As more community solar installations come online, the issue of financing inevitably arises.  And as the solar industry has matured, the options for paying for solar technology have matured as well.  Fourteen states as well as Washington, D.C. now allow solar equipment to be leased (aka, third-party ownership through a power purchase agreement (PPA) agreement).

The National Renewable Energy Laboratory (NREL) has developed a briefing paper to help local government leaders understand the pros and cons of purchasing vs. leasing systems. Communities planning a solar technology installation should always do their own background research before making a decision on how to finance new projects, but here are a few of the pros and cons of both financing options as identified by NREL:

 

Leasing Pros

Leasing Cons
  • No or low upfront payment for installation of the system.
  • Lower monthly energy bills.
  • The responsibility and costs of equipment cleaning and maintenance resides with the owner.

 
  • Negotiating an agreement can be time consuming and expensive.
  • Limited control of the project design, operations, and risk.
  • Pricing may be less than optimal with the developer receiving the most financial benefits.
   
   

 

 

Purchasing Pros

Purchasing Cons
  • Ability to choose what to do with the renewable energy generated by the project.
  • Ability to use cheap public debt through the issuance of a tax-exempt debt.
  • Maintain control over project design, operations and risks.
  • Expertise required to fully realize potential revenues.
  • Federal renewable energy tax incentives cannot be monetized by public entities.
  • Ongoing project management is required.
   
   

 

 

 

For more information on financing solar for government-owned installations, click here.

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