Thursday, October 6, 2016

Solar Financing Options

Recap of Solar Financing:

There are many different financing options available for PV systems. You may purchase a PV system or enter into a lease or power purchase agreement (PPA). Below you will find information about owning vs. leasing/PPA and the advantages and disadvantages of both options.

OwningLeasing
What are you buying?
Buying an assetBuying a service, usually with a purchase option
What is included in the purchase?
Generally will not include inverter replacement, O&M, insurance, may include monitoringGenerally includes O&M, inverter replacement, insurance, monitoring
What are the tax implications?
Need to have the tax appetite to make use of the 30% ITC. If financed through home equity loan, then get tax deductionSolar services provider has the tax appetite for the 30% ITC AND can make use of commercial depreciation tax benefit
What are the risks?
Responsible for O&MLongevity of the solar services provider
What happens if I move?
New homeowner buys the assetCan transfer payments to new homeowner or must buy out the remainder of the contract at 'fair market value'
What are the financial benefits?
Return on investment in the form of lower electricity bills and increased home valueNo or little up-front cost, benefits from commercial depreciation tax credit, usually cash positive or neutral in year 1

You may purchase a PV system or enter into a lease or power purchase agreement (PPA). Each has its own benefits and disadvantages.
AdvantagesDisadvantages
Purchasing30% federal investment tax credit (through 12/31/16)
You own the asset/investment
Home value increases without property taxes increasing
Responsible for operation and maintenance (O&M)
Responsible for replacing inverter after 10-year warranty
LeasesLittle to no money down
              
Fixed monthly payment
O&M covered for 20 years
Inverter & module replacement for 20 years
Electrical production guarantee
20-year lease term
Do not own system
Possible restrictions when selling your home
PPAFixed $ per kWh produced by system
Little to no money down
O&M covered for 20 years
Inverter & module replacement for 20 years
Electrical production guarantee
20-year PPA term
Do not own system
Possible restrictions when selling your home
Pay for all kWh produced, even if you do not use it