October 14, 2024 Commercial Solar, Solar Financing
How To Fund A Commercial Solar Installation
One of the many advantages of a commercial solar installation is that, as an investment, it has two rare qualities. Assuming you use a reputable installer and have a thorough expert survey before the project begins, then:
- the return on your investment is fast
- the return on your investment is guaranteed
Since solar panels are also the least expensive they have ever been; for some businesses, opting for solar becomes something of a ‘no brainer’, but that doesn’t discount the fact that funding commercial solar can still require budgeting and planning.
Here is your guide to the funding and financing models that you might choose when you are investing in solar for your business.
Self-funding a commercial solar installation
If you have the capital, you may choose simply to pay for the installation up front. It is arguably the simplest way to get business solar power, because of course the panels are yours straight away, and so is the power that they generate.
Even better, the capital that you need may not be as much as you might expect, given the range of financial incentives for solar power in the UK.
Full expensing
Solar panels qualify for the capital allowance tax scheme, so can deduct 100% of their cost from your profits in the first year.
Non-domestic rates relief (Scotland)
New solar schemes in Scotland are except form non-domestic rates until 2035.
Green Business Loan Scheme (Wales)
The Welsh Development Bank offers loans of £1,500-£1.5m for businesses looking to fund renewable upgrade projects.
Power Purchase Agreement for Commercial Solar
Rather than making the capital expenditure yourself, you might choose to enter into a power purchase agreement with an external investor. That investor would fund the solar installation, with a contract under which you agree to buy the energy that the panels produce.
Aside from saving the up-front cost, the other advantage is that you can get your business electricity at a price that is far lower and more stable than the grid price.
Of course, a key difference from a self-funding model is that you pay for the electricity as the panels generate it, rather than paying for the panels and consuming ‘free’ electricity.
Asset finance for Commercial Solar
Another way to own your commercial solar power installation, is an asset finance agreement. The up-front cost is an initial deposit, with the remaining cost of the installation and panels paid for with a loan.
The electricity cost savings will pay for the loan and the interest over a lease period, after which your solar panels are yours to generate free electricity. One key difference between this arrangement and the power purchase agreement is that the panels belong to you, not another business or investor.
Agricultural businesses may be very familiar with asset financing for vital equipment — the difference with solar is that it pays for itself far more quickly than the typical investment.
How to calculate the ROI on commercial solar power
On the topic of how long solar panels can give you a return, as we say, solar power for business tends to pay for itself far quicker than most investments. Calculating that payback period will depend on a number of factors, but often it is as little as four years.
Rest assured, if you choose to partner with Innasol for your commercial solar installation, you will enter into the project knowing what your expected payback period will be. We can also advise on the best approach to funding your business’s solar installation.
Need to know if solar power is a viable choice for your business electricity? A 10-minute questionnaire will help us to prepare a free, bespoke proposal, in which we can tell you what the project will cost, and estimate how quickly the panels will pay for themselves.
Find out if solar power is right for you with just a few questions.
Innasol is a leader in UK renewable energy. Our growing network of trusted, expert partners manufacture and install only the highest quality panels on the market, backed by a best-in-class design-led approach that ensures all of our solar installations realise their full potential.
