Using Cash Incentives to Sell Solar Power | How Solar Financing Works

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January 6, 2015 | By RGR Marketing Blog

Another Way to Promote Your Solar Business

Solar energy has become quite a hot ticket over the past few years, but if your solar installation business is like most other firms in the industry, then you could always use more clients.

Solar power already offers a great value proposition for just about anyone willing to make the switch to this renewable energy source. For many consumers, going solar can offer substantial monthly savings, even when the cost of financing the solar panels, installation, and associated peripherals is taken into account.

That said, there are plenty of folks out there who are still on the fence about going solar, and many more who are still skeptical. Perhaps they fear change, or are still under the impression that solar is an expensive niche product that mainly appeals to well-to-do environmentalists and celebrities who can afford to make environmental efforts.

Whatever the case may be, solar businesses will need to figure out how to make going solar an even more irresistible deal for these folks if they ever hope to usurp traditional energy providers as the dominant force in the market.

Some have proposed that persuading the rank and file to adopt solar energy would be much easier if consumers were given all their eventual savings up front, in a single lump sum payment.

How Solar Financing Works Now

For consumers who opt for third-party financing options as a means of purchasing PV power arrays, the deal typically works in one of a few distinct ways. Homeowners have the ability to purchase the solar panels outright, or they can take out a loan to finance the purchase, spreading the payments over a longer period of time.

With financing of this variety, the consumer pays a monthly payment to the solar installer or financier, which are often the same entity. This monthly payment covers the cost of the electricity provided, and eventually repays the solar installer for the costs associated with the initial installation and equipment.

Two other financing options that are available to consumers include a solar lease, or a Power Purchase Agreement, or PPA.

Overall, it’s a win-win situation: the installer earns a healthy ROI, and the consumer is happy to be cutting monthly costs while simultaneously doing something positive for the environment that requires little to no extra effort. So why aren’t more people seeing the light, so to speak?

How Is a Solar Lease Different From a Solar PPA?

Solar PPA and Solar Lease options both represent great solar financing deals for consumers, and in reality, they both offer similar financial advantages to the homeowner. The primary difference between these two options is that when you are leasing a solar panel system, you pay by the month, just like you would any other utility bill. With a PPA, however, you pay per kWh. One of the benefits of the Solar PPA is that you can purchase the system outright, any time after year five. The availability of Solar PPA and Solar Lease options vary by location, typically based on what your local utility company prefers to offer.

We’re a Shortsighted Species

Study after study has shown that human beings, by and large, tend to value immediate gratification over long-term benefit, even when we know that being patient is the prudent course of action.

That’s why more than eighty percent of lottery winners take their jackpots as lump sums, even though choosing to receive the winnings as an annuity would provide a larger sum of money overall. It’s hard to deny the appeal of immediate gratification.

How Solar Providers Could Use Impatience to Their Advantage

What if solar installers were to offer consumers a one-time windfall instead of splitting the savings up over the duration of the lease?

Given what we know about human behavior, it’s very likely that an incentive like this would entice even the most intractable power consumers. After all, who wouldn’t jump at the chance to not only go solar at no cost, but also to receive a healthy cash flow bump, just for doing so?

Even better for solar installers, the lump sum payment wouldn’t necessarily have to equal the overall savings of the usual long-term leasing option. As we’ve discussed, most people will opt for an immediate payoff, even if it ends up being substantially smaller than what their overall savings could be, were they to opt for taking the savings over time. So, the installer could end up with higher overall profit margins, all while attracting happy new customers who simply aren’t swayed enough by long-term savings.

[Photo Credit: US Solar Institute]

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Another Way to Promote Your Solar Business

How Solar Financing Works Now

How Is a Solar Lease Different From a Solar PPA?

We’re a Shortsighted Species

How Solar Providers Could Use Impatience to Their Advantage

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