Solar Project Financing 101

One of the first steps to starting any commercial or utility-scale solar project involves obtaining financing. While cash will always be king, solar projects require a significant upfront investment, which makes financing more appealing for most developers. In fact, 90 percent of the U.S. solar installations are financed.

Looking ahead to 2020 and beyond, project developers seeking to enter the solar power market need to know their financing options. There are several types of project financing options available, each with their own variations, but with a little research solar developers can find the project financing that best suits their project’s needs.

Let’s take a look at the three most popular solar project financing options:


1. Solar Power Purchase Agreements


A power purchase agreement (PPA) is one of the most popular solar project financing options. There are different types of PPAs available, each with their own terms. One of the main reasons PPAs are so popular is because many require no money down, although some do need down payments or an upfront installment.

The PPA works similarly to a rental agreement. For a solar PV system, the solar energy offtaker signs a contract with a solar financing company. The offtaker then buys the energy from the PV system, but the third-party financing company owns and maintains the system. This makes the financing company responsible for operation and maintenance on the PV system.

The signed agreement will include a specified rate, rate escalation and terms, which are a function of cost and production. This means, the offtaker buys the system’s energy at an established per-kWh price.


2. Solar Leases


Solar leases serve as another popular project financing option. Although sometimes used interchangeably with a PPA due to their operating similarities, a solar lease does differ in a crucial way.

Like a PPA, a solar lease is essentially a rental agreement. The third-party leasing company owns the panels and balance of system, and in some cases may be responsible for ongoing operations and maintenance. However, unlike the set per-kWh price agreed upon with a PPA, the offtaker pays a fixed monthly lease payment.

Solar leases are typically divided into two types: a capital lease or an operating lease. These both function quite differently, and it’s wise to speak with a solar financing specialist to see which one works best for the proposed project. The Solar Energy Industries Association has a good primer on the details of solar leases.


3. Solar Loans


There are many types of solar loans available for project financing as well. From regional to national banks, and from SBA 504 loans to USDA guaranteed loans, there’s a solar loan for all types of solar PV projects.

A solar loan grants ownership of the PV system to the project developers or property owner instead of a third-party leasing party. This means project developers and engineers, procurement and construction companies EPCs are then required to perform operations and maintenance of the PV system.

When considering a solar loan, most developers seek out the lower interest rate and the longest amortization. However, solar loans do have a higher bar for qualification, and can potentially be prohibitive for project developers just getting started.

The terms available from a PPA, solar lease and the solar loan will vary greatly between states, installers and leasing companies. Thankfully, Trina Solar has extensive partnerships and relationships with many global banks and leasing companies.

Reach out to an experienced Trina Solar specialist to learn more about solar project financing options.

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