How Does Solar Financing Work in Utah?
How Does Solar Financing Work in Utah
Solar financing in Utah allows homeowners and businesses to install solar energy systems without paying the full cost upfront. Instead of purchasing a system entirely with cash, residents can use flexible options such as a solar loan, solar lease, or power purchase agreement (PPA) to make renewable energy accessible and affordable. Each option differs in ownership rights, cost structure, and eligibility for solar incentives, giving Utah residents multiple paths to go solar depending on their financial situation.
A cash purchase gives full ownership of the solar array and immediate access to all available incentives, including the 30% federal Investment Tax Credit (ITC), which is valid through 2025. However, the average system in Utah costs between $15,000 and $20,000 before incentives, an amount that many households prefer to finance over several years.
Utah’s strong solar resources make financing particularly worthwhile. The state enjoys about 240 sunny days each year, making solar one of the most productive energy investments available. State and federal programs further reduce the total cost of ownership through:
- Federal ITC (30%): A credit covering 30% of the total system cost for owned systems.
- Utah Renewable Energy Systems Tax Credit (Residential): A nonrefundable state credit of up to $400 for residential installations through 2024.
- Sales Tax Exemption for Commercial Solar: Businesses installing solar benefit from sales tax exemptions on equipment.
- Net Metering Rules: Utilities credit excess solar generation against future electric bills.
By combining these programs with modern financing options, Utah homeowners can begin saving on electricity immediately while paying for their systems over time.
Solar Financing Options in Utah
Utah homeowners can choose from several solar financing arrangements that vary by cost structure, ownership, and savings potential. The four main methods are direct cash purchases, solar loans, solar leases, and power purchase agreements (PPAs), the latter two falling under third-party ownership (TPO).
1. Cash Purchase
Buying a solar system outright provides complete ownership and the highest long-term savings. It also qualifies the homeowner for all federal and state solar incentives. However, cash purchases require substantial initial capital, which may not be ideal for every household.
2. Solar Loan
A solar loan enables homeowners to spread the cost over time, often between 5 and 20 years. Because the system is owned by the borrower, they remain eligible for the ITC and state tax credits. Monthly loan payments are often lower than prior electric bills, creating immediate monthly savings while building long-term equity in the system.
3. Solar Lease
In a solar lease, a third party installs and owns the system, and the homeowner pays a fixed monthly fee to use the generated electricity. This structure eliminates upfront costs and maintenance responsibilities but excludes eligibility for tax incentives, since the provider owns the system.
4. Power Purchase Agreement (PPA)
A PPA, or power purchase agreement, differs from a lease in that the homeowner pays only for the energy the panels produce, usually at a rate lower than utility electricity prices. The system is owned and maintained by a third party. This option offers predictable savings but no ownership rights.
Comparison of Utah Solar Financing Models
| Option | Ownership | Upfront Payment | Incentive Access | Payment Form | Maintenance | Ideal User |
|---|---|---|---|---|---|---|
| Cash Purchase | Homeowner | Full | Full eligibility | None (paid in full) | Homeowner | Homeowners seeking max ROI |
| Solar Loan | Homeowner | Minimal | Full eligibility | Fixed monthly payments | Homeowner | Long-term residents with good credit |
| Solar Lease | Third Party | $0 | Not eligible | Fixed monthly fee | Provider | Those wanting simple savings |
| Power Purchase Agreement (PPA) | Third Party | $0 | Not eligible | Per-kWh rate | Provider | Homeowners preferring flexible payments |
Utah’s electricity prices (around 11¢ per kWh, below the national average) mean solar financing is most attractive to households looking for stable long-term rates and independence from utility price changes.
Types of Solar Loans in Utah
Utah residents can choose between two main types of solar loans: secured and unsecured. Both options make solar ownership attainable without requiring the full cost upfront.
Secured Solar Loans
A secured loan uses collateral (often a home or other property) to reduce the lender’s risk. Because of this security, interest rates are typically lower, often between 4% and 6%, with repayment terms up to 20 years. These loans are ideal for homeowners who plan to stay in their homes long term and want the lowest possible monthly payment.
Unsecured Solar Loans
An unsecured loan requires no collateral and is approved based primarily on creditworthiness. Approval is faster and simpler, but interest rates are generally higher, averaging 6% to 9%. These loans are ideal for new homeowners or those without substantial equity.
Comparison: Secured vs. Unsecured Solar Loans in Utah
| Loan Type | Collateral | Interest Range | Term | Approval Time | Main Advantage | Common Borrower Type |
|---|---|---|---|---|---|---|
| Secured Loan | Required | 4–6% | 10–20 years | Slower | Lowest cost over time | Established homeowners |
| Unsecured Loan | Not required | 6–9% | 5–15 years | Quick | Fast, easy application | First-time solar buyers |
Most Utah residents with strong credit prefer unsecured solar loans because of their convenience and minimal paperwork, while secured loans appeal to those seeking to minimize overall costs.
How to Find the Best Solar Loans in Utah
Choosing the best solar loan in Utah depends on several variables, including interest rate, repayment flexibility, and total system cost. Because solar performance in Utah is exceptionally strong (due to abundant sunlight and low maintenance costs), most financing options yield positive returns within 8 to 10 years.
The interest rate is the most important factor to consider. Utah solar loans typically range from 4% to 8%, depending on credit score and term length. Borrowers with credit scores above 700 may qualify for rates near the lower end of that range. The loan term also matters: shorter terms reduce total interest paid, while longer terms provide smaller monthly payments. The best solar loan is one that balances affordability with flexibility, offering fixed interest, no prepayment penalties, and monthly payments lower than your average utility bill.
Utah homeowners can also enhance the value of financing by combining it with solar incentives. The 30% ITC, plus Utah’s state tax credit, can reduce upfront costs by several thousand dollars, and net metering further offsets ongoing electricity costs.
Example: Utah Solar Loan Scenarios
| System Price | Loan Category | Loan Term | APR | Approx. Monthly Payment | Total Interest Paid | Post-Incentive Cost (30% ITC + Utah credit) |
|---|---|---|---|---|---|---|
| $18,000 | Secured | 15 years | 5% | ≈$142 | $7,640 | $12,200 |
| $18,000 | Unsecured | 10 years | 7% | ≈$210 | $7,160 | $12,200 |
Even after financing costs, most Utah homeowners save thousands over the system’s lifetime, particularly given the state’s high solar output per installed kilowatt.
Can I Get Free Solar Panels in Utah?
The idea of “free solar” is often used in marketing, but in practice, it refers to third-party ownership models like solar leases and power purchase agreements (PPAs), not systems that cost nothing overall. These financing structures allow Utah residents to install solar panels with no upfront payment while enjoying immediate energy savings.
A solar lease operates much like renting the equipment. The homeowner agrees to pay a fixed monthly fee to use the power generated, while the provider maintains, insures, and monitors the system. This eliminates maintenance concerns but disqualifies the homeowner from claiming solar incentives such as the federal ITC.
Under a PPA, or power purchase agreement, the homeowner pays only for the energy produced at a fixed per-kilowatt-hour rate. This price is typically 10–20% below utility electricity rates. PPAs can deliver higher savings if energy production remains strong throughout the year.
Comparison of Solar Lease vs. Power Purchase Agreement in Utah
| Feature | Solar Lease | Power Purchase Agreement (PPA) |
|---|---|---|
| Ownership | Third-party provider | Third-party provider |
| Payment Basis | Flat monthly fee | Per-kWh energy cost |
| Maintenance | Provider | Provider |
| Upfront Cost | None | None |
| Incentive Eligibility | No | No |
| Savings Potential | Stable, predictable | Higher if the output is high |
| Best For | Homeowners wanting simplicity | Users seeking flexible, usage-based pricing |
Both financing methods fall under TPO and are designed for those who prefer predictable payments or lack the credit to qualify for a solar loan. Although ownership benefits are limited, these models help Utah residents access renewable power without incurring upfront costs.
How to Get Solar Financing in Utah
Getting solar financing in Utah begins with evaluating your property’s solar potential and selecting the financing option that fits your financial goals. Once you’ve determined system size and budget, a certified installer will prepare a proposal detailing estimated output, cost, and available solar incentives.
If you choose a solar loan, the next step is to apply for financing through a lender or solar financing partner. Approval depends on your credit score and income level; typically, a score above 650 qualifies for competitive terms. Once approved, you will sign a loan agreement outlining the interest rate, repayment term, and total project amount. Installation follows soon after, and when the system becomes operational, you can file for the federal ITC and Utah’s state credit to offset costs. Timely repayment of your solar loan can also improve your credit over time, while missed payments can have the opposite effect.
Those opting for a solar lease or PPA follow a different path. The third-party provider handles system ownership, installation, and maintenance. The homeowner signs a long-term contract (often between 15 and 25 years), agreeing to pay either a fixed monthly lease or a per-kilowatt-hour energy rate. Because ownership remains with the provider, there are no tax filings for incentives, and maintenance costs are entirely covered.
For both ownership and TPO models, Utah’s net metering program plays a crucial role. Homeowners receive credits for excess solar power sent back to the grid, which helps offset utility consumption when sunlight is limited. Combining net metering with financing ensures steady savings throughout the year.
Overall, Utah’s favorable climate, steady electricity rates, and continued availability of state and federal solar incentives make it one of the most advantageous states for solar investment. Whether you finance your system through a solar loan, enter a power purchase agreement, or sign a solar lease, these options make renewable energy attainable for nearly every household. For many residents, financing turns solar power from a long-term dream into an immediate economic benefit, all while supporting Utah’s growing clean-energy economy.