Video: Solar Financing Deal Structures
As the solar industry matures and evolves, so have the financial deal structures for companies to invest in solar energy.
Many companies might not be aware of the wide range of options available for funding or owning a commercial solar
project, or how exactly these options differ from each other. However, solar financing doesn’t need to be complicated. Safari Energy has helped numerous businesses understand and select the financial structure that best fits their business objectives.
The Solar Deal Structure video series is a four-part series detailing the characteristics of four primary solar deal structure types: Client Ownership, Operating Lease, PPA (Power Purchase Agreement), and PACE Loan (Property Assessed Clean Energy). From upfront costs to operational control, the Solar Deal Structure video series takes a look at the details that decision-makers consider when choosing the solar project arrangement that best fits their needs.
Client Ownership
The client ownership model works best for businesses seeking to monetize tax benefits and maintain full operational control over a solar project. The electricity generated is free to use and excess production can oftentimes be sold back to the local utility and used as an additional revenue stream.
Furthermore, the owner of the system is the full beneficiary of the environmental attributes contributing to ESG goals.
This deal structure requires a capital expenditure for the system up front, which is not always an option for all C&I businesses. That’s where Safari Energy can advise on alternate deal structures to help achieve monetary, operational, and ESG goals.
Operating Lease
Companies that cannot monetize the federal investment tax credit (ITC), but eventually wish to own their own solar system, can opt for an operating lease model because it provides a fast path to system ownership via buyout option after tax benefits have been monetized by the project lessor. While the lessor – who owns the system – receives the federal tax benefits, the client receives any available cash incentives and maintains a high level of operational control over the project throughout the entire term.
With zero upfront costs required, this arrangement is ideal for investment grade clients with little to no tax appetite that wish to reap the benefits of solar energy.
Power Purchase Agreement (PPA)
Unlike client ownership models and operating lease structures, PPAs are a low maintenance way for clients to receive the all the ESG, financial, and operational benefits of solar without owning or even paying for the system. In a PPA, Safari Energy designs, builds, and owns the system on the client’s property. Then, we sell the energy back to the client at a set discount compared to utility rates, which fluctuate and tend to increase over time, especially in the current economic environment.
This deal structure works particularly well for clients with low tax appetite that want to assume a hands-off approach while still capitalizing on the environmental and cost benefits of solar.
PACE Loan
PACE stands for Property Assessed Clean Energy. The PACE model allows property owners to finance the up-front cost of a solar project with no money down and then pay the costs back over time through their property tax assessments.
PACE financing is an increasingly popular solution for clients with low tax appetite that wish to maintain a high level of control over the project because debt is tied to the property and not the borrower.
