21 May

Why the Purchase is the HIGHEST RISK Solar Financing Option

           When looking to go solar, many organizations wonder about purchasing their solar array. From afar, the purchase solar financing option looks great; once past the pricey upfront cost, there is high financial reward. Also, organizations can take advantage of the 30% ITC, local and state rebates as well as any available SRECs.

            However, upon closer inspection, there is a lot of hidden risk associated with owning solar that must be taken into consideration before deciding that a purchase is the best choice. The first risk is simply buying the solar array. They are expensive and require organizations to have large amounts of free cash that can be used to buy the array. On average, a solar array is priced at roughly $4.87 a watt installed. Meaning that if an organization were to install a megawatt of solar it would cost them about $4.87 million. Assuming the organization has that much free cash available, they will then need to procure the materials and find a contractor to install the solar array. This can be quite time consuming and often requires the organization to assign an internal project manager to coordinate the installation. Even with a well-researched project manager, there is still a risk that the wrong materials might be ordered, or they could be less than adequate for the job. Check out this story of an organization that used the purchasing solar financing option and ran into problems with the technology they used.

            Once installed, there is continuing risk with a purchased solar array. If anything goes wrong with the technology, it is the organization’s responsibility to identify if a problem exists, and then find and implement a solution. This responsibility can be outsourced to a solar company, but will mean additional ongoing capital expenses.

            In addition to the installed risks, there is the risk of owning the array. What if the organization wants to move buildings or needs to fix a leak on the roof? The organization, yet again, will be in charge of removing the array for repairs or relocation. In many scenarios, the organization does not physically deal with the solar array, but rather employs someone to do it for them. However, this could come with additional expenses as well as risk.

            These are all possible scenarios when it comes to owning a solar array. For some organizations, all of these higher-risk scenarios might happen, where as some organizations could have no issues with their solar array for the entire time they have it. Under the right circumstances it can be a perfect fit, but in general, the purchase solar financing option is higher risk and can be more expensive than other solar financing options. Before you conclude that purchasing is in your best interest be sure to explore all available financing options such as a lease, a PPA, or even a loan. Often times companies like Google and Walmart, for instance, have chosen the PPA solar financing option because of the guaranteed savings it offers while shifting the risk to a third party. In this way they get most of the benefits of going solar, with none of the risk.

Eliza Porter

Eliza Porter

Eliza is the Chief Learning Officer for Clean Footprint. As the Chief Learning Officer, she is responsible for writing and editing blogs, e-books, videos and white papers as well as other learning content created for Clean Footprint’s developer partners and clients. Eliza attended New York University in Paris, France and studied Global Liberal Studies before moving to Florida and joining the Clean Footprint team. She also studied Business and Entrepreneurship at the University of Central Florida.