With rising electricity costs and increasing incentives, 2025 is one of the best years to invest in solar energy. But the big question is: How do you pay for it?
While some homeowners choose to pay upfront, the majority finance their solar installations through options like:✔️ Solar Loans✔️ Leases & Power Purchase Agreements (PPAs)✔️ Government Tax Incentives & Rebates
In this guide, we’ll break down the best ways to finance solar in 2025 so you can make the switch without breaking the bank.
Understanding Solar Panel Costs in 2025
The average cost of a solar system in the Midwest depends on a few key factors:
Average Installation Costs (Before Incentives):
5 kW system – $10,000 - $14,000
10 kW system – $18,000 - $26,000
Key Factors Affecting the Price:
System Size (kW capacity) – The larger the system, the higher the cost but also greater savings.
Roof Condition & Complexity – Older or complex roofs may require additional prep work.
Battery Storage – Adding a Tesla Powerwall or Enphase battery increases upfront costs but provides energy security.
How Incentives Reduce Costs:Example: A 6 kW system costing $16,000 before incentives could qualify for $4,800 in federal tax credits, plus state-specific rebates, lowering the final cost significantly.
Federal Solar Tax Credit (ITC) in 2025
One of the biggest incentives for going solar in 2025 is the Federal Investment Tax Credit (ITC).
What is the ITC?The ITC allows homeowners to deduct 30% of their total solar costs from their federal taxes.
Example Savings:
Total system cost: $20,000
ITC savings (30%): -$6,000
Final cost after ITC: $14,000
Eligibility Requirements:
✅ Your solar system must be installed in 2025.
✅ You must own (not lease) your solar panels.
✅ Your system must be new and connected to the grid.
How to Claim: Simply apply the credit when filing your federal income tax return.
State & Local Solar Incentives in the Midwest
Beyond the federal tax credit, many Midwest states offer solar rebates and grants:
Top Midwest Solar Incentives (2025):
Illinois – Illinois Shines (SREC Program) pays homeowners for the energy their system produces.
Minnesota – Xcel Energy Solar Rewards program provides extra rebates.
Iowa – Offers state solar tax credits & utility rebates.
Indiana, Wisconsin, Michigan – Incentives vary by local utility providers.
How to Find More Incentives:Check DSIRE (Database of State Incentives for Renewables & Efficiency) or ask a Midwest solar installer about local programs.
Solar Loans – The Most Popular Financing Option
Most homeowners choose solar loans because they offer low monthly payments while allowing full system ownership.
1. Secured vs. Unsecured Solar Loans
Secured Solar Loans (Home Equity Loans, HELOCs)✔️ Lower interest rates✔️ Uses home equity as collateral✔️ Interest may be tax-deductible
Unsecured Solar Loans✔️ No collateral required✔️ Slightly higher interest rates✔️ Faster approval process
2. Best Solar Loan Providers in 2025
Traditional Banks & Credit Unions – Offer low-interest solar loans.💡 Clean Energy Financing (Mosaic, Sunlight Financial) – Specialized solar lending options.🏛 Government-Backed Programs – Some states offer low-interest solar loans.
Leasing Solar Panels – Pros & Cons
If you don’t want to buy solar panels, leasing might be an option.
What is a Solar Lease?
You pay a fixed monthly fee to "rent" the solar panels instead of owning them.
✅ Pros:
$0 upfront cost
No maintenance responsibility
Immediate energy savings
❌ Cons:
No tax incentives or rebates
Lower long-term savings
Can complicate home sales
Power Purchase Agreements (PPAs)
Similar to leasing, a Power Purchase Agreement (PPA) allows you to buy solar energy at a fixed rate instead of owning the system.
📌 Best for Homeowners Who:
✅ Want lower energy bills without upfront costs
✅ Can’t qualify for a solar loan
✅ Don’t plan to stay in their home long-term
📌 PPA vs. Buying Solar:
Financing Option | Upfront Cost | Ownership | Monthly Payments | Tax Incentives | Best For |
Cash Purchase | High | Yes | None | Yes | Homeowners with savings |
Solar Loan | Low or None | Yes | Fixed monthly | Yes | Most homeowners |
Solar Lease | Low or None | No | Fixed monthly | No | Homeowners wanting no maintenance |
PPA | Low or None | No | Pay per kWh | No | Homeowners looking for low-cost solar |
PACE Financing | None | Yes | Paid via property taxes | Yes | Homeowners in PACE-approved areas |
PACE Financing – No Money Down Solar Loans
🏡 What is PACE? Property Assessed Clean Energy (PACE) loans allow homeowners to finance solar with no upfront cost, and repay through property taxes.
📌 Pros:
✅ No credit check required
✅ Long repayment terms (up to 20 years)
✅ Transfers if you sell your home
📌 Availability: Offered in select Midwest states. Check with local programs.
How to Choose the Right Solar Financing Option
💡 Ask Yourself:
Do I want to own my system or just save on electricity?
Can I qualify for tax incentives?
What’s my credit score and loan eligibility?
How long do I plan to stay in my home?
Final Thoughts: Is Financing Solar in 2025 Worth It?
YES! Financing makes solar in the Midwest affordable for every homeowner. Whether you choose a solar loan, lease, or PPA, going solar can:
✅ Lower your electricity bill✅ Increase home value✅ Qualify for thousands in incentives
📢 Ready to save? Get a FREE solar financing consultation today!
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