We offer best-in-class options for purchasing your solar system, or implementing a power purchase agreement (PPA) that offers the benefits of going solar with no capital outlay. Whether you have tax appetite and prefer a cash deal or want to leverage a zero-down power purchase agreement, IMC Solar can make sure you find the best commercial solar financing to maximize your financial goals.
Financing Your Way
As a business, you can implement a solar system with NO CAPITAL OUTLAY, using a Purchase Power Agreement, or you can invest in your solar project to take advantage of the Investment Tax Credit (ITC) and related tax advantages (e.g., Accelerated Depreciation).
- Purchase Power Agreement. A solar power purchase agreement (PPA) is a financial agreement where a developer arranges for the design, permitting, financing and installation of a solar energy system on a client’s (offtaker’s) property (Net Metering) or nearby property (Virtual Net Metering) at no cost to the offtaker. The offtaker agrees to purchase the energy generated by the system for a period of 20 years, typically at a rate lower than what the offtaker would pay its utility company. The benefits of the PPA include:
- Predictable energy costs for the portion of the energy utilized by the offtaker… the offtaker only pays for the solar energy they use
- The PPA has defined costs for the amount of energy generated by the solar system
- Any remaining consumption by the offtaker is subject to utility rate adjustments, etc.
- Usually lower energy rates relative to current and future utility/grid power rates
- Utilization of renewable energy in fulfillment of sustainability goals
- Hedging opportunity using the 20-year PPA, because you will have a contracted energy rate for 20 years
- Predictable energy costs for the portion of the energy utilized by the offtaker… the offtaker only pays for the solar energy they use
- Direct Purchase or Investment. If a company has available capital to purchase its own solar system, the federal government provides significant financial incentives for purchasing or investing in solar energy systems.
- Investment Tax Credit. The federal government provides a tax credit (a credit against income tax owed) worth 30% of the installed cost of an energy system, based on the year that construction begins. Better yet, it is dollar-for-dollar, uncapped tax credit that can be carried forward into future tax years.
- 30% Tax Credit if construction starts by 12/31/2020
- 10% Domestic Sourcing if construction starts after 12/31/2020
- 10 % Disadvantaged Energy Zones if construction starts after 12/31/2020
- Investment Tax Credit. The federal government provides a tax credit (a credit against income tax owed) worth 30% of the installed cost of an energy system, based on the year that construction begins. Better yet, it is dollar-for-dollar, uncapped tax credit that can be carried forward into future tax years.
- Accelerated Depreciation and Bonus Depreciation.
- The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that allows the owner of the solar energy system to accelerate the depreciation based on the installed cost of the project. Rather than depreciating the cost over 20 or 25 years, the owner can depreciate the cost of the solar energy system in just 5 years. The depreciation benefits are a deduction against income, which reduces your tax liability.
- The Bonus Depreciation qualification is based on the year in which a project is placed into service; that is, when it is interconnected and generating power. Projects placed into service in 2020 can qualify for a 30% bonus depreciation… so, 30% of the depreciable basis can be taken in the first year.
- Delayed Purchase. A company can have the solar system installed under a PPA and purchase the solar system after the 5th year of the PPA.
- Become an Investor. In addition to steady investment returns, solar project investments come with some significant tax advantages.
- Invest Passive Income. You can invest passive income in a solar project instead of paying tax on that passive income.
- Invest Capital Gains. You can invest capital gains in a solar project instead of paying tax on that passive income.