Tag Archives: power purchase agreement

Solar Financing Options For Businesses

Welcome to the solar energy channel where you will get an honest inside look at all things solar. In this video, we’re gonna discuss solar financing options for businesses. (upbeat music) My name is Charles.

And I’m Warren, and please be sure to subscribe and like this video to be notified when we release future videos just like this. – So Warren, solar is a significant investment with a great return. – Yes.

So how should a business pay for a solar investments? – Yeah, well, the first way and the most easiest way is to use cash, but there are some things to consider before you dial out your cash. Number one, do you have cash? And number two, what else could you do with that cash that might have a better return than investing in solar? – Yeah, so the reality, if you have cash, great, there is also the conventional loan where you could borrow and depending on your interest rate, and your return on investment, it may make a lot of sense to borrow that money because you can take your savings, your electric bill that you would have owed to the utility, and you can use that now to pay off your loan.

Correct, and if you’re a business, you’re gonna be essentially eliminating, or dramatically reducing an expense to pay off the debt service that you have on that loan. – Yeah, so you can pay with cash, you can get a conventional loan.

Another option is a lease, there’s two types of leases. One is a capital lease and the other is an operating lease. – Absolutely, and those are primarily for businesses, the capital and operating leases, and we suggest that you seek the advice on your accountant for what makes more sense for you and your business.

Yeah, the capital lease is where you actually own it’s, you can almost consider a traditional loan. – Correct. – Couched in the form of a lease, or an operating lease is you actually do not hold title to, you do not actually own the equipment, but at the end of the lease term, you do get the title.

You do own the system. – And typically the distinction there is that with the capital leases, you get the benefits that come with owning the tax credits, etc. With the operating leases, you do not. So, in most environments, capital leases make more sense for businesses and operating leases make more sense for nonprofit entities.

Yeah, and then another way that you can invest in solar and pay for that investment is through a PPA. And a PPA stands for Power Purchase Agreement. And what that is is a third party will actually own and operate and maintain the system.

So let’s say you have a nonprofit and they do not want to get a traditional loan, or they do not have the cash. They can get solar through a Power Purchase Agreement where someone will buy the solar, maybe an investor, someone close to the entity.

They will sell the power to that nonprofit or to that end user, and in that way they can still benefit from solar. – Sure, and PPAs aren’t necessarily just for nonprofits, they work well for nonprofits, but for profit businesses can explore PPAs as well if they don’t wanna the capital necessary to install solar.

But the person who would get the incentives would be the owner of the system, not necessarily the ones who take it. – Correct, a business that would sign up for a PPA would see a reduction in their kilowatt hour costs or their cost of energy, but they would not take advantage of any of the incentives that come along with it.

So in summary, there’s really four great ways to pay for solar, either with cash if you have that available, taken out a conventional loan, taking out a lease either a capital operating lease depending on your situation or a power purchase agreement.

Thanks for watching, if you enjoyed this information, be sure to like this video and subscribe to our channel for future releases.

Source : Youtube

Solar Energy Leasing Explained

Solar Leases & PPAs – Solar leases and Power Purchase Agreements – also known as PPAs – allow you to take advantage of the financial and environmental benefits of solar without owning your solar panel system.

Both options are similar to renting. With a solar lease, you pay a monthly fee for the system and get to use all the electricity the solar panels produce – for free. With a PPA you agree to purchase the electricity the system generates at prices that are lower than what you would pay your utility.

Most leases and PPAs have $0 down options so you won’t pay anything upfront. Your monthly payments for a lease or PPA is usually less than your current electric bill so you begin saving right away. A solar lease or PPA will help you to save 10%-50% over your utility’s electricity bills, without making any upfront investment.

And, over time, as electricity prices continue to rise, your savings will continue to grow. Although solar panel systems require little to no maintenance, if something were to happen, the lease or PPA company would be responsible for any repairs since it is the owner of the system.

Securing a lease takes less time and effort than securing a loan. Generally, you sign a 20 year contract with the leasing company and they will install the panels at your home. You will need to have a credit score of more than 700 to qualify for a solar lease or PPA.

Today, these options are only available in a limited number of states. Where they are not available, you always have the option to get a solar loan. Since the leasing company owns the solar panel system, many of its financial benefits – things like rebates, tax credits and incentives – would go to them.

So if you are looking to maximize your investment in solar, lease and PPAs aren’t the best choice. They are a great option though if you’re looking for a simple solution – one that provides you with the environmental benefits without responsibility for maintenance.

They are also a good option if your tax bill is less than the tax credit you would receive. If you decide to sell your home before the end of the contract period, you can do one of two things. Option 1: You can work with the new buyer and the lease or PPA company to have him or her assume the remainder of the contract.

In this instance, the company would verify the buyer’s credit worthiness, but this is generally not an issue since they already needed to qualify for the mortgage used to purchase the home. Option 2: you can buy the system from the lease company at fair market value and then include it in the price of your home at the time of sale.

Now that you understand your options, you’ll need to choose the one that’s best for you.