fixed term at 6.49%.
• 5% Dealer Fee
• Loan re-amortizes after years 1, 2, and 3 when principal is applied and lowers payment.

This is the least desirable homeowner option unless all three conditions below are:

There is no real home equity (i.e. property is underwater).
Homeowner doesn’t have the cash or credit.
Homeowner cannot take the federal tax credit.
Homeowner wants to be “green” and have solar on their home.
Essentially these companies seduce the customer away from the Investor Owned Utility (IOU) by leasing the homeowners’ roof space to them and then selling the solar energy produced from that same roof back to the homeowner at a slightly lower kW-hr. rate. The homeowner is prohibited from taking advantage of a “Time-of-Use” rate schedule which allows utility customers to sell their solar back to that IOU at the peak rate and use off-peak power at a much cheaper price.

These Leases and PPA’s always have a minimum contract term in order to guarantee the investors their rate of return. These investors not only receive a tax credit, but get to take 5-year accelerated depreciation on the solar equipment they affixed to your roof. Some companies offer system buy-out options after a certain periods of time.  While this is a positive aspect, the homeowner ends up paying at least 40-60% more than original retail for a “used” PV system when an initial system purchase would have been paid back in full (usually twice) over that minimum required buy-out period.

These supposedly green companies will place as many modules on your roof as they can irrespective of shading, slope and direction (many will install modules even on the north side of the roof…a definite ‘no-no’ in the northern hemisphere). AND if/when in 5-10 years re-roofing or repair is necessary the expense to remove and replace ALL those modules will be the homeowner’s financial responsibility!