Hybrid Cash Downpayment / Loan:
Any source of funds you can apply to lower the finance amount will help keep your monthly payments as low as possible.
Solar Lease / Power Purchase Agreements (PPA):
A “PPA”, or solar lease is a popular approach in areas of the US with high electricity rates. Although these are great mechanisms for financing solar without money down, they don’t really pencil out in states with low electricity prices and therefore NOT AVAILABLE, or maybe only in a limited, case-by-case basis. For the typical Illinois, Missouri and adjacent Midwest homeowners, forget about this approach the PPA is generally not available. There are many pros/cons of a PPA so do your homework if you are considering one.
Farm Credit Unions:
Farmers – you are likely financing all types of ag equipment now. Solar can provide you great tax benefits from the ITC (30% federal tax credit) and 5-year accelerated depreciation. Invest in solar and eliminate the electrical cost from your farm budget!
Residential PACE Financing:
In states like Missouri, The HERO (Home Energy Renovation Opportunity) Program may be available in certain areas and provides an affordable financing option for energy-efficient and renewable energy upgrades, which help homeowners increase efficiency, comfort and savings. The HERO Program is a 100% financing option, repaid through property tax assessments over 5, 10, 15, or 20 year fixed terms. Qualification is not dependent upon a homeowners personal credit score, but instead uses the value of the property. The HERO Program will offer financing to qualified homeowners up to 20% of their property value, with the total debt on the property not exceeding 90%. This PACE program allows homeowners to install solar, or other water and energy efficiency items without the burden of cash up front, most often leading to instant savings on their monthly utility bills. The HERO Program is coming to MO soon – please contact us for most recent news on the program availability.
Power Purchase Agreement (PPA):
PPA’s are popular financing options in states with high costs of electricity and/or lucrative incentive programs. The PPA model looks like this:
- You lease your rooftop to a solar company that will pay for, install, and OWN the solar system for long term (typically 10 to 20 years).
- The PPA provider (not you) will take the tax credit, any incentives, and accelerated depreciation since they own your solar system as a business investment.
- You then enter into a long-term contract with the PPA provider to purchase electricity from the solar array on your rooftop. You agree to an electric rate ($/kWh) that is lower than your current rate. There are also likely agreed-upon escalators on that electric rate.
Keep in mind that company’s offering these options need to earn a rate return to cover the financing costs, and their long-term overhead of installing and owning the solar asset on your roof or property. These same companies may often securitize multiple solar contracts into a security they sell to Wall Street to raise capital.
At the end of the day, a PPA may not be in your best interest. They work great for public-sector entities like a school or government facility. It’s a case-by-case consideration. This model is not readily available in states with lower cost of electricity found in Illinois and surrounding Midwest states for example.