We Determine the Financial and Tax Benefits and Costs for Solar-Thermal Projects
Some businesses and government entities finance their large-scale solar energy installations using tried-and-true financing vehicles such as capital budgets, long-term debt, municipal bonds, bank loans, etc. Other entities choose to ‘go solar’ through a recent financing innovation known as an “energy purchase agreement.” In the solar electric market, these financing structures are called “power purchase agreements” or PPAs. In the solar thermal business, they are known as Thermal Energy Purchase Agreements (TEPA’s)
In a Thermal Energy Purchase Agreement (TEPA), a separate company finances and owns the solar heating system and then sells the heat to you, the end user. This enables you to manage your organization without the hassles or up-front costs of ownership or long-term operations and maintenance, while enjoying all the advantages of going solar, including predictable long-term heating costs.
TEPAs are useful for nonprofit and government organizations, which cannot take advantage of federal renewable energy investment tax credits (ITCs). The TEPA approach gives the solar equipment owner the full benefit of the tax credits and depreciation allowances. This lowers the equipment owner’s costs, and the savings can be passed on to the building owner in the form of lower energy payments.
Commercial Customer Solar Project Financing Options
Commercial customers can use our installations to lower the cost of their heating bill and to lower taxes. Of the three main financing options – self-financing, lease terms, and TEPA – the best return on investment (ROI) comes from self-financed systems.
Commercial owners get a first year, 30% federal tax credit and five-year accelerated depreciation for a solar heating roof. The payback for some systems can be as low as six years. In many cases, the installation will be lower cost to the owner at startup than installing a conventional, non-solar roof.
One disadvantage of self-financing is that the customer must come up with the cash to pay for the project. If the company does not have the capital and cannot get financing, a TEPA may be a good alternative.