If you’ve been involved in solar development before, you understand that leveraging your commercial solar financing is a critical part of a successful project. For many, funding is crucial to determining the feasibility of a solar undertaking. Don’t let high up-front costs scare you away. Depending on your location, financing and loan options can help you go solar with minimal up-front costs while saving money on electric bills.
When you work with a solar energy contractor, there are generally three paths you can take to maximize the value of your solar infrastructure.
Solar Financing Options
When it comes to financing your solar system, these are the three most popular options.
If you have enough the available up-front capital with the ability to leverage all available tax benefits, a cash purchase can provide an ideal solution for your business. By owning your infrastructure outright, you can maximize your return on investment (ROI). With incentives like the investment tax credit (ITC) and forgoing third-party financing costs, you can also protect your bottom line. But you accept all risk and responsibility for your system.
- Maximize ROI
- Shorter project timelines
- Retain environmental benefits and incentives
A lease allows you to rent your solar infrastructure for regular fixed monthly payments. By leasing, you can generally lower the cost of financing when compared to alternatives. You can get the latest infrastructure for with minimal up-front investment. While you maintain operating risk, you can mitigate risk by leveraging measures like performance guarantees and operations and management services.
- Lower financing costs than solar loan alternatives
- Minimal up-front cost to reduce capital investment
- May be able to take advantages of incentives
- Tax benefit allocations to reduce rental rate
With a solar purchase power agreement (PPA), you host a solar panel system at your facility, but instead of paying a utility company for electricity, your organization pays a predetermined rate to a third-party investor for electrical power. The investor retains risk and responsibility for maintenance and repairs. This option benefits you by enabling a long-term energy solution at a fixed price by locking in lower energy costs for 10 to 30 years, depending on the arrangement. At the same time, a PPA allows your organization to go solar with minimal up-front investment. At the end of the agreement, you have three options:
- Purchase the system outright
- Negotiate another PPA
- Have your solar system removed
- No up-front investment
- Only pay for electricity produced
- No responsibility for system operation and maintenance
- Tax incentives are passed on to you through lower rates
Although these are the three primary options many businesses choose to cover the cost of their solar infrastructure, there are a number of other options available on the market. If you have any questions about financing your next solar project, contact the experts at Verogy today.