Financing Options

You can finance your multifamily solar PV system two ways. You can purchase it outright with cash or through loans, making you the system owner. Or, you can obtain a lease or power purchase agreement (PPA) held by a third-party owner.

What loans are available to finance a solar PV system?

If you decide to purchase a system, you may use one or a combination of options: cash, home equity loan, property assessed clean energy (PACE) loan or a bank energy efficiency and renewable energy loan.

Energy efficiency and renewable energy loan – Typically offered by credit unions or banks, these loans are a secured loan with low interest rates.

Property assessed clean energy (PACE) loan – This loan is approved based on the property, and not on personal or business credit. In the event of a property sale, the loan stays with the property and ownership transfers to the new building owner. There are 5-, 10- and 20-year payback periods and the interest will be based on the length of the loan. Check for PACE availability in your county or city. In California, use the CSE PACE Map.

What is a lease or a PPA?

Other financing options include leasing a system or entering into a power purchase agreement (PPA). With both agreements, the system is third-party owned and you pay per month. In a lease, you pay a fixed monthly rate no matter how much electricity your system produces. The appeal is that ideally this lease payment should be less than your original utility bill. With a PPA, you pay a fixed amount for each kWh the system produces. With a PPA, the appeal is that this price/kWh should be less than the $/kWh charged by your utility. Both a lease and a PPA typically are contracted for a 20-year period.

Another emerging financing option is a roof income agreement, or the “rooftop lease model.” This entails a third-party financier leasing the roof from the property owner to install a solar system and setting individual PPAs with participating tenants. Property owners can realize additional savings by including common area accounts in the solar agreement. There are only a handful of companies we have seen offering this financing option. We recommend searching within your local contractor base to learn more and see if this option is available to you.

Be sure to read and understand the entire lease or PPA agreement before you sign, as these contracts will contain many terms and conditions that will remain in place for a period up to 20 years.

What are the advantages and disadvantages of purchased vs. third-party owned systems?

Purchased Third-Party Owned
What are you buying?
Buying an asset Buying a service, usually with a purchase option
What is included in the purchase?
Generally will not include inverter replacement, operation and maintenance or insurance, may include monitoring Generally includes operation and maintenance, inverter replacement, insurance and monitoring
What are the tax implications?
Need to have the tax liability to make use of the federal investment tax credit (ITC). If financed through home equity loan, you may be eligible for a tax deduction. Solar services provider has the tax liability for the 30% ITC AND can make use of commercial depreciation tax benefits.
What are the risks?
Responsible for operation and maintenance Longevity of the solar services provider
What are the financial benefits?
Return on investment in the form of lower electricity bills No or little upfront cost, usually cash positive or neutral in first year


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