The price to install solar PV systems has declined dramatically over the last few decades. Although this trend has continued in recent years, availability of capital remains a major impediment to businesses considering solar. Additionally, many of the federal tax incentives designed to make solar more affordable are not available to every business and/or property owner. Lack of available capital and an inability to utilize tax incentives are two of the most common reasons businesses and property owners decide against going solar.
Sun Light & Power addresses these issues by offering a variety of financing options which can be tailored to fit your organization’s specific needs. The most common of these options are Power Purchase Agreements, Solar Leases, and Solar Loans. Below is a brief description of each of these options and their associated benefits.
Power Purchase Agreements, or “PPAs,” are ideal for customers who are unable to take advantage of the solar tax incentives. In a PPA, a third-party financier owns, maintains and claims the associated tax incentives of the system. The property owner then agrees to purchase electricity generated by the system at a predetermined rate ($/kWh). This rate is typically lower than the rate charged by the local utility. This plan produces savings for the property owner from day one. PPA payments are also typically considered off-balance sheet (OBS).
Solar Leases, sometimes called “Tax Leases” or “Operating Leases,” is another form of financing which is great for customers who cannot take full advantage of the solar tax incentives. Similar to a PPA, a third-party owns, maintains and claims the associated tax benefits of the system. Unlike a PPA, the monthly payments are fixed, and not based on the amount of energy produced by the system. Monthly lease payments are typically considered OBS.
Solar Loans, sometimes called “Capital Leases,” are best for customers who can take full advantage of the tax incentives because unlike a PPA or Lease, the property owner retains ownership of the solar system rather than the third-party financier. Monthly loan payments are fixed, and typically considered on-balance sheet.
While these options vary in their tax treatments, term lengths, and organizational structures, one key feature they all share is no upfront payment. We believe this is incredibly important for businesses which want to go solar but do not have capital available for major infrastructure upgrades.
Every organization must consider their unique needs and goals when going solar. When considering financing options for your business, Sun Light & Power will be happy to help guide you through this process. The first step when considering financing requires an answer to the following key questions:
1) Is your organization eligible to utilize the solar tax incentives?
2) Do you currently own or lease the property on which the solar will be installed?
3) Will your organization prefer on-balance sheet, or off-balance sheet financing?
After answering these questions, we can begin to tailor a financing option which best suits your needs.
Ben Green is a Solar Financial Analyst at Sun Light & Power