Commercial Solar Financing
Financing can be difficult for any business. You know that you want to invest in an energy solution that benefits your business. The real difficulty can be which is the best commercial solar financing option for you to get the most out of your investment without it bogging down your expenses and liability column. Omega Solar+Batteries offers a range of commercial solar financing solutions, meaning you’ll be able to invest in renewable energy in a way that best suits you. Our offered solutions and pros/cons are shown below.
Paying Cash
In most cases, paying cash may seem like the most convenient payment method when purchasing a new solar system. This may not be the most appropriate payment if you are a tax-paying entity, however. This is due to a solar system not being a rapidly depreciating asset, as they have a standard life of 20-30 years.
Pros
- Full ownership of the system from the beginning of its lifetime.
- No further payments or interest required after purchase.
- No need for a third-party financer to be involved, making it easy to understand.
- You can claim the GST on purchase in following business activity statement.
- As per ATO guidelines – tax depreciation of 5% per annum for 20yrs.
Cons
- Large capital expenditure may impact the liquidity of your business. Trade-off between having access to a cash reserve or promised future savings.
- Improved profitability thanks to energy bill savings may lead to higher overall tax liability.
- Typical payback period of 3-5 years; the cash flow of the solar PV system does not become positive until that point.
Conventional Business Loans & Chattel Mortgages
One of the most expensive but common methods for a company to secure financing for a high-cost item is a business loan. Attaining the loan by securing the solar PV system against itself is labeled a “chattel mortgage”. Due to the tax implications, these options are usually exercised by not for profit and community organisations. This is because they cannot benefit from the tax breaks.
Pros
- Ownership of the system.
- Maintain working capital.
- You can claim the GST on purchase in following business activity statement.
- Financing options should be straight forward to obtain pending good financial track record.
- Large number of providers means ample choice on rates & packages.
- Additional payments can be made in order to reduce interest costs.
Cons
- Payments, with interest, are ongoing.
- Fixed monthly payments may not be possible.
- Potential for company tax to increase associated with loss of tax deductions on current electricity bill.
- Payments made are not deductible on tax (only depreciation and interest).
- Payment costs are based on full invoice price (including GST).
- Capacity to borrow is reduced as asset and borrowings are included on balance sheet.
- Long-term savings typically not as great as other finance options.
Purchase Power Agreement
A Power Purchase Agreement (PPA) is an electricity supply agreement that is made between Omega Solar+Batteries, its partner companies and a client. This agreement consists of all parties purchasing power at an agreed rate, with either an upfront amount or at no cost at all. Omega Solar+Batteries agrees to provide clients with affordable energy at a fixed rate up to an extended period of 15yrs. We agree to secure the potential cost of your energy during this period in return for the service agreement. We will also monitor and service the energy system we provide over the duration of the agreed period at no additional cost to you. To put it simply, we will install your solar system that provides your facility with renewable energy, at a fixed cost that will equal substantially less than you currently pay.
What is a PPA and how does it work?
Purchase Power Agreements are easy to understand. We produce the power, and you purchase it from us at a reduced rate. Omega Solar+Batteries will install the power generation unit (solar system) to your existing facility up to any size over 50kW. When you deal with Omega Solar+Batteries, you can be guaranteed that we will:
- Use the highest quality products that will produce clean energy capable of powering a commercial manufacturing facility
- Provide this energy at a fixed rate for the entire period of the agreement (usually 15 years). This is generally up to 50% less than current rates (subject to your area)
- Ensure any additional power you are using will feed back in to the grid. During this you will pay us at a parallel rate of the current feed in Tariff. This amount is then be reimbursed to you by your current grid supplier. In short you will only ever pay for the power that you use.
- Provide you with monitoring software that will allow you 24/7 access to see how your system is performing, how much energy is being produced and how much your facility is consuming.
Omega Solar+Batteries will provide a high-quality product with high-quality service. You will have power for the entire term agreement and even beyond, if needed. Omega Solar provides this service to any commercial solar project. We look forward to hearing from you.