7 Solar Financing Mistakes & How to Avoid Them:
1. Using inflated utility escalation rates: Savings calculations are only projections & are dependent on estimated utility rate increases. If rate increases are less than the projections, then the savings will be diminished. Try to use realistic rate escalations. Run your economic plan using a variety of rate escalation scenarios (high, middle, & low).
2. Neglecting to consider direct ownership & Power Purchase Agreements: Solar equipment can be rented or purchased. Power Purchase Agreements are indirectly subsidized by the Federal Investment Tax Credit & accelerated depreciation. State incentives may be available. Operations, maintenance, & system upkeep are the responsiblity of the owner. But solar systems are fairly easy to maintain & don’t have much risk. Owning the system provides the owner with nearly free electricy once the system is paid off. Create of list of pros & cons for both options.
3. Misunderstanding the savings warranty/guarantee: The guarantee is a large & important part of the process, so be sure to understand it. What is being warranted? And by whom? And for how long? What happens if the company goes out of business? Or gets sold?
4. Forgetting operation & maintenance costs: The system must be well maintained to operate efficiently. Inverters need to be replaced periodically & panels need to be washed regularly.
5. Accepting the first financial offer: Use a competitive process when bidding out these goods & services. There may be dramatic interest rate differences between vendors & providers.
6. Making a decision based solely on the interest rate: The interest rate is not necessarily the most important criterion for financing. Terms & conditions shoud be examined. Prepayment terms can vary.
7. Overlooking low-cost & subsidized financing: Numerous federal & state programs are available & offer attractive financing options. Some federal options offer financing under 1%! Some state options offer financing at 0%! Cost-free grants may be available. Don’t hesitate to bring in outside expertise. Shop around. Ask questions.