By Scott Sklar
Senior Advisor
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.
Scott Sklar, a nationally known expert and frequent speaker on clean energy policy, technology and applications, serves as a strategic advisor on NSI’s Energy and Sustainability teams, focusing on clean tech, sustainability and renewable energy issues. He has assisted a wide-range of national corporations and government clients on dynamic, diverse projects that include interconnection equipment, fuel cells, photovoltaics, waste heating engines, modular biomass and concentrated solar power. Scott is also President and Founder of the Stella Group, Ltd and Executive Director of the Solar Energy Industries Association. He also serves on the Boards of Directors of the Business Council for Sustainable Energy and the Renewable Energy Policy Project, co-chairs the Policy Committee of the Sustainable Buildings Industry Council, and serves as Chair of the Steering Committee of the Sustainable Energy Coalition. Scott served for nine years as Energy and Military Aide to Senator Jacob K. Javits (NY), and for three years was Washington Director and R&D Director of the National Center for Appropriate Technology. For 15 years, he simultaneously served as the Executive Director of two industry groups, the Solar Energy Industries Association and the National Biomass Industries Association. For the past eight years, he has served as President and Founder of The Stella Group, Ltd., a strategic marketing and policy firm for clean distributed energy users and companies using renewable energy. Scott is also a noted author, whose book, “A Consumer Guide to Solar Energy,” was just re-released for its third printing, and his coauthored book, “The Forbidden Fuel: A Political History of Biofuels,” was published in 1985 and was republished in 2009.
Labels: financing, grants, incentives, lease, power purchase agreement, renewables, solar, sustainability