NSI News

Financing alternatives put solar within reach

While no one argues against the merits of harnessing the sun’s power, the half-century-old technology’s growth has been slow in the United States. But that’s starting to change thanks to some creative financing options that are gaining favor in the public and private sectors.

According to a recent Fast Company piece, despite the dramatic drop in cost of solar energy components and overall systems, companies remain slow to embrace the option due largely to the necessary capital investment regardless of its long-term payoff.

Unfortunately, this is true despite government incentives. Businesses can obtain a 30 percent tax credit and other benefits for on-site renewable technologies that reduce capital costs by 25 to 40 percent, a huge incentive that NSI is helping to facilitate for several clients. However, the Fast Company article aptly points out that all the grants and subsidies in the world won’t make for a sustainable market.

Alternative financing methods might turn that around. Lately, more companies have turned to options involving lease contracts and Power Purchase Agreements that are far easier on recession-strapped budgets and ease nervous board members’ minds.

In one scenario that’s become more common recently, a solar power vendor works with a client and leasing company who purchases the solar energy system. The client then holds and pays on the lease contract rather than an acquisition. Another option involves a Power Purchase Agreement (PPA), in which the vendor finances and builds a system on the client’s property and the client signs an agreement to pay a fixed monthly amount for use of the generated power. This has been a valuable tool for expensive, large-scale systems that clients don’t want to shoulder the cost of or responsibility for.

The PPA model, according to the Fast Company piece, has been used across a range of power-related industries globally. With the right credit-worthy partner, solar is suddenly within reach for many entities that are unable or unwilling to make any upfront investment, the article states.

These financial options could very well be the key to the growth that has eluded the solar power industry for so long. Because once cost is no longer an obstacle, the reasons to forgo solar energy are what become elusive.
These and other financial options could very well be the key to the growth that has eluded the solar power industry for so long. Because once the up-front cost is no longer an obstacle, there are no other reasons to forgo solar power as a long-term, reliable, emissions-free and renewable energy resource.

 

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For more information, please contact Heather Sabharwal at hsabharwal@kglobal.com or 202-349-7016.