Image: US Department of Energy, Wikimedia Commons
Residential solar customers typically purchase their project through a loan, cash, or a third-party contract such as a lease or power purchase agreement (PPA). Marketplace operator EnergySage shared data on trends in residential solar loan packages throughout the first half of 2024.
At the end of 2023, Wood Mackenzie reported that 57% of residential solar installations were purchased through a loan.
EnergySage said that compared to solar leases, solar loans offer solar buyers several benefits. Loans enable access to the federal solar tax credit and state and local incentives, greater long-term savings and result in system ownership.
“While third-party systems are becoming increasingly popular outside of EnergySage due to the introduction of tax credits through the Inflation Reduction Act, solar loans remain the preferred financing option among homeowners and installers on EnergySage,” says the report.
The two main components of a residential solar loan are the upfront dealer fees and interest, which are reflected in the monthly payment amounts. EnergySage said installers have been moving to lower upfront costs in recent months.
About 40% of loans listed on EnergySage in the first half of 2024 were no-fee loans. According to the report, this is why financing provider Credit Human rose from around 2.5% of all quotes on the EnergySage platform in 2023 to almost 13% in the first half of 2024. Its market share among private solar financiers is still strongly divided, as shown in the report. in the diagram below.
Together with lower dealer costs, the average interest rate in loan packages is increasing. The average interest rate for loans on EnergySage has increased again, from 5.5% in the second half of 2023 to 7.49% in the first half of 2024.
Interest rates for solar loans have skyrocketed, with the average quote showing an interest rate of 2.99% in 2022, and the average interest rates today 7.49% for a 20-year loan product.
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