Solar Financing Options: Lease, Cash, or Power Purchase Agreement?

Solar panels aligned in an array being hit by sunlight

When it comes to solar energy, the benefits are plentiful. From environmental impacts like lowering your carbon footprint, to reliability gains with systems that typically last at least 25 years, there are numerous advantages. Additionally, the financial impacts are clear, when you consider the steady increases in utility electricity pricing across many markets and the fact that solar Investment Tax Credit (ITC) values are expected to remain at current levels through 2019. However, the upfront costs of installing a solar energy system can be high, which is why it’s important to research financing options to determine the right choice for your non-profit, for-profit, community, or home.

Depending on how you choose to pay for your energy and the system, these are some of the financing alternatives you’re likely to see in the market:

Solar Lease

With a solar lease, you pay a fixed monthly price to use the system for your facility or home. Depending on the lease terms, you can opt to purchase the system before the term is up, similar to a car lease. Operations and maintenance costs are typically covered, and you don’t pay for the energy produced.

Cash Purchase

Purchasing your system outright can sometimes contribute to a quicker project ramp-up time while giving you an opportunity to take advantage of tax credits or other incentives in your state. With a cash purchase, operations and maintenance costs are your responsibility. You can take advantage of solar tax incentives, and all energy generated by the system is free for your use.

Power Purchase Agreement

A Power Purchase Agreement offers another option to long-term energy savings. It provides an affordable alternative to a solar lease or purchasing a system outright. Through a PPA, you buy the energy produced by the system at a fixed rate from the developer that is typically lower than that offered by the utility. The ongoing operations and maintenance costs are covered, too. At the end of the term, you can often choose to extend the contract or purchase the system. Be sure to read the agreement carefully to ensure you understand your choices before signing.

How Power Purchase Agreements (PPAs) Make Solar Affordable

Some dismiss solar energy as an option due to the upfront capital costs and ongoing equipment responsibilities. However, Power Purchase Agreements offer a unique opportunity. Through this third-party ownership model, the developer designs, permits, installs, owns, operates, and maintains the array for the duration of the agreement. You are simply responsible for purchasing the energy produced by the system, at a rate that is typically lower than that offered by the utility. This, also, can help with affordability.

Who Can Benefit from a Power Purchase Agreement?

With a Power Purchase Agreement offered by the right solar partner, businesses, communities, and homeowners can benefit by not having to manage project and incentive details themselves. They can also count on predictable, long-term electricity costs without the responsibility of system maintenance or ownership. Be sure to fully research your options to make the best decision for your needs.

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