This is a common arrangement in residential solar and it is likely available for your business. Pacifico Power and our partners have the uncommon ability to finance projects with our own capital and realize the full the benefits of tax incentives. Being able to do that internally allows Pacifico Power to pass on savings from financing and transaction costs.
In this arrangement, Pacifico Power will bill you monthly based on your new energy system production, likely at a rate much lower than your current bill. We refer to this as an Energy Service Agreement (ESA), which could be contracted for 20 or 25 years, although 15-year and 30-year options may also be available. Other companies may refer to this as a Power Purchase Agreement (PPA).
If you would like to purchase the system but you don't have the necessary capital, you can seek support from a lender. If you would like to own the system outright and you can find attractive lending rates, this may be a good option for you.
In this case, Pacifico Power would seek a small but long-term contract to operate and monitor the system and provide necessary routine maintenance—what we call Operations and Maintenance (O&M). We refer to this agreement as a System Service Agreement (SSA).
If you have the capital, you have the option to purchase the system outright. You should ensure that your tax liability will be high enough for you to take advantage of the Investment Tax Credit (ITC), which will be at 26% through 2022, 22% in 2023, and 10% thereafter.
C-PACE financing is repaid over time via a voluntary tax assessment. The security provided by the tax assessment results in several compelling features, including longer-term financing and the transferability of the repayment obligations to the next owner. Consent from current lienholders is a common requirement, and not all states have adopted C-PACE programs.
More information about C-PACE financing in your state can be found here.
To create a more robust emergency preparedness plan, the California Public Utility Commission (CPUC) offers rebates for installing energy storage technology at commercial facilities that can function during a power outage. There continues to be money available for commercial projects, as large-scale storage funds exceeded $10M for all California investor-owned utilities (IOUs). Further information can be found at https://www.cpuc.ca.gov/sgip/ and https://www.selfgenca.com/home/program_metrics/.
The federal government has legislated an investment tax credit (ITC) to incentivize and spur investment in solar. The ITC effectively reduces the capital costs to have an energy system installed. Specifically, the ITC applies to solar systems as well as battery systems that are charged by solar systems. The solar ITC is a federal tax credit claimed against the tax liability of the investor. The ITC can be applied to the tax liability of the party who invests the capital. The recent and future ITC rates are as follows:
- 2018 – 30%
- 2019 – 30%
- 2020 – 26%
- 2021 – 26%
- 2022 – 26%
- 2023 – 22%
- 2024 – 10%
It is important to note that this is a tax credit, so a system buyer can only fully utilize the tax credit to the extent that they are paying sufficient taxes to be offset by that tax credit in the year the tax credit is taken. This tax credit is very lucrative and encourages potential buyers to adopt renewable generation sooner rather than later.
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