Solar Energy Financing

Solar Energy installations are now a very attractive investment for businesses, homeowners and to outside developer/investors as well.  Government incentives, rebates, tax credits and low interest financing options have made it a no brainer.  Several great solar energy financing options are now available, such as state backed, low interest loans, leasing and third party financing.  It is estimated that a solar PV system will add about 10% to the value of your home or business without increasing your property taxes for 20 years.

This has created a wealth of financing options for those interested in solar energy systems, who may not be able to pay for the entire system up front. They include no and low money down loans, solar leasing and power purchase agreements (PPA’s). You can either own your own system or an investor partner will be glad to own it instead. In the long run, both are a wiser financial decision than to stay completely on-grid and Clean Energy Design will help you decide which plan is right for you.

Owning Your Own Solar Energy System

Clean Energy Design will facilitate solar energy finance options for our customers who would like to own their system.  We have partnerships with banks who have aggressive programs for businesses and individuals interested in solar projects.  In some scenarios, you could pay nothing for 2 months and start benefitting immediately.  Other traditional options are available as well.

Mass Solar Loan:

The Mass Solar Loan program provides new financing options for Massachusetts residents and homeowners to directly own solar installations. The $30 million program provides funds to banks and credit unions to create residential solar electric project loans that give more individuals the option to own solar. Mass Solar Loan also enables lenders to provide low interest rate loans and make loans available to moderate income and lower credit score borrowers. While terms may vary, lenders will offer 10-year fixed-rate loans between $3,000 and $35,000. Lenders also have the discretion of offering loans up to $60,000. The maximum interest rate for a Mass Solar Loan is 5.25 percent.  Please visit MASS Solar Loan for more info.

Please email or call us for more specific information and other lending institution information.

Home Equity or Improvement Loan:  Many who have equity in their homes own their own home may go to their local bank for a home equity loan.

Refinance a Mortgage:  An individual, business or non-profit entity may choose to refinance the mortgage on their building and use the freed-up capital to invest in a solar system.Investor Owns Your System – Leasing or SPPAs

Power Purchase Agreements (PPAs):

A Power Purchase Agreement (or PPA) is an agreement between a host customer and a developer/investor who arranges for the design, permits, installation and maintenance of a solar energy system at no cost to the host customer. The developer then sells the power generated by that system to the host customer at a rate lower than the local utility’s retail rate which can either be fixed or rise slightly each year. The typical agreement ranges between 10 and 20 years. It is a win-win situation since the developer receives tax credits and other government incentives and receives the income that the system generates as well.

Integrated solar power purchase agreements are a popular way for customers with good credit to buy clean solar energy (at below-the-grid rates) instead of purchasing the solar equipment and maintenance packages themselves. With no capital outlay, this type of solar power financing makes your project cash-flow positive from day one.

Solar financing with PPAs work best for customers who want a $0-down option, and/or are unable or unwilling to use the Federal Investment Tax Credits (ITC) and state tax credits.

Benefits to Host Customer

No or low upfront capital costs
Reduced energy bills
Limited Risk
Developer can better leverage available tax credits
Increase in property value – 10% estimated
Option to purchase the system after 7-10 years for fair market value

Note: Generally the PPA rates are lower than the utility rate and is calculated to rise slightly over the years, but unlike utility rates, your PPA rate is pre-negotiated for the lifetime of the agreement. So, instead of paying for “dirty” grid power with rates that can go up at any time and by any amount, you’re paying for clean, renewable energy generated through your solar panels and you know exactly how much you’ll be paying for that energy for as long as the term of your agreement. If the monthly PPA payment is lower than your electric bill, a PPA makes economic sense for you. However, the financial benefit from tax credits, rebates and the sale of SREC’s will go to the system owner.

Solar Leases:

A solar lease involves someone else owning the equipment, and you paying a monthly fee to lease it. This differs from a PPA in that you are leasing the equipment whereas with a PPA, you’re paying for the energy the panels produce. Both leases and PPAs can have either fixed, escalating, or de-escalating monthly payments over the lifetime of the agreement, which can be ten years or more.  Like a PPA agreement, the advantage of a solar lease is that instead of making a large upfront investment in solar panels, you can get started for little to no money down.  If the monthly lease payment is less than what you’re currently paying per month for electricity, leasing probably makes economic sense for you. You’ll be able to start saving money from the first day your panels are installed, for little to no upfront investment.

When your lease is over (leases can vary in terms from 10 to 20 years), you’ll have a few options. You can renew the lease for a new amount of time, buy out the system at fair market value, or ask your leasing company to remove the system. If you move before your lease is over, you may transfer the lease to the new owners which is a nice feature because solar power increases the value of your home.

Financing Opportunities for Religious Organizations:

Solar Endowment: Solar energy systems will likely return on an initial investment at a higher rate than that of an already- established endowment fund.  If an organization already has a fund, it can withdraw the principal to pay for the installation of the solar system and use the net savings in electricity costs, plus the SREC benefits to pay back the fund over 8-10 years, depending on the size and type of system.

Split-Interest Gift: A member of a congregation may be interested in pursuing a Charitable Lead Trust to help a congregation install solar.  A donor may give an asset (i.e. a given amount of appreciated stock valued at the amount the congregation requires to complete the solar deal after state rebate) and the congregation sells the stock to purchase the solar system.  The congregation tallies its electricity savings in a given amount of years. When it reaches the initial cash value of the ‘gifted’ stock, it returns the ‘gift’ to the donor (i.e. the initial cash value of the stock.)

Sponsor a Panel:  A donor or group of donors makes a gift that pays for the system.

Internal LLC / PPA’s: Is a system that takes advantage of the availability in the private sector of tax credits and depreciation (see PPA model above).  The upfront capital to purchase the system was entirely gathered through a group based financing method: third party ownership through a group of individuals setting up a limited liability corporation (LLC).  This LLC was able to capture the significant tax/depreciation benefits otherwise not available to a church because of its non-profit status.  The LLC shareholders each “invested” enough to purchase the system outright, and from the federal tax credit and state rebate, they each got an immediate return on their investment in proportion to the total amount they originally paid into the LLC.  This return is further augmented by the Five-Year Accelerated Depreciation value of the system (also a tax credit) – an amount paid yearly for five years – to each shareholder and the sale of solar renewable energy certificates (SREC”S).  These original shareholders thus have the option of getting paid back on their initial investment at a much higher rate of return than say, stock options or other low-yield investment options, AND many of them instead opted to forego their tax savings, funneling the money back to the congregation as a tax- deductible donation.  Members can use their LLC participation (credits, rebates, depreciation value and SREC’s) to lower their yearly tax payments and realize the return on investment and more in less than 20 years in most cases.  In addition, they will be facilitating the congregation’s ability to realize energy cost savings.