Show me the money

A variety of financing options give the solar industry a chance to shine.

Solar projects are cropping up across the country. Whether you’re talking about residential, commercial and utility projects, the volume of deals being closed this year is impressive, and there are few signs the markets will slow down.

To meet those growing needs, funding the projects becomes critical. There are many different types of financing options for solar projects, so the key issue is which one is right for you.

“There’s a lot of energy and effort being put into figuring out how to finance solar projects,” says Larry Mapes, owner of Valverde Energy in Taos, N.M. “But people are slowly but surely figuring it out.”

Mapes says what’s holding back the solar energy industry is not the technology itself — it’s the financing issue.

“One of the sticking points of solar energy is not the technology,” Mapes says. “It’s the business model. People are still trying to understand it. There’s an entrenched way of doing business, but we have to get past it.”

Conventional Funding

The funding mechanism for a project depends on its size, Mapes says. He says it also depends on who is purchasing the system.

“Is it a residential, commercial or utility application?” Mapes says. “You have to look at the size of the project and the kind of customer to decide what the best way to fund it.”

Mapes says the incentives from local, state and federal governments differ depending on the kind of project. He recommends using the website to see what incentives your state has to offer.

“It’s a great resource for anyone trying to discover the best deals are out there at the moment,” Mapes says. “If you’re planning to do a solar project, you need to understand what funds are available to you.”

Homeowners typically self-finance projects to put solar panels on their homes, whether it’s purchasing the panels outright, taking out a home-equity loan or making use of one of the non-profits to fund the projects.

“Non-profits are offering extremely low-interest rates,” Mapes says. “That’s a new way to fund that hasn’t been there before.”

Mapes also said homeowners should investigate the Property Assessed Clean Energy (PACE) financing (see sidebar), which is a type of financing that is an alternative to a loan. It’s not available in all states and localities, but it’s another possible funding mechanism.

Utilities and commercial properties can finance projects themselves if their pockets are deep enough, Mapes says.

“If you’re a big utility, you may have the ability to build and own a solar field on your own,” Mapes says. “But that’s not always practical for smaller utilities.”

In those cases, the utility will set up at Power-Purchase Agreement (PPA), under which an independent power producer (IPP) will build the array and lease the power to the commercial or utility client.

“The IPP will get its money back through depreciation and incentives and from the money they get from the utility from the energy purchase,” Mapes says. “There are a lot of flavors with a PPA, so it’s just a matter of finding one that fits.”


Kevin White, market development manager for the solar and smart energy division of Sayno, says his company offers a host of financing options for installers of homeowner projects. In fact, the company just launched a leasing program aimed at residential solar installers.

“We have established relationships with banks that allow us to offer a number of different financing opportunities,” White says. “We cover the broad range of options.”

White says Sanyo is able to offer bankability to projects, which makes lenders more likely to fund them.

“We’re focused on the installers,” White says. “We want to create a streamlined process where installers can get bank funding and insurance for the project — we can give them the whole package.”

Under Sanyo’s program, an installer can package several different leases together and put them before a bank for funding. “With our focus on installers, that allows us to be creative when we’re putting together a financing package,” White says.

Joe Thomas, president and CEO of MAGE SOLAR USA, says his company has a leasing program that works for all sizes of projects: residential, commercial and utility scale projects.

“The loan-and-lease program is just one of several financing options we have rolled out,” Thomas says. “None of our programs are really subject to any limitations. We serve a broad range of customers with a multitude of needs and requirements. We do not offer a one-size-fits-all solutions.”

Each project goes through a thorough check by MAGE’s financing partners on the “who, where, when and what” of a project, Thomas says. Smaller residential projects could be financed in a process similar to what it takes to finance a car or a house, while larger projects undergo much more scrutiny. “We want to make sure that every customer has the most solid financing and backing of a major lender that they need to successfully execute a project,” Thomas says.

Thomas says MAGE created the program based on its proven track record of development in Germany and the rest of Europe.

“Each of our various financing programs has gotten a huge amount of attention and interest from our customers,” Thomas says. “Ultimately, it is our opinion that the ‘new solar frontier’ — this incredibly exciting and rapidly expanding U.S. solar market — really needs this very strategy at the moment.”

White says he sees significant growth in the solar leasing area. “In California, 20 to 30% of home installations are now leases,” White says. “We have to do our part to educate the consumer and educate the installer — there’s really no reason not to lease.” SPW

Setting the PACE

Property Assessed Clean Energy (PACE) is a type of financing that is an alternative to a loan. This financing method may be used to encourage the installation of renewable energy and energy efficiency technologies by helping customers overcome the financial barrier associated with high up-front equipment costs. Some states are also allowing water conservation and other improvements to be financed using this mechanism.  This financing mechanism is similar in some regards to a loan program. While it does not reduce the price tag of solar systems, it can help make purchases more affordable by spreading the cost of the system over time.

PACE financing effectively allows property owners to borrow money from a local government to pay for renewable energy and/or energy-efficiency improvements. The amount borrowed is typically repaid through a special assessment on property taxes, or another locally-collected tax or bill, such as utility bills, or water or sewer bills.  Only the property owners within the local jurisdiction that opt into the PACE program will be subject to this special assessment.  In addition to reducing the upfront costs of renewable energy and/or energy efficiency improvements, PACE financing allows the cost of home improvements to be linked to the property.  If a property owner participating in a PACE program sells the property, then the repayment obligation will legally transfer with the property.  This approach has a number of appealing features, including: long-term, fixed-cost financing; loans that are tied to the tax capacity of the property rather than to the owner’s credit standing; a repayment obligation that legally transfers along with the sale of the property; and a potential ability to deduct the repayment obligation from federal taxable income as part of the local property tax deduction.

In most states, the legislature must authorize cities or counties to issue special assessments on select customers’ property taxes to finance solar energy systems.  Certain local jurisdictions, like charter cities or local jurisdictions in home rule states, may not need state authorization to develop a PACE program.  Cities or counties can use their bonding authority to finance programs.  PACE programs typically do not affect state or local budgets or general funds, as the administrative costs are covered by bond issuance and interest paid by property owners that participate in the program.

Source: DSIRE Solar,


By: Frank Andorka/Editorial Director