Thinking of buying solar, how do you plan to finance it?
Financing a solar project, whether it is for commercial or residential use, can be very complex. Companies around the globe are coming up with innovative financing models to simplify the adoption of solar, but there is no one size that fits all solution. Financing a solar installation pretty much depends on a few keys factors, some of those are:
· Ownership of the roof
· Your objective from the solar installation — maximise savings, achieving energy independence, climate action or a mix of all
· Your purchasing power
· Your credit history
As we mentioned, companies are coming up with new and innovative solar financing models, but in essence, they are all variations of the following three financing solutions:
· Self-funded — You pay upfront for the entire installation and you own the project from day one.
· Solar Loan or debt — Like a loan for any other purpose, you pay 20% — 30% of the installation cost and the bank funds the rest. Like any other loan, you repay it over the next 5–10 years. In some cases, you may need to provide security, or else, it could even be asset-financed, meaning that they solar project itself would act the security.
· Solar leasing or PPA (Power Purchase Agreement) — Also quite popularly known as 0 cost solar, with this option, you would not have to pay anything to get solar installed on your roof. A financing company would pay for the whole solution, but, you would sign an energy buying agreement with the financing company. Additionally, in some cases, the financing company would also retain any solar incentives provided by your government.
The reason it is called leasing is because you are effectively leasing your roof-top to the solar financing company for next 25 years and promising to buy electricity from that installation — a pretty long-term commitment.
Since there is no one size that fits all and so, each of these financing options have their respective pros and cons. Below is a comparison:
So, if you are thinking about solar, think of it as a long-term, capital asset for your house or company — one that would generate returns and savings over the next 25 years, don’t be tempted by the lowest cost installation.
PowerMarket is a product of SunReign Ltd, a UK registered company founded with a mission: sustainable energy for all. PowerMarket, an Oxford University Innovation and European Space Agency supported venture, provides companies end-to-end solar solutions — helping you assess, procure, finance, install and maintain solar energy projects.
