September 3, 2024 solaroneusa

Commercial Solar Finance Options

Commercial Solar Finance Models

Common financing options for businesses to go solar.

Solar Roof Lease / Solar Site Lease

Boost Your Rental Income with No Upfront Costs

Tenants Save 5-10% on Energy Bills

Owner Pays Nothing

Here’s how it works: A third-party solar company leases your rooftop or land and pays you rent, typically ranging from $0.10 to $0.50 per square foot annually.

To make this model work, your tenants need to agree to purchase the electricity generated by the solar system. This is usually handled through a lease amendment or a Power Purchase Agreement (PPA) between the system owner and the tenants. In some cases, like with office buildings, you might purchase the electricity and then recover the cost through monthly Common Area Maintenance (CAM) charges.

From a lender’s perspective, this model is appealing because it resembles a standard commercial lease, which they are already familiar with. They treat the solar roof lease like any other lease, adding the rental income to your rent roll and updating your financial ratios accordingly. Some lenders even compare it to a cell tower lease. Plus, the third-party solar company will handle both the system and roof maintenance, giving you peace of mind.

Power Purchase Agreement (PPA)

Reduce Building Expenses

Predictable Power Costs

No Upfront Cost to Owner

A Power Purchase Agreement (PPA) allows a third-party solar company to own and operate the solar system, relieving you of maintenance responsibilities.

Instead of paying a fixed lease rate, you pay based on the energy produced by the system at a pre-agreed rate. This means your payments may vary throughout the year, but the PPA rate is generally lower than the utility rate.

With a PPA, you can lock in your electricity costs for over 20 years, protecting your budget from rising energy prices. While you won’t profit from selling the electricity (since only the system owner can sell power), you will benefit from reduced building expenses.

A potential drawback is that you’ll need to buy the electricity generated by the system even when the building is vacant.

For an even more attractive option, consider a PPA secured by C-PACE financing, which offers lower rates.

Solar contractor serving Peoria

Purchase Options: Cash, CPACE, Lease, or Bank Loan

Maximize Returns and Control Your Investment

High Return on Investment (ROI)

Ongoing Maintenance Required

Requires Cash or Strong Credit

When you purchase a solar system outright, whether with cash or through a bank loan, you gain full ownership and reap the maximum financial benefits. This includes all the tax advantages associated with owning the system.

Typically, if you opt for a loan, you might put down about 30% and finance the rest over 7-10 years. While this option requires significant upfront capital or excellent credit, it allows you to fully benefit from the solar power generated—minus the loan payments, if applicable.

With ownership, you can hire third-party vendors to manage billing and potentially sell excess electricity at a discount, making a profit from the difference between the sale price and your loan payment.

However, you will need to handle system maintenance yourself, and some lenders might not recognize the solar income when assessing credit.

For those interested in C-PACE financing, which offers attractive interest rates, note that this option is secured by a property tax lien, which may involve higher legal costs and require lender consent. Additionally, USDA solar loans are available for projects in rural areas.

Energy Savings Payment Model (ESP)

At Commercial-Solar.org, we’ve developed the Energy Savings Payment Model (ESP) to offer a unique blend of benefits from traditional solar financing methods. This innovative hybrid approach ensures you enjoy tax advantages, reduced upfront costs, enhanced property value, and immediate energy savings.

Here’s how it works:

  • Instant Cash Flow: Start seeing positive cash flow from Day 1.
  • No Upfront Costs: Instead of a hefty initial payment, you only pass along the equivalent value of tax benefits you would have paid to the Federal government.
  • Full Ownership: Own your system outright without sharing profits with a bank.
  • Free Maintenance: Enjoy complimentary maintenance until the system is fully paid off.
  • Increased Asset Value: Boost your company’s asset value with solar equipment.
  • Performance Guarantee: No savings, no risk; if the system doesn’t generate electricity, you don’t owe anything.
  • Flexible Contract: Should you sell your facility, the Commercial-Solar.org contract can be easily transferred.

With the ESP model, Commercial-Solar.org takes on all the risks and responsibilities for maintaining the system, ensuring that you only pay when you benefit from the energy savings.