BlueSel Commercial Solar Blog
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4 Ways to Pay for Commercial Solar Energy – Part Two
Earlier we took a quick look at some of the more popular ways companies and organizations finance a commercial solar energy system. In the best case, a cash purchase gives the buyer every possible benefit available. And those benefits start the moment the solar panels begin to generate electricity to the building.
We also looked briefly at Power Purchase Agreements (PPA), which are very often the preferred method for non-profit organizations to finance a solar system. These agreements have their place in the business world, too. However, there are even more options available for business that generate revenue but may still be limited in available cash. Because of the rapidly lowering capital costs for solar energy, more institutions are offering affordable loans. And for companies that cannot take on the debt and especially for non-profits without any tax liability, solar leases remain popular.
Buying Solar Energy Through a Loan
With a loan to purchase your solar energy system, you will continue to take advantage of all of the incentives made available through the federal government and by the states of Massachusetts and Rhode Island. Some solar incentives vary over time, or may reach a predetermined limit or goal. As a first pass to determine if you are suitable, a buyer should consider a few of these as an example:
You have enough tax liability to take advantage of the 30% federal Investment Tax Credit (ITC) over a one or up to two year filing period. We encourage you to contact us to help you quickly estimate your potential costs.
You currently buy from a regulated utility in the state. Many of the programs co-developed by the states of Massachusetts and Rhode Island and the respective utilities get little participation from municipal authorities. Of course, this applies on a case by case basis.
You can budget the monthly payments.
Every company that takes advantage of a modern loan gets the same benefits they would from a direct cash purchase. Loan payments must simply be balanced against the benefits. However, over the 25+ year solar energy system lifetime, the payments are made for a relatively very short period of time. For the remainder of tens of years, you are your own utility generating a substantial portion of your electricity demand. In Massachusetts and Rhode Island nearly all of our customers also choose to work with their preferred and existing lenders. We itemize a number benefits with a solar energy system loan here.
Some of the most valuable of these benefits include:
- Interest deductions
- A dependable source of cost relief, the equivalent of a long-term income stream
- An asset that can add equity to your property
We invite you to Contact Us to learn about buying a solar energy system via a loan in terms more specific to your circumstances and needs.
Leasing a Solar Energy System
Not long ago, solar energy costs were high enough that most companies were unable to justify the debt. Solar leasing was a predominant method for the early adopters to finance and take advantage of benefits. As solar panel costs and other system components costs have dropped, so has the popularity of leasing. However, this method still plays a vital role for some profit making companies and even more for non-profit institutions.
There are two kinds of traditional solar lease: a capital lease or an operating lease.
An operating lease is like renting the equipment. Essentially, you grant a third party (TPO) the right to own and operate a solar generator on your behalf, at your facility. The TPO provides you with the solar energy to offset your utility purchases.
A capital lease functions more like a loan since the asset is treated like it’s owned by the lessee. In some cases you may have some responsibilities similar to direct ownership, such as certain areas of operation or maintenance costs.
All solar leasing agreements provide you with less monthly savings compared to either method of direct purchase.
At BlueSel Commercial Solar, we recognized that even with historically low costs some companies and organizations will not be able to buy a solar energy system with cash or through a bank loan. As a result, we worked with reputable lenders to craft a unique way to break with tradition and offer a lease to qualified customers. We explain in more detail our Lease to Own product here.
Let BlueSel Commercial Solar Guide You
In summary, for businesses with sufficient tax liability and cash or the ability to assume debt, a direct purchase of a solar energy system maximizes the value and delivers the quickest Return on Investment (ROI). However, leasing continues to be a highly useful option under the right circumstances. And professional property managers have come to recognize it lately as a conventional way to enhance property value while generating additional revenue, as noted in this guideline from Mintz Levin.
There is more to consider and compare about your financing options and consider which one works best for your organization or company. We welcome a chance to guide you through the first phase of your important decision with a No Cost Solar Evaluation. Or simply call us at 781-281-8130 .