Solar energy systems are not cheap, commercial solar systems are even more expensive, so the question is how to finance commercial solar systems? in this article, I am going to discuss some of the options you have.
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Why do you need to go solar?
There are many reasons to go solar, the main ones being to save money on electricity bills, to use environmentally clean energy, to become energy independent, or just because it is something you should do. Whatever is the reason to go solar, you will need to finance your project.
How Do You Finance Commercial Solar?
When it comes to financing a commercial solar system you have four options, you can use your own cash, you can get a loan, you can lease the system or you can have a PPA (Power Purchase Agreement).
There are advantages and disadvantages to each approach, which we will explore further below.
4 Ways to finance a commercial solar system
Cash Purchase – Own the System and the Energy
This is the straightforward way to finance a commercial solar system. If you have available capital and do you want to absorb tax credits this might be the best option.
The main advantage of paying cash for your system is that you will avoid third part expenses and interest rates if you had to take a loan or lease.
You own the system and the energy this way you can maintain complete control of your solar system and get the highest savings from your solar investment.
Although there aren’t many downsides to a cash purchase, the biggest con would be the access to capital.
Not every company has the required money to make a full cash purchase, but it’s possible to combine cash with a loan or lease to maximize the ROI on your commercial solar investment.
If you do not want to pay cash upfront, another great way to finance your commercial solar system will be by taking solar loans.
Solar loans offer significant savings with no upfront cost. If you can utilize the Federal Tax Credit as well as accelerated depreciation but do not want to pay cash, this is an excellent choice.
Essentially, the big advantage of the solar loan approach is that it provides you with the money to purchase the system outright, meaning you will own all the equipment once the loan is paid off.
If you do not want to pay for cash or load the solar system, there is another great way to finance it, and this is the solar lease.
A solar lease will allow your business to lease a solar system with little to no upfront costs, allowing you to reduce your initial capital investment.
In many cases, the electrical savings generated from the solar system is more than what your monthly solar lease installment will be, creating instant electricity savings!
You’ll get the same solar savings you would with the loan option, and the monthly payments will likely be lower.
Depending on your specific case, you may be able to purchase the equipment following the completion of the lease period.
Power Purchase Agreement (PPA)
The last method to finance your commercial solar system is called Power Purchase Agreement or PPA in short.
A power purchase agreement (PPA) is a contractual agreement between energy buyers and sellers. They come together and agree to buy and sell an amount of energy that is or will be generated by a renewable asset. PPAs are usually signed for a long-term period between 10-20 years.
This way of financing is sometimes referred to as a “third party” ownership model. For the duration of your contract, you will enjoy lower, stable electricity rates along with the renewable, green energy generated from your solar power system.
That is it, this is how you can finance a solar energy system, in this post we saw the 4 ways you can do it, depending on your situation you can pick the method that suits you the most, remember to speak with your solar installer for the best solution for you.