When it comes to embracing solar energy for your business, funding the installation can seem like a daunting hurdle. However, there are several options available that allow commercial businesses to adopt solar power without the heavy upfront costs, such as leased solar panels or solar power PPAs.  

Leased solar panels and solar power PPAs are two popular funding options that make it easier for businesses, landlords, and facility managers to reduce their energy costs and environmental impact. Here, we’ll explore the ins and outs of these options, including their advantages and disadvantages, to help you decide which funding solution is right for your business.

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What is a Solar Power PPA?

A solar power PPA is a financial arrangement where a third-party provider installs, owns, and maintains a solar energy system on your property. As the business owner, you agree to purchase the electricity generated by the solar panels at a predetermined rate over a fixed term, usually ranging from 10 to 25 years.  

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How do solar power PPAs work?

Solar power PPAs are a straightforward way to benefit from solar power without the initial expense of purchasing and installing panels. There are no upfront costs involved here as the solar provider covers the costs of installation and maintenance.  

Also, your business will pay fixed energy rates by paying for the electricity generated by the commercial solar panels at a rate that is lower than the local utility rate. With solar power PPAs, you won’t have to worry about maintenance as the solar provider is responsible for this.  

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Benefits of solar power PPAs  

Solar power PPAs provide your business with predictable energy rates which will help you avoid fluctuating utility prices and will reduce energy bills. Also, you won’t need to worry about any maintenance for commercial solar panels, which will save your business from having to pay for maintenance.  

The biggest benefit, however,  of solar power PPAs is that your business will start noticing immediate energy savings once switching to one.  

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Disadvantages of PPAs for leased solar

As with most things, there will be potential disadvantages to solar power PPAs, for example:  

• Long-term contracts: PPAs often last between 10 to 25 years, making it difficult to exit the agreement prematurely.

• No ownership benefits: As the system is owned by the provider, you won’t benefit from tax credits or other ownership perks.

• Energy payments based on generation: The cost depends on the amount of energy generated, which can fluctuate with weather conditions.

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How do leased solar panels work?

Leased commercial  solar panels are another option for your businesses if you’re interested in adopting renewable energy with no upfront costs. So, you’ll rent the commercial solar panels from a third-party provider instead of purchasing them outright.  

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Types of solar panel leases

There are two types of solar panel leases that you can choose from when leasing our solar panels. The first type is known as a Capital Lease, which is a long-term agreement where you will own the commercial solar panels at the end of the lease.  

An Operating Lease is a shorter and more flexible agreement where commercial solar panels remain the property of the provider.  

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Benefits of leasing solar panels

With leased solar panels, there are no upfront costs involved, which eliminates the need for any significant initial investment.  

You also have the flexibility to upgrade your commercial solar panels, for example, with technology upgrades, which ensures that you benefit from the latest solar technology. Also, certain lease agreements may offer tax deductions for your business.

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Disadvantages of leased solar panels

There will also be a few disadvantages that come with leasing solar panels. For example,  

• Higher long-term costs: Leases can be more expensive over time compared to purchasing solar panels outright.

• No ownership: Unlike capital leases, operating leases do not grant you ownership of the system.

• Early termination fees: Ending a lease early can result in significant financial penalties.

• Property resale complications: Leasing agreements may complicate the process of selling a property.

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What you should consider when deciding between PPAs and leasing solar panels

When choosing between a PPA and leasing, several factors should be taken into account, like the cost structure of the agreement. Solar power PPAs and leased solar panel agreements both offer reduced upfront costs but also have distinct payment structures. PPAs charge for energy consumption, while leases typically involve fixed payments.

Also, leasing solar panels may not include maintenance, depending on the lease type. PPAs, on the other hand, will always include maintenance. So, you’ll need to decide if this is a clincher for you and your business when choosing between the two.  

You’ll also need to take your ownership goals into account. If you aim to own the solar panels eventually, a capital lease might be the better option. If you’re focused on energy savings without ownership concerns, a PPA or operating lease may suffice.  

Both options provide opportunities to save significantly on energy costs, but the level of savings will depend on your business’s energy needs and the specific terms of the agreement.

Adopting solar energy for your business doesn’t have to involve a hefty upfront investment. PPAs and leasing offer flexible funding options that can help you start saving on energy costs immediately while reducing your environmental footprint. Each option has its benefits and drawbacks, so it’s essential to consider your business’s unique needs and goals when making a decision.  

If you’d like to learn more about how leasing or a PPA could work for your business, contact Sustain Commercial Solar today at 0333 880 0891. Our team can help you explore your options and guide you toward the best solution for your solar energy goals.

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