The Philippines, with its abundant sunshine and tropical climate, stands as a prime candidate for harnessing solar energy. This renewable power source offers numerous advantages, from environmental benefits to cost savings, making it an attractive option for both households and businesses. As solar technology becomes more advanced and accessible, the cost of solar electricity has significantly decreased, becoming 20% to 50% less expensive than earlier estimates. However, the question remains: how do you finance a solar system installation?
Fortunately, if purchasing a solar system outright isn’t feasible, there are effective alternatives available in the Philippines: solar leases and power purchase agreements (PPAs). This guide explores these two major solar financing options, providing insights into their respective benefits and drawbacks, to help you make an informed decision about your transition to solar energy.
Understanding Solar Lease and PPA
Both solar leases and PPAs allow you to benefit from solar energy without the need for significant upfront investment. Here’s a closer look at the common advantages and disadvantages of these options:
Pros of Solar Lease and PPA
- No upfront costs: Both financing options require little to no initial investment, making solar energy accessible without a substantial financial burden.
- Maintenance and performance: The provider handles installation and maintenance, saving you from additional expenses and inconvenience.
- Predictable costs: With a lease, you pay a consistent monthly fee, facilitating easier budgeting. A PPA offers a fixed price per kWh, so lower electricity usage translates to reduced monthly charges.
- Quick setup: Leasing typically involves faster approval and installation than other financing options, while PPAs also offer streamlined setup processes with the provider.
Cons of Solar Lease and PPA
- Ineligibility for rebates or tax credits: Since you do not own the panels, you cannot access government incentives such as rebates or tax credits.
- Long-term commitment: Leasing agreements often last at least 10 years, and PPAs can extend from 15 to 25 years, which may be a lengthy obligation if your circumstances change.
- Property sale complications: Selling your property may be challenging due to the lease or PPA, as the new owner must agree to take over the contract.
- Potential rate increases: Some leases and PPAs include escalator clauses that increase your payments over time or based on external factors.
Differences Between Solar Lease and PPA
What is a Solar Lease?
A solar lease involves renting solar panels from a provider in exchange for fixed monthly payments. This arrangement may include a battery system and can offset the net meter rate of your electricity bills.
Reasons to Choose a Solar Lease over a Solar PPA
- Predictable monthly payments: Fixed rates regardless of usage make budgeting and financial planning straightforward.
- Simpler approval process: The lease agreement focuses on renting the solar system with a fixed payment, offering a quicker and simpler approval process.
- Performance guarantees: Many leases come with guarantees that ensure the system meets energy production expectations, providing peace of mind.
What is a Solar PPA?
A power purchase agreement allows you to install and purchase solar energy generated by the provider’s system at a fixed price per kWh, typically lower than utility rates.
Reasons to Choose a Solar PPA over a Solar Lease
- Lower kWh rate: PPAs often offer a lower rate per kilowatt-hour compared to the fixed monthly lease fee, resulting in immediate savings.
- Cost flexibility based on usage: With a PPA, you pay based on consumption, allowing costs to decrease with lower energy usage.
- Customizable contract terms: PPAs offer tailored agreements, including personalized contract lengths and rates to suit your energy needs and financial situation.
Solar Solutions Within Reach
Solar power presents numerous benefits that are hard to overlook, especially when you can avoid the high upfront costs of purchasing a solar system through financing options like leases and PPAs. Understanding your choices is crucial when acquiring solar energy.
As you explore your options, consider partnering with SolarNRG. We provide access to solar energy for industrial, residential, and commercial use across the Philippines.
Source: The Essential Guide to Solar Financing in the Philippines: Solar Lease vs. PPA