Solar Energy Companies’ Non-Profit Financing Options
Non-Profit Financing Options
Often times, pure cash investments in solar electric systems are challenging for non-profit companies because they are not eligible for Federal tax incentives available to commercial entities. While rebates for non-profits are richer compared to commercial rebates, the inability to take advantage of federal incentives like the 30% Treasury Grant (tax credit after 2011) and bonus depreciation results in higher acquisition costs for non-profits.
However, solar leases and power purchase agreements (PPAs) allow non-profits to benefit from federal incentives. The lease or PPA provider is able to monetize federal incentives and passes the benefits through to non-profits via lower lease payments, or as in a PPA, lower contracted utility rates. Moreover, leases and PPAs are designed to minimize or eliminate initial up-front costs, making solar immediately affordable for non-profits that want to be green.
Solar Lease
Financing a project with a solar lease offsets any upfront system costs via your monthly lease payments. These lease payments are typically structured to be on par or lower than your utility savings, effectively allowing you to purchase solar while staying cash flow positive. Through our multiple finance partners, SunGreen can arrange for a lease on your behalf. The benefits of a lease are:
1. 100% Financing
Little or no upfront capital required.
2. Optimal Use of Federal and State Energy Tax Benefits
Federal solar tax grant and accelerated depreciation lower the lease payment.
3. Fixed Payments for the Lease Term
Fixed monthly lease payments represent a significant hedge against rising utility rates.
4. Expensed Lease Payments
Most leases are considered “true leases” for tax purposes, with the lease payments treated as an operating expense. Further, most leases meet FASB 13 criteria for off-balance sheet, “operating lease” accounting treatment.
5. Preserve Credit Lines
Leasing represents an alternative source of funds. Bank lines remain intact for other uses.
6. Fixed Purchase Option
Leases can be structured to offer a fixed purchase option at the end of the lease term.
7. Renewal Options
Attractive renewal options are available with every lease.
8. Savings
A solar power system provides enormous savings over paying high utility rates both immediately and over the long term—see our lease cash flow comparisons.
9. Marketing & Environmental Benefit
Enhance your public image. You can avoid the risk while highlighting your company’s long-term commitment to renewable energy and the well-being of the environment.
Power Purchase Agreements (PPA)
A Power Purchase Agreement is an alternative financing method in which a PPA provider installs, owns, and operates a solar power system at your facility. You contract with the PPA provider to purchase electricity generated by the solar power system, typically at a rate 10-15% lower than your current average electricity rate. While a PPA provides you the opportunity to install solar power at your facility without paying upfront costs or worrying about system operation and maintenance, the length of the PPA is long, typically 15 to 20 years.
1. 100% Financing
No capital investment.
2. Optimal Use of Federal and State Energy Tax Benefits
Federal solar tax grant and accelerated depreciation lower the lease payment.
3. Maintenance-Free
PPA provider owns and installs the solar electric system, so they maintain the equipment at no cost to you
4. Hedge Utility Rates
Keeps energy costs under control by locking in long-term electricity rates, putting you in control if utility prices soar
5. Fixed Purchase Option
Leases can be structured to offer a fixed purchase option at the end of the lease term.
6. Renewal Options
Attractive renewal options are available with every lease.
7. Marketing & Environmental Benefit
Enhance your public image. You can avoid the risk while highlighting your company’s long-term commitment to renewable energy and the well-being of the environment.
So, bottom line:
Both leases and PPAs allow non-profits to enjoy predictable, pre-determined electricity rates along with the renewable energy generated from your solar power system, without the upfront cost. Like any bank loan that you might apply for, both lease and PPA providers require customers with solid to excellent credit. You must be able to provide information demonstrating your company’s strong operating history and financial health. Ultimately, the best financing option depends on your company’s environmental goals, your investment criteria, and your financial situation. Our team at SunGreen can help you to understand the various financing tools available and secure financing that fits your needs.
