Financing Options for Solar and Renewable Energy Systems

An initial investment in renewable energy can save your business money with years of clean energy generation.

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Financing Options, Tax Benefits and Sizing

This page provides an overview of the financing options for solar and clean energy technology, along with tax benefits and other incentives for going green. You also will find tips on choosing the proper size for the renewable energy system that will power your business. Whether you choose to purchase your own system and save over a lifetime of use or lease a renewable system with predictable and low monthly payments, PG&E is here to help you make informed decisions about bringing solar and renewable energy to your property.

 

Financing a Solar or Renewable Energy System

There are many ways to help finance the installation of a solar or renewable energy system for your business. Buying, leasing and Power Purchasing Agreements (PPA) are the three most popular choices. We have put together useful information and tips to help you weigh your options.

  BUYLEASEPOWER PURCHASING AGREEMENT (PPA)
OVERVIEW Purchasing a renewable energy system from an approved contractor or manufacturer means paying for it up front or financing your purchase through a bank loan. You own the entire solar energy system, which most manufacturers guarantee for up to 25 years. Leasing allows you to “rent" the renewable energy system for a set period of time. Generally, you pay a fixed monthly rate no matter how much energy the system produces each month. Similar to leasing, a third party owns and maintains the renewable energy system on your behalf. You agree to pay for the electricity generated at a rate per kilowatt-hour (kWh) specified in your agreement.
BENEFITS
  • Lower monthly electricity bills
  • Greater return on investment
  • Increased property value
  • Minimum 10-year warranty
  • Possible 30 percent federal investment tax credit and other deductions
  • Lower monthly electricity bills
  • No large, up-front financial investment
  • Typically no costs for system operations, monitoring and maintenance
  • Fixed monthly rate regardless of how much electricity produced
  • Usually break even or save money in the first year
  • Generally provide performance guarantees
  • Lower monthly electricity bills
  • No large, up-front financial investment
  • Typically no costs for system operations, monitoring and maintenance
  • Fixed rate per kilowatt-hour (kWh) produced
  • Usually break even or save money in the first year
  • Generally provide performance guarantees
ADDITIONAL COSTS
  • Expensive components like the inverter may need to be replaced after warranty expires
  • Extended service agreement for maintenance, repairs and insurance
  • The monthly price of your lease may escalate over time
  • Rates per kWh or energy usually escalate over time
RISKS
  • You are responsible for maintenance costs
  • A performance monitoring system may be necessary as an add-on service to maximize energy production
  • If lease provider goes out of business it may cease to provide contracted operations and maintenance
  • Check for purchase (buyout) options in your contract
  • If lease provider goes out of business it may cease to provide contracted operations and maintenance
  • PPAs usually include long-term commitments of over 25 years
  • Check for purchase (buyout) options in your contract
ADVICE You may be able to finance your purchase of a solar or renewable energy system by taking a business equity loan or secure line of credit, which is often eligible for tax deductions. Be sure to speak with your tax advisor about the implications before your purchase. Agreements are long term, and specific fees may rise over time. Be sure to understand any changes in your monthly rate over the lifetime of the solar lease agreement, and ask about purchase options. Prepaid leases may also help reduce your monthly payments. Agreements are long-term, and specific fees may rise over time. Be sure to understand any fluctuations in the price per kWh rate over the lifetime of the PPA contract, and ask about purchase options.

What Happens If I Sell the Property?

If you have purchased a renewable energy system, its value is incorporated into the purchase price of your property. Generally, a solar system will increase a property’s value and is viewed positively by potential buyers. If you have a lease agreement or PPA, you will need to work with the service provider to transfer the lease or PPA obligation to the new owner. In some cases, you may be able to buy out the remainder of the contract at fair market value.

 

Tax Credits and Other Incentives

State and federal governments, along with PG&E, offer incentives to help reduce the cost of installing a solar or renewable energy system. Consult your personal tax advisor to find out if you qualify, or review the information on the following websites:

 

How the Size of Your System Affects Costs 

Choose the Right-sized Renewable Energy System for Your Home

PG&E gives you the tools to help select the size of the renewable energy generation system right for your business based on your usage history, the size of your roof and whether you want to offset all or only a portion of your usage.

First Step

Reduce the size and cost of the renewable system needed for your home by first completing energy-efficiency upgrades.

Sizing Your System

Estimate the size of your system using the handy solar calculator.

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  • System size is calculated based on how much energy you want to offset (80 to 85 percent recommended) and your usage history or average bill.
  • Estimated system details and cost will be displayed.
  • Note the photovoltaic (PV) system size, which refers to the energy production of the PV solar panels. This is your first estimate of the “size” of the solar system you will need.
  • Discuss cost and size findings with your contractor.

The amount of physical space a solar panel system will require also is important. As a rule of thumb, you will need approximately 100 square feet of roof space for each kilowatt installed.

Important Notes

  • There is no incentive for installing a system larger than your home needs. Compensation for excess generation through Net Surplus Compensation (NSC) is set by the California Public Utilities Commission (CPUC) at roughly $0.03 to $0.04 per kWh and does not justify the cost of an oversized system.
  • In some cases, network upgrades may be necessary before you can install your system. Your contractor will work with PG&E to determine if upgrades are required and inform you of any additional costs that may be incurred.
 

Use the Solar Calculator

  • Get a quick estimate of the cost and size of the system you will need to power your business.

Understand Your Bill

     
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