As you investigate whether solar is the right fit for your organization, it is imperative to educate yourself on the financing options available.
For some of our non-profit clients with the funding to self-finance their solar investment, forgoing the federal 30% Investment Tax Credit is the most direct path. Because Massachusetts has some of the best incentives in the country, typical IRRs (internal rate of return) are 10%-15%, with a payback inside of 10 years.
For non-profits with strong credit, commercial loans can be attaractive. There is no upfront cost required, though a downpayment will reduce the loan term and/or payments. Typical loan term duration is 10 years, during which time SMART revenue can play a large role in offsetting those fixed monthly payments.
PPAs are the mosy common financing method for non-profit organizations. There is no upfront cost required, though a downpayment will reduce the energy purchase rate of the PPA. A typical PPA term duration is 15-20 years, during which time there is an annual escalator of 0-2% and monthly payments are variable based on monthly solar generation. This option offers buyout financing after 3-5 years and the option for system removal or buyout at the end of the PPA term. There a mandatory buyout at the end of the operating lease term, where you would pay the greater of Fair Market Value or 15% of original lease value. IRRs (internal rate of return) vary by system, but you can expect to be cash-flow positive from year 1 onward.
Leasing is another tool for some clients with strong credit but who are unable to take advantage of federal solar tax incentives. There is no upfront cost and a typical lease term duration is 7 years, during which time there is no annual escalator and monthly payments are fixed. This option offers buyout financing after 3 years and requires a mandatory buyout at the end of the operating lease term, where you would pay the greater of Fair Market Value or 15% of original lease value.
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