As more commercial property owners recognize the benefits of solar energy, the question of financing often arises. While some businesses have the upfront capital to invest in solar installations, others may seek alternative options.
Commercial solar leasing provides a solution for those who require immediate access to solar power but lack the cash flow to pay for an installation outright. In this article, we will explore the advantages and disadvantages of commercial solar leasing, highlighting the potential opportunities and drawbacks that property owners should consider before deciding.
Understanding Commercial Solar Leasing
Commercial solar leasing is a financing arrangement allowing property owners to install solar panels on their premises without significant upfront capital. Instead of purchasing the solar panels outright, businesses enter into a lease agreement with a solar company or a third-party leasing outfit. The company installs and maintains the solar panels on the property, and the business pays a monthly lease payment in return.
The Upsides of Solar Leasing
One of the primary advantages of commercial solar leasing is the ability to access solar power without a substantial upfront investment; additionally, leasing allows for predictable monthly payments, providing budget stability and avoiding unexpected maintenance costs.
Another positive aspect of solar leasing is that the responsibility for system maintenance and repairs often falls on the leasing company. This relieves the property owner of managing the solar panels and ensures that the system remains in optimal condition.
Potential Downsides of Solar Leasing
While commercial solar leasing offers benefits, some potential drawbacks should be considered. One disadvantage is the loss of tax credits and incentives. In a leasing arrangement, the company that owns the solar panels will receive the tax benefits, such as the Investment Tax Credit (ITC). This means that the property owner misses out on the long-term advantages that could have offset the installation costs.
Furthermore, commercial solar leasing can result in long-term financial commitments lacking flexibility. Depending on the lease terms, businesses may be locked into extended contracts, making it difficult to terminate the agreement or change the solar system if needed.
Building Equity through Financing
While solar leasing may be the best option for some, it is important to consider the long-term financial implications. Opting for a solar financing program, such as a solar loan or power purchase agreement (PPA), allows businesses to retain ownership of the solar panels without forfeiting the benefits beyond energy cost savings.
It will all depend on many factors from varying business models. However, for those who want the maximum control over their solar installation and plan on utilizing solar for the long-term, financing a system over leasing makes sense to most.
To learn more about solar installation and financing strategies, contact us today.