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FINANCING & INCENTIVES

Structure Determines Outcome

Solar can be financed multiple ways. The right structure depends on your capital position, tax appetite, and long-term operating priorities.

FINANCING STRUCTURES

POWER PURCHASE AGREEMENT (PPA)

A Power Purchase Agreement allows you to stabilize power costs without deploying capital.

A third-party investor installs, owns, and maintains the system.

You purchase the electricity it produces at a defined rate over a fixed term.

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  • Zero upfront capital
  • Locked-in energy pricing
  • No maintenance responsibility
  • Predictable operating expense
  • Capital remains available
    for core operations
  • Contract length and escalation terms
  • Buyout options over time
  • Interconnection and performance guarantees
  • Flexibility if operations change
  • Credit and security requirements
  • Farms or businesses prioritizing cash flow
  • Operations expanding or preserving borrowing capacity
  • Organizations without immediate tax appetite
  • Facilities facing rising utility rates
  • Operators who prefer not to manage equipment maintenance

FINANCING STRUCTURES

Lease Structure

A lease allows you to install solar with structured payments over time.

You operate the system while making fixed lease payments, with defined terms

that may include a transfer of ownership.

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  • Lower upfront capital requirement
  • Fixed, predictable payment schedule
  • Potential ownership at end of term
  • Budget alignment with operating expenses
  • Defined term and payment clarity
  • Total cost over the lease term
  • Accounting treatment and balance sheet impact
  • End-of-term ownership conditions
  • Early payoff or termination options
  • Maintenance and performance responsibilities
  • Capital is better deployed elsewhere
  • Cash flow stability is a priority
  • When ownership at the end of term is important
  • When borrowing capacity needs to be preserved
  • You prefer defined payments over rate-based contracts

FINANCING STRUCTURES

Direct Ownership Structure

Direct ownership means you purchase the solar system and own it outright.

You control the asset, receive the incentives, and benefit from the

full economic upside over its operating life.

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What It Provides

Ownership prioritizes long-term value and maximum control.

What To Consider

Ownership requires upfront capital and long-term commitment.

When Ownership Makes Sense

Ownership makes sense when you want your facility to generate power — not just purchase it.

  • Full access to tax credits and depreciation
  • Lowest long-term cost of energy
  • No third-party contract pricing
  • Complete operational control
  • Asset ownership with long-term value
  • Initial capital deployment
  • Tax appetite to utilize incentives
  • Maintenance and performance oversight
  • Technology selection and system design quality
  • Long-term operational responsibility
  • When tax credits and depreciation can be fully utilized
  • When capital is available for infrastructure investment
  • When long-term cost reduction is the priority
  • When energy is a significant operating expense
  • When control matters more than flexibility

Structure

Structure Determines Who Captures the Incentive

Incentives do not apply the same way under every structure.
Who owns the system determines who captures the value — and how it impacts your economics.

Under a PPA

  • Tax credits go to the investor
  • You benefit through contracted pricing
  • No tax appetite required

Under a Lease

  • Tax treatment varies by structure
  • May include ownership transition
  • Requires financial review

Under Direct Ownership

  • You capture ITC and depreciation
  • You may apply for REAP
  • Tax capacity determines real value

Incentives Are Enhancements

INCENTIVES & TAX CREDITS

Rural Energy for America Program (REAP)

The REAP grant supports agricultural producers and rural small businesses investing in renewable energy systems.

What It Does

• Provides grant funding toward eligible project costs
• Reduces total capital required for installation
• Can improve project return and payback
• May be combined with tax incentives in certain ownership structures

Current Funding Percentage

REAP grants can cover up to a percentage of eligible project costs, subject to USDA program limits and funding cycles.
Grant availability, caps, and matching requirements vary by year and funding round.
Approval is competitive — not automatic.

What Costs Qualify

Eligible costs typically include:
• Solar equipment and installation
• Engineering and design
• Electrical and interconnection work
• Certain project development costs

Final eligibility is determined through USDA review and program guidelines.

Application & Timing Benefits

• Requires formal application and documentation
• Subject to scoring criteria and funding availability
• Approval must occur before certain project milestones
• Funds are typically reimbursed after completion and verification

Timing and compliance directly impact success.

INCENTIVES & TAX CREDITS

Investment Tax Credit (ITC)

The ITC allows eligible owners of solar systems to claim a percentage of the project cost as a federal tax credit.

What It Does

• Reduces federal tax liability
• Can materially lower net system cost
• May include adders for domestic content or energy communities
• Often paired with accelerated depreciation (MACRS)

Current Percentage

ITC is currently 30% of eligible project costs for commercial solar systems, subject to prevailing wage and apprenticeship requirements.

What Costs Qualify

The ITC generally applies to:
• Solar panels and racking
• Inverters and electrical equipment
• Installation labor
• Balance-of-system components

Depreciation Benefits

In addition to the ITC, commercial solar systems may qualify for accelerated depreciation under MACRS.

This allows a significant portion of the system cost to be depreciated over a shortened schedule, improving after-tax return.

Understand What Actually Applies to Your Operation

See how incentives apply under your structure.

Understand My Incentives