SolBid: Clean Energy News

Commercial Solar: Loan or PPA?

Posted by John Mavros

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One of the biggest questions asked by businesses who are looking to deploy a commercial solar energy system, is how to pay for it. Many solar companies are steering customers towards 3rd party Power Purchase Agreement (PPA) Models, but does this really provide the end-customer with the best ROI?

The answer is No.

While the benefits of a PPA model are prevalent, they do not prevail as the king of ROI. Per a report done by the National Renewable Energy Laboratory (NREL), buying a solar energy system with a solar loan is more economically beneficial, saving the end-customer up to 30% more than if they went with a solar lease or PPA.

 

Solar Loan vs PPA Comparison

  • 30% Federal Tax Incentive 
    • Loan: End-customer receives tax benefit.
    • PPA:  PV system stakeholder receives tax benefit.
  • 5yr MACRS Acclerated Asset Depreciation (Tax Benefit)
    • Loan: End-customer receives tax benefit.
    • PPA:  PV system stakeholder receives tax benefit.
  • Local Incentives (If Applicable) 
    • Loan: End-customer receives incentive.
    • PPA:  PV system stakeholder receives incentive.
  • Electric Utility Cost Reduction


    • Loan: End-customer receives full PV energy production cost offset.
    • PPA:  PV system stakeholder provides end-customer w/ PV production at a cost.
  • Energy Savings Term


    • Loan: End-customer owns the system. Will receive energy for life of the system - 25-30yrs.
    • PPA:  Term is usually 20 years with an option to buy the system at end of term.
  • Up Front Cost


    • Loan: Small down payment usually recovered within 1st year by Federal Tax Credit.
    • PPA:  Little to no up front cost.

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