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Solar Financing Options

September 28, 2018

Solar Photovoltaic, or Solar PV, is really getting hot these days.  In fact, it accounts for 40% of the new power brought online in 2016, 33% in 2017, and estimated 29% in the first half of 2018.  While it still only accounts for 1-2% of the US power generation, it is increasing significantly each year.


solar financing impact graphic

What accounts for the success of solar in the past few years?  One word - financing.  Here is some detailed information on all of the options, so you can understand and use one of these methods if you don't have $20k laying around.  

Traditional Bank Loan

Lets start with the most straight forward plan to finance a solar PV array - a traditional bank loan.  If you own your home or business building, your bank will likely be willing to finance a solar capital improvement to your space.  There are also financial institutions that specialize in this type of lending, so you can get terms specific to this product.  This is a great option, as you can spread the cost out of solar over 10-20 years and pay less per month than you would for the electricity.  


Power Purchasing Agreements

Power Purchasing Agreements, or PPAs, have been popular the past 10 years and have really driven growth in the solar industry.  In this complicated financing scenario, an investor owns the solar array on your roof and you purchase the electricity from them at a fixed rate over 20 years.  This is a great win win scenario for both parties - an investor gets a long term fixed income, and the building owner gets renewable zero carbon electricity for less than they would likely pay from their local utility. 

Most of these PPAs are best for large buildings with solar arrays that are more than $100,000, since the due diligence necessary to make this happen typically require big numbers.  That being said, there are some companies that specialize in this for small arrays for residential homeowners.  Often, better rates and incentives can be found in partnering with companies that sell electricity in deregulated markets, as they can sell you the excess energy you would need over the 20 years - especially a viable option for public sector buildings.

This can also be considered "subscription solar" or "solar as a service".  More of a lease, this arrangement has some complicated considerations for your roof ownership rights and maintenance. 


Community Solar

In community solar, you don't typically have the solar array on your building, but instead purchase "credits" for your electricity usage from a solar array that is offsite.  These large arrays are usually in a rural area with cheap land costs, and you and a bunch of other subscribers join in and buy electricity credits.  

This can also be done on your roof in theory, if you are a church or large multifamily housing complex.  However, this is much more challenging to do in this scenario because of the complexity of these arrangements


Is Solar Right for You?

There are lots of considerations for solar PV, like your roof age, angle of your roof, tree canopy, local utility rate, and how long you will be in your building.  The truth is that if you are a good candidate, there is a way to get your project financed and completed - and all of these options lead to a less expensive option than buying electricity from your utility.  

Posted by Jen Panattoni

Jen loves the city of Chicago and the people that live and work here. Her goals include: Making the city a better place for everyone to live, to eat at all the Mr. Submarine's there are in Chicagoland and... that's it. No other goals. that's all of them.


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