Now that you're ready to take advantage of all the benefits offered by a solar electric system, one big question remains - how do you pay for it?
You can either purchase your own solar electric system or you can enjoy the lucrative benefits of a solar system owned by someone else. Here are some purchasing options:
Purchase with Cash
Purchase with Loan
Lease a Solar Electric System
Host a System/Power Purchase Agreement (PPA)
Rent Space
Purchase with Cash
A solar system will typically pay for itself within four to six years by taking advantage of:
Depending upon the price and interest rate, your monthly loan payments for a solar electric system could actually work out to be less than your income from the solar system. Essentially, the system would immediately begin paying for itself.
For example, if you take out a loan for the total cost of the system construction and use the 30% ITC grant to reduce the loan principal, then the balance of the loan can be paid off within ten years through the proceeds of depreciation, SREC income, and energy savings. This would yield a positive cash flow throughout the loan period.
Lease a Solar Electric System
Leasing a solar electric system is a good option when the lender takes advantage of available tax credits. The lender can offer terms whereby monthly payments are less than the income derived from the sale of SRECs and the electrical savings, resulting in an immediate positive cash flow from the date of installation.
There are two types of leases:
1. Capital Lease
The business owner (lessee) can immediately benefit from electrical savings while making a fixed number of payments (on an agreed upon schedule) instead of having to take out a loan to handle the transaction. The lessee also has the option to purchase the system once the payments have been settled in full.
2. Operating Lease
This type of lease is beneficial for businesses who only want to use, not purchase, a solar electric system on a short-term basis and want to keep their lease out of their financial statements. The business is responsible for a lower monthly lease payment and is able to write off 100% of each payment.
Host a Solar System/Power Purchase Agreement (PPA)
A Solar Power Purchase Agreement (SPPA) enables a business to purchase lower-priced electricity produced by a solar electric system without having to purchase the system outright.
Here's how it works: an investor (or investor group) owns the solar system, but the business owner hosts the system on its property. The host agrees to purchase the electricity produced by the system at a predictable rate (which will be lower and less inflationary than utility rates).
Benefits to Investor:
Monthly electricity payment from the host
Investment Tax Credits
Depreciation tax benefits
Revenue from SREC incentives offered by the federal and state governments
Benefits to Host:
No Capital Investment - The investor provides the capital to purchase the solar system.
Hedge Against Price Inflation - Obtain a long term contract for electricity at apredictable price.
Avoid System Responsibility - The investor is responsible for the design, construction, maintenance, repairs, and operation of the solar system.
Corporate Acceptance - A long term power purchase agreement may be more acceptable to a
company's management, directors, and stockholders.
Public Relations Benefits - Hosting
a solar system demonstrates sensitivity to the environment and to the
health and welfare of employees and community.
Decrease the Business's Carbon Footprint - Utilizing solar power will immediately reduce your emissions of CO2 caused by the burning of fossil fuels
Rent Space
Property owners can earn additional revenues by renting available space to a solar system owner. An installation can be mounted on roofs, over parking lots, or on unused land.
