Typically, there are three financing options for both private and public sector companies. The option you choose depends on several factors, including any budget limitations, debt capacity or other restrictions your company has in place for such projects.
Cash Purchase or Capital Expense (CAPEX) – requires budget and money. The owner of the system can monetize the incentives such as tax credits and depreciation while paying a levelized cost of energy of 2-5 cents/kwh of solar generation.
Debt-Financed (AKA – capital lease) – This is a typical loan from a financial institution that is financed over a fixed term length. For debt-financed systems, the lessee can still monetize the tax credit and depreciation incentives that are typically monetized under a Capital Purchase, however the projects can achieve positive cash flow in the first year while using internal capital for other operational needs such as production. The owner of the solar energy system is a lessee to the lessor (bank or other financier), the owner still gets the incentives without the upfront investment and the system can achieve positive cash flow in year one.
Operational Leases/PPA’s/EaaS –Operational Leases/ PPA’s (Power Purchase Agreements)/ EaaS all have a similar transactional structure and allow for a 3rd party owner to own and operate the system while monetizing the incentives. The facility owner leasing the system still gets to enjoy the energy reduction benefits from solar while keeping the asset off of the company books since the lease/PPA payment is considered an operating expense. This type of financing is ideal for agencies and businesses that can’t use the incentives, don’t have a CAPEX budget, or have reached their debt capacity and can’t take on a loan.