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The Four Main Sources of Funding for Solar PV Systems

The Four Main Sources of Funding for Solar PV Systems

You are considering a commercial Solar PV System then you may be wondering about the various Funding Options available.

Generally there are four main ways in which you can fund a Solar PV project, all of which will be highly dictated by an individual business’s specific circumstances.

The Funding Options are as follows:

1. Outright Purchase

An Outright Purchase is beneficial to Companies who have an excess of liquid funds and are looking for a cast-iron investment, guaranteed for 20 years and index linked. With rates of more than 16% it is very hard to find a better way to make capital work for you!

This is one of the more common ways that clients tend to purchase a Solar PV System.

The Outright Purchase method allows the System Owner to benefit from all of the benefits from day one, such as Feed-In Tariffs, selling Surplus Energy to the grid and generating Free Electricity.

Companies will find that in time the savings on existing Electricity bills produced through utilising Solar Electricity will exceed the tariffs and be the main benefit of Solar energy. If required Empower Energy Ltd are able to help with the cost of a system through our Network of trusted lenders.

Loans are secured against the equipment with no lien on property, banks are also normally more than happy to offer help with financing solar energy as they consider this a bankable investment with guaranteed returns

2. Operating Lease Purchase

With an Operating Lease Purchase, a company does not have to invest capital which it might or might not need for other projects in the future. No upfront costs and lease payments designed to benefit you. Lease payments are normally calculated to be less than the financial benefits you receive by having a Solar System installed, thus a system should be Cash Positive from Year 1 The system does not show as a debt on the balance sheet and does not affect future borrowing requirements. The system is maintained and serviced every year and this is included in the Lease Payments. From a financial point of view, sometimes a business might find it better to Lease than to own outright.

3. Joint Funded System

A Joint Funded System is where a business or individual (let us call them Party A) wants to install a PV system, but does not wish to use capital to pay for the system and therefore an Investor purchases the system.

It is similar to a Fully Funded PPA (see Option 4 below) where the Investor funds the entire installation of a Solar PV system.

The main difference from PPA is that Party A forward buys the Solar PV Electricity that the System will produce at today’s tariff rate, thus avoiding all the inevitable future energy price rises. This option can provide a pay- back period as little as three years and provides the highest internal rate of return

After the 20 year period the Investor gifts the System to Party A and they continue to benefit from the free energy produced and selling any unused electricity back to the national grid.

4. Fully Funded PPA

A Fully Funded PPA (Power Purchase Agreement) is similar to a Joint Funded System because the Investor still funds the entire installation of a Solar PV system. There is no financial responsibility to Party A. The main difference from a Joint Funded System is that Party A essentially leases the space above the roof where the PV system will go.

In turn will be able to purchase the power produced at a greatly reduced rate, this is set to rise with inflation and not with regular energy prices! Once the 20 years is up and the PPA ends Party A is gifted the solar PV system and therefore can continue to generate free energy and sell any excess back to the national grid.

The Investor within the 20 year term will be responsible for Maintenance and Repair of the System. Empower Energy Ltd already has a pipeline of Investors looking to create a PPA. Therefore finding an Investor is very simple.

As you can see there are many different Funding Options available for the installation of Solar PV Systems and so choosing the right one for you may take time. Our trustworthy and knowledgeable experts are the best people to help give you advice on the next step to take Please use our Contact us to get in touch with or alternatively Contact our friendly team on 01425 461 461