FINANCING
The attractive cash flow and investment return on a solar PV system purchase is driven by a combination of energy savings, state-based incentives, and federal and state tax incentives. Accurately determining the value of this cash flow depends on many factors that vary for each project and can sometimes be complex. 621 Energy will provide detailed and clear 30-year projections for every proposal.
Energy cost savings per kWh produced will vary depending on the utility rate tariff in place for the utility meter. There may also be peak electric demand savings in some months.
State-based incentives vary by state. In Massachusetts, the value and availability of incentives also varies by utility. If eligible, the utility will pay incentives for solar production for up to 20 years based on the rules for the Solar Massachusetts Renewable Target (SMART) program. Reimbursement to the customer for any solar electricity produced in excess of the building usage is subject to Massachusetts net metering rules.
A tax-paying entity can receive a federal Investment Tax Credit (ITC) of at least 30% of the PV system cost, depreciate the investment over an accelerated 5-year period (federal and state taxes), and take first year federal bonus depreciation of 80% for PV projects completed in 2023 system (decreasing to 60% in 2024). The Inflation Reduction Act of 2022 now allows nonprofits to also receive a Direct Payment of the ITC.
621 Energy works with our clients to take advantage of the available benefits of a new PV system. We then leverage the capability of our financing partners to find the optimal financing solution for our clients’ solar project.
The simplest method of financing a solar project is purchase the system outright. If you have available investment capital, tax liabilities and can benefit from accelerated depreciation, this approach will provide the greatest positive cash flow over the 30+ year life of the system.
A tax-paying entity desiring a minimal capital investment should consider a bank loan or capital lease. These options reduce or eliminate the up-front cost while allowing the customer to retain all the cash flow benefits of ownership (energy savings, incentives, and tax benefits).
A 621 Energy Solar PPA allows your organization to host a solar PV system on your site without any maintenance responsibilities or costs. All you pay for is the clean electricity produced on your site at a low and stable rate below the local utility price, locking in long-term energy savings.
Alternatively, an operating or site lease allows a 3rd party to own the PV system for at least 6 years to realize the tax benefits and the system Host to realize an operating cash flow with potential future ownership.