I’ll make the assumption that you’ve already decided to install a solar system, and you’ve worked out the numbers, but it doesn’t make financial sense. The choice you make in terms of how you fund that system will affect how much it costs you over the funding period and the lifespan of the solar system.
We’ve identified six options available that you can use.
1. Cash
If you have the cash available, we always tell our clients that this is the best option to use.
- It gives you the best return.
- It gives you the best bang for your buck.
2. Loan
If you have excess equity available on your mortgage loan, that’s a good option as well.
- Interest rates are generally lower.
- You achieve a good return on the mortgage bond.
There are lots of banks that offer solar-specific loans, so you can approach them or your own bank, or you could just get a personal loan as well.
3. Rent to Own
Something that has come up in the last couple of years is a ‘rent to own’ option. How that works is similar to a loan, so your repayments and term will probably be 48, maybe 60, 72, or even 84 months, allowing you to spread this out over a longer term.
The advantage of rent-to-own is that you can start off with a very low repayment or rental and increase that with inflation. The objective here is to match your rental to the savings on your electricity, which puts you in a cash-neutral position when it comes to repayments.
At the end of the term, you will then take ownership of the system and essentially get free power.
4. Subscription
A very recent innovation has been subscription options. What these companies do is:
- Install the system on your roof.
- You pay a fixed monthly fee.
- You get the benefit of any savings from that system.
What you must be aware of, though, is that this contract is over 20 years, so you’re locked in for 20 years and you will never own the system. If ownership isn’t your objective and you don’t mind this, then it’s the perfect option for you.
Bear in mind that if you do want to own the system, there is mostly a clause that allows a buyout, but this will cost you a small fortune, likely much more than what the system would cost at that point in time. You’ll have to evaluate this carefully and see what works best for you.
5. Roof Rental
What has been used at times is a roof rental option. The installer or provider will say they’ll rent your roof from you for a specific amount per month. This is mostly aimed at schools, NPOs, and similar organisations.
Any energy that is generated will be sold by the provider to a third party. The term for this is called “wheeling.” These providers often make a very good return on the investment in that solar system. They may also provide you with some power at a rate similar to Eskom or the municipality.
We do not recommend roof rental options as they are not the best choice for clients. Similarly, subscriptions are not our favourite way of funding either.
6. PPA
PPA stands for Power Purchase Agreement. Here’s how it works:
- The provider pays for the system.
- They install it on your roof and provide you with energy.
- The energy is supplied at a lower tariff than Eskom or your local municipality.
Summary
As you can see, there are quite a few options available to you. It’s worth your while to investigate all of them and see what suits you best.
Don’t hesitate to reach out to our team should you require further information.