Cash purchases allow the buyer to be eligible for the 30% federal tax credit and MACRS (Modified Accelerated Cost Recovery System. This is the current tax depreciation system and allows the capitalized cost basis of tangible property to be recovered over a specified life by annual deductions for depreciation) program.
Additional benefits of cash purchases:
- Ownership can be assumed in the first year
- Returns on investment can be seen as early as three years after purchase
Leasing allows your business to generate solar electricity without an upfront capital investment. When leased, the solar equipment is provided (at no cost) in exchange for a monthly lease payment.
Additional benefits of leasing:
- The elimination of an electric bill and the fixed payments (lease cost) allows your operation to be cash flow positive within the first year with zero upfront capital investment
- Rates as low as -1.97% (when amortized over the 7-10 year lease) from lending institutions offset the lack of eligibility of the 30% tax credit
Power Purchase Agreement (PPA)
A Power Purchase Agreement (PPA) allows two parties to contract with each other to generate electricity, often times with no upfront capital cost. Typically, one party generates the electricity by installing a solar system on an unused rooftop, parking lot, or parcel of land and sells to the other party. Most often, this type of agreement is used with nonprofits, business, and government agencies.
Additional benefits of PPAs:
- PPA’s allow operations with no tax liability to have realized savings year one
- Provides nonprofits with the ability to accurately budget and plan due to a fixed monthly utility bill