Solar panels are an excellent choice if you’re a homeowner looking to generate homegrown electricity, reduce energy bills, gain energy independence, and reduce your carbon footprint.

According to data collected from the Microgeneration Certification Scheme involving 28.2 million homes in the UK, solar panels are the most popular renewable technology among UK homeowners.  

Solar power has undoubtedly become a sought-after energy source in many British homes, but considering the costs, you may decide to stick with an alternative option.

Let’s be frank: although solar power saves the average household in the long run, it isn’t cheap to install.

If you’re on a budget, you may believe solar power isn’t for you, but you’d be wrong. With several financing options for solar power across the UK, you may find a deal that makes solar power a reality for you and your home.

What you’ll discover in this guide:

• The available financing options for solar panels in the UK
• Benefits and drawbacks of cash purchases
• Benefits and disadvantages of solar loans
• Benefits and drawbacks of solar leases and power purchase agreements (PPAs)
• Benefits and disadvantages of installer financing

What is Solar Panel Financing?

Solar panel financing refers to financing options allowing you to purchase solar panels and solar systems with little to no upfront cost.

Various financing options for solar panels aim to increase the accessibility and affordability of solar power for homeowners and small businesses.

Related solar guides:

• How many solar panels do you need?
• Smart Export Guarantee
• Can you install solar panels in a conservation area?
• Best 4kw solar system with battery storage
• Sunshine hours map UK
• Best Solar Panels
• Solar panel output calculator

Available Financing Options for Solar Panels in the UK

There are different financing options available for solar panels in the UK.

These include:

Cash Purchases

Buying your solar panels outright is the best option if you have the capital or funds to cover the cost.

It requires a significant upfront investment but provides the fastest return on investment by allowing you to take full advantage of available incentives like tax credits while making savings on energy costs.

Purchasing solar panels outright gives you full ownership and control of the system, allowing you to avoid interest rates and monthly payments.

Benefits

• Immediate increase in the resale value of your property
• Quick return on investment
• You’ll not have to worry about further payments or interest rates
• Allows you to benefit from available incentives

Drawbacks

• High upfront cost
• Not accessible or suitable if you don’t have sufficient funds
• You’ll be solely responsible for any repairs, replacement or maintenance costs.

Solar Loans

Solar loans are similar to other loan types but aim to finance solar panels, systems, and equipment.

Solar loans can be unsecured or require collateral and are usually available from solar providers or lenders specializing in solar energy systems.

With solar loans, you can get the funds needed to purchase solar panels upfront and make affordable repayments over a few months or years.

Solar loans are an excellent choice if you want the benefits of owning solar panels but don’t have the cash to purchase them outright.

Benefits

• Easy access to solar panels that might otherwise be unaffordable
• Immediate ownership provides financial benefits like savings, incentives, and earnings that can go toward repayments.

Drawbacks

• Interest rates can be high or may increase after a fixed term.
• A loan can impact your financial responsibility and freedom.
• Bad credit may limit your options or result in rejections.
• There’s a risk of finding yourself in financial trouble or losing collateral if you fail to keep up with repayments.

Power Purchase Agreements (PPA) and Solar Leases

Power purchase agreements (PPAs) and solar leases allow you to enjoy the benefits of solar power without making a significant initial investment.

Solar leasing provides a way to rent the solar system without upfront costs. You make monthly or yearly payments for the use of the system to a third-party company that owns the solar installation on your property and takes care of maintenance, repairs, and replacements.

PPAs follow similar structures, but instead of leasing the system, you agree to purchase the power generated by the panels at a rate that is typically lower than what you would pay for grid energy.

PPAs are usually long-term commitments ranging from 10 to 25 years, and you can choose to extend the PPA, remove the system, or buy it at the end of the contract.

Check out our video on selecting solar panels in the UK:

Benefits

• Low or zero upfront costs as the third-party company is responsible for purchasing and installing the solar system.
• Immediate savings on energy bills as soon as the system becomes operational
• They can help increase your property value at little to no cost
• Fixed and predictable energy costs for the duration of the agreement, allowing more savings as utility prices rise over time
• Limited risk since the company is responsible for operational risk, repairs, and solar panel maintenance.

Drawbacks

• You’ll have to depend on the installing company for repairs or maintenance.
• You’ll not be eligible for incentives like solar energy tax credits and cannot receive income from the sale of electricity.
• Monthly or yearly payments don’t go towards owning the solar system.
• Potential buyers must agree to take over the lease or PPA when they want to sell the home.

Installer Financing

Some installation companies allow you to put down a portion of the total cost to secure solar panels and pay portions of the remaining balance until installation.

They can also feature agreements with lenders and financing institutions to offer financing to solar panel customers.

The rates, terms, fees and amounts available can vary depending on the installer. Some installers can offer lower or zero interest rates for the first few years to attract customers and allow you to benefit from rebates, incentives and lower monthly payments.

Benefits

• Subsidized lending as installers compete to remain competitive
• You get ownership after completing the payments
• You can benefit from energy savings and tax incentives

Drawbacks

• Monthly payments can increase after the subsidy period.
• A downpayment is necessary to qualify.

Final Thoughts on Financing Options for Solar Panels in the UK

It’s crucial to evaluate each available option carefully so you can make an informed decision when looking for financing for solar panels.

Ensure you assess your financial situation and ability to afford upfront costs and monthly payments associated with each option.

Sources used in this article:

• https://mcscertified.com/2023-a-record-breaking-year-for-mcs-and-small-scale-renewables/
• https://solarenergyuk.org/resource/power-purchase-agreements/#:~:text=Solar%20PPA’s%20provide%20a%20fixed,customer%20over%20the%20long%20term.