Many nonprofit organizations finance their solar installation through a lease or Power Purchase Agreement (PPA), rather than owning the system. PPAs are $0-down, which means there’s no upfront payment required.
Essential Alternative Energy (EAE) has partnered with Sustainable Capital Finance (SCF) to provide nonprofits the opportunity of a PPA.
SCF’s Power Purchase Agreement (PPA) allows energy consumers to avoid the expensive capital costs of solar panels, inverters, permits, installation and construction.
A Power Purchase Agreement — basically an electricity power agreement — is a contract between two parties: the one generating electricity (the seller) and the one looking to purchase electricity (the buyer).
The PPA defines all of the commercial terms for the sale of electricity between the two parties.
In the case of distributed generation (where the generator is located on a building site and energy is sold to the building occupant), commercial PPAs have evolved as a variant that enables businesses, schools, and governments to purchase electricity directly from the generator rather than from a utility company.
The Solar Power Free-Market Financing Act of 2015 (Georgia HB 57)
Passage of SB 299 will eliminate critical barriers to consumer-owned solar energy and give greater access to the financial benefits of solar to more Georgians.
In the past, nonprofits have had a difficult time going solar because of constrained resources. The falling cost of solar installations and the wider availability of specialized financing options are making it easier for nonprofit organizations to take advantage of the benefits of solar energy.
Here are some answers to the questions we receive the most about our services.
If we missed anything, please do not hesitate to contact us. We’ll be happy to help
A power purchase agreement (PPA) means that your nonprofit buys only the solar electricity generated by the solar system installed by a third party at at your facility. Your nonprofit does not buy any equipment; it’s a contract to supply solar electricity at a known price for the long term.
It does. Under the terms of a solar PPA, a third party owns, operates, and maintains the solar system and sells 100% of the solar electricity generated to your nonprofit at a locked price for a term of up to 25 years. The federal tax incentives available to businesses – the investment tax credit (ITC) and accelerated depreciation – can offset 50% or more of the installed cost of a solar system. The PPA provider can then pass a portion of the savings on to to your nonprofit in the form of a lower PPA cost of electricity.
Very. The third-party ownership model can be a cost-effective arrangement for nonprofit organizations interested in pursuing solar but lacking access to the necessary funding, or prefer to forego ownership for other reasons. Additionally, buyout options can be negotiated into the contract for the host to purchase the system sometime after 6 years and up through the end of the PPA term at the solar system’s fair market value.
1. Benefit from Federal Investment Tax Credit (ITC)
Your nonprofit can benefit from the 30% ITC. By lowering the cost of the project to the solar developer and its investors, a lower solar electricity price can be offered to the nonprofit.
2. Benefit from accelerated depreciation.
Solar installations can be depreciated over a 5-year period rather than over the expected useful life, which is much longer. The impact of depreciation usually is greater losses for the investors, which then are used to offset other taxable gains. Like the ITC, the host benefits from accelerated depreciation in that it could allow for a lower price per kilowatt-hour of electricity in the PPA.
3. No up-front capital investments for your nonprofit.
Although installed costs are declining, the required initial investment to install a PV system is still significant, even after rebates. The cost of a 1MWp solar system on a middle school, for example, can exceed $2,500,000. Using the third-party PPA model, it is the solar developer and investors that finance and own the system, thus eliminating the need for the school district to invest its own capital into the project.
4. Locked electricity prices for 20+ years.
Power purchase agreements are structured with a locked price per kilowatt-hour of electricity that is adjusted annually with a pre-determined inflation rate, also known as escalator, for the length of the contract. The kWh price is most likely competitive with the utility rates that a school is currently paying.
5. Operation & maintenance responsibility handled by system owner.
The system owner operates and maintains the solar system, removing this burden from the school district. This includes replacing the system’s inverters should they fail after the standard 10-year warranty but prior to the end of the PPA term.
6. Buyout option provides ownership potential.
Often PPAs are structured so that the school district has the option to buy the system at various points during the life of the PPA. The first option to buy the system takes place sometime after year 6, because changing ownership before then causes significant tax penalties. The buyout price is typically calculated as the greater of fair market value of the solar system or the discounted cashflow of the remaining payments in the PPA term.
7. Risk avoidance.
The risk of electricity production is borne by the PPA provider. The school district only is obligated to purchase what the system produces. Additionally, the PPA provider commonly guarantees a certain level of minimum production of electricity, compensating the school district for any shortfall.
The solar panels are chosen by the leasing company
The leasing company owns the equipment and therefore choses the equipment.
The leasing company owns the equipment until you pay it off. We have multiple options for your current financial situation.
The output of the system is guaranteed by the leasing company.
Leasing company received the tax benefits
As equipment owners, they will receive the 30% tax credit and any other incentives available to you.
You can see savings from day one. Once we design, pull the permits, install the equipment and turn on the system, your meter can start to spin backwards. Whether you lease or buy it, from day one, the monthly investment on the system is less than what you are paying your local utility. In other words, you are ahead of the game.
Ownership is always good! Once you own the solar system, the electricity generated is free for the next 25 years.
That is a myth. Most people have a misconception that solar energy is too expensive and the payback is too long. This is not currently the case. Solar system costs are at historical lows and electric rates are at historical highs. THERE IS NO BETTER TIME TO GO SOLAR THAN NOW. The industry is installing more systems than ever before, because the numbers make sense.
With a PPA, your solar installation cost is free and the leasing company owns the equipment. They maintain it and give you a production guarantee. In exchange, you will make monthly payments for the term of the PPA. Your savings are more than your PPA payment.