Are you looking at investing in solar energy but unsure of how best to finance it? The options may seem overwhelming to choose from. We will help you determine which option will provide you with the best rate of return for your business.
Here, we list out the different purchasing and leasing options available. Have questions? Reach out to us. We can also help you navigate available solar financial incentives.
For those businesses that have the cash reserves or low cost of capital
to pay for and own a system upfront. Utility savings start on day one.
Advantages: Greatest savings over time.
A term loan is a funding from a bank for an amount that is to be repaid as per a schedule. The interest rate can be either fixed or a floating rate as per the choice of the borrower. The loan tenure typically ranges between 1-10 years.
Advantages: Simple terms and conditions along lower rates provide flexibility.
Commercial Property Assessed Clean Energy (C-PACE)
Commercial Property Assessed Clean Energy (C-PACE) is a state policy-enabled financing mechanism that allows building owners and developers to access the capital they need to make energy related upgrades. More than 37 states have C-PACE legislation.
Advantages: 100% financing, no personal guarantee, no income requirements.
PPA (Power Purchase Agreement)
Tax Equity Purchase
The hybrid lease is specifically designed for non-profits and delivers value through a 30% discount off the solar system price in exchange for ownership with guaranteed solar performance for the non-profit. Nonprofits leverage the ownership of their properties to secure affordable long-term financing through C-PACE to cover the balance of the solar system cost
Advantages: Zero cash out of pocket, 100% cash flow positive, upfront monetization of solar tax credit, remaining amount financed via C-Pace, 3rd party ownership with guaranteed system performance, ownership options after 6 years.
Solar Site Lease (Roof Rental):
A solar site lease is an agreement to lease property for a solar installation. In a site lease agreement, you turn an unused space – a roof, an open plot of land, a parking lot, etc. – into a revenue stream.
A third party investor or solar developer will own and operate a solar array on a rooftop or piece of property. The investor puts up all of the capital to develop the solar, but keeps all associated energy savings, environmental attributes, and all related tax and depreciation benefits.
The investor signs a long-term lease to site the solar on the customers property in exchange for a monthly or annual rental payment. The investor is viewed as a tenant on the customers property.
Advantages: Create a revenue stream by doing nothing.
Power Purchase Agreement (PPA)
A solar power purchase agreement (PPA) is a financial agreement where a solar developer builds a solar project on your property or somewhere in your region and then sells the electricity to you at a lower rate than the local utility’s retail rate. The rate your organization pays is generally “subsidized” by the tax incentives retained by the project owner. The solar project owner assumes the risk because you, the energy buyer, only pay for kilowatt hours that are actually produced by the solar system. Additionally, it is not held on the balance sheet.
Advantages: No cost to build or maintain for 25 years.