What is in this article?:
- Financing Trends in the Solar Sector
- SIDEBAR: Funding Options
Ups and downs in incentives, energy costs, and investor attraction have made funding photovoltaic (PV) prospects increasingly more challenging
SIDEBAR: Funding Options
As much work as went into refining solar PV technology, there’s been no shortage of effort into finding ways to make it financially practical to install. Financing solar PV has almost become an industry unto itself, as all parties look for creative ways to factor up-front costs, payback periods, prevailing electric rates, subsidies, and a host of other variables into a favorable equation.
While every financing deal can come with its own unique structure and nuances, most come down to a choice between system ownership of some sort or reaping the cost benefits of solar-produced electricity.
Outright ownership: Residential or commercial power users with deep pockets or willing lenders can buy a system, reaping both the potential benefits of lower cost power and the intrinsic value of a PV system. Tax credits, net metering, and depreciation can effectively lower the costs of ownership over the system’s life and potentially raise a property’s value, but system maintenance and financing costs are offsets. Users without the ability to pay cash for a system can access a variety of lending schemes, including bank and subsidized loans, as well as those secured by the solar equipment or property, or unsecured commercial or guaranty loans like those through the Small Business Administration.
Leasing: Significant up-front costs can be eliminated under leases where a third party owns the system. The user makes lease payments on the hardware, but those costs are offset by cheaper power. Under a typical lease, the user can extend the lease at term’s end or purchase the system for residual value.
Power Purchase Agreements (PPA): Users simply interested in cleaner, cheaper power can purchase the solar power generated from a hosted system. Installation, ownership, and maintenance is handled by a third party, which contracts to offer the user power at a set rate for a period of time. Power cost savings are typically reduced in this scenario, but up-front costs are eliminated.