Prepaid Solar Power Purchase Agreement
Project developers and installers have few solar financing options for non-profits like places of worship, schools and homeowner associations. Since non-profits don’t have a tax bill, they can’t use federal tax benefits, and they end up paying more for solar than for-profit enterprises. However, with HelioPower's prepaid solar power purchase agreement, non-profits CAN substantially reduce the cost of solar, using a structure commonly called a “prepaid PPA’.
Interested in a Prepaid PPA?
Financing solar for EPCs and Developers is becoming easier, but time is running out to take full advantage of the generous benefits.
What is a Prepaid Solar PPA?
Prepaid PPAs allow developers to attract financing partners who can use the tax benefits that would otherwise be stranded by the non-profit. The financing partner owns the solar system and sells the electricity that it generates to the non-profit. This allows non-profit solar customers to share in the savings. However, with the coming step-down of the Investment Tax Credit (ITC), and the reduction in depreciation incentives beginning in 2018, non-profits who act soonest will be rewarded the most. Helio Micro Utility (Helio mU) has offered prepaid solar power purchase agreements since 2010, providing installers and developers a significantly improved solar financing structure for non-profit and other ITC-ineligible prospects.
How a Prepaid Solar Power Purchase Agreement Works
For Non-Profit Solar Customers
A Prepaid Solar Power Purchase Agreement (PPA) reduces the cost of solar by approximately 15%, compared to the full cash price quoted by the developer. For example, a project quoted at $200,000 would cost the non-profit only $170,000. The $170,000 is structured to be a pre-payment for the energy that will be generated by the solar array. Because of this prepayment, the customer pays nothing more for solar energy for the life of the power purchase agreement, and still enjoys a lower monthly utility bill.
An additional $10,000 or so of savings can easily be had over the first 6 years by avoiding the expenses that come with maintaining the system, as those are the responsibility of the investor-owner. The non-profit then takes full ownership of the system at the end of Year 6 without any additional payouts.
The non-profit can use cash-on-hand for the prepayment, or fund with a loan, as they might with the purchase of the system. The difference between the purchase and the prepaid solar PPA again, is the prepaid PPA enables the non-profit to share in the tax attributes of the project. In the case of a “house of worship” (e.g. church), for example, the prepayment could also be funded through tax-deductible donations by congregation members. This creates savings for everyone, including the church, and conveys a sense of community ownership and pride. Helio mU can even direct you towards resources that assist in gathering such contributions through online platforms.
For Installers and Developers
The installer gets their full quoted price and an operations & maintenance contract, if appropriate. Although the non-profit pays 85% of your price, the remaining 15% is funded by a third-party investor/owner, just as in a regular PPA. Considering that many installers don’t offer a prepaid solar power purchase agreement as a financing option to the non-profit, you can be confident that your price is substantially lower than your competitors.
The investor-owner uses the prepayment to fund 85% of the installation costs, and provides 15% of their own capital, plus a fee to Helio Micro Utility for structuring the transaction. The investor-owner's compensation comes in the form of tax benefits, which the non-profit cannot use. When those tax benefits are exhausted after the 5th year, the investor-owner and non-profit exchange the remaining prepaid energy for solar facility ownership, and the non-profit becomes the solar facility owner without any additional cash outlay.
About Helio Micro Utility
Helio Micro Utility works with solar installers and developers to finance and execute Prepaid PPAs, and ensure a profitable outcome for all parties: a fair installation price and timely payment for installers, energy savings for non-profits and other offtakers, and attractive tax savings to investor-owners. Helio mU is the industry leader in prepaid solar power purchase agreements, winning the coveted “Tax Credits Development of Distinction Award” from Novogradac for its pioneering work using a Prepaid PPA to deploy solar on 100 affordable housing rooftops back in 2010. For a free consultation and discuss how we can help you achieve your goals, please contact us today!