Many businesses recognize the value of onsite solar↗, and 70% plan to invest↗ in onsite generation and storage to regain predictability and control. However, upfront capital costs, internal competition for budget, and evolving incentive frameworks can make adopting solar energy feel daunting. Fortunately, a range of financing models now make it possible for organizations to pursue clean energy while balancing financial strategy, risk tolerance, and sustainability goals.
Multiple ownership models offer financial options
Direct ownership
Direct ownership requires payment up front. While the option includes a higher initial cost, it is attractive to businesses because it offers full control over the design, operations, and energy use. It also provides businesses with the ability to take advantage of tax incentives. However, the owner is responsible for performance and maintenance.
Power Purchase Agreement (PPA)
With a Power Purchase Agreement (PPA)↗, a third-party developer installs, owns, and operates the solar energy system onsite. The hosting organization then buys the electricity the system generates, avoiding utility electricity purchases. PPAs may include an escalator - an agreed-upon rate at which the PPA price will increase over time – often in order to lock in a lower PPA rate in earlier years.
This model, whether it includes an escalator or not, ensures the hosting organization incurs no upfront costs. Additionally, this option offers predictable energy pricing for 10–25 years, and the developer carries any performance and operational risks.
Lease
Companies may choose to lease the solar equipment from a third-party developer for a fixed period, typically 10-15 years. This model offers a lower upfront cost than direct ownership. Contracts to lease a solar energy system will have varying terms and may include an option to purchase the system once the leasing period ends.
Comparison of financing options
Each model offers unique trade-offs in cost, control, and risk. The table below summarizes how these financing structures differ across the criteria that matter most to decision-makers.
| Criteria | Direct owner | PPA with or without escalator | Lease |
|---|---|---|---|
| Upfront costs | High | None | Low |
| Ownership | Business | Developer | Shared/Developer |
| Operational control | Full | Limited | Partial |
| Tax incentives | Retained by business | Claimed by developer | Usually claimed by developer |
| Best for | Capital-strong organizations seeking maximum ROI | Capital-constrained or risk-averse businesses | Medium-sized businesses seeking flexibility |
Strategic considerations
Choosing the right model isn’t just about cost. It’s about strategic alignment with your unique business goals. As you consider your financial options, keep these three areas in mind.
- Financial strategy: Cash purchases favor balance-sheet strength and long-term savings. PPAs or leases preserve capital for core operations. Consider whether higher upfront costs will align with your current strategy.
- Risk appetite: Ownership places performance and maintenance risk on the buyer, while PPAs transfer it to the developer. Having a developer guarantee the output, while the company pays only for the energy it receives, reduces uncertainty for more risk-averse businesses.
- Sustainability goals: Ownership guarantees the ability to claim rights to Energy Attribute Certificates↗, though many PPAs allow shared crediting structures.
For organizations with limited capital, third-party models like PPAs or leases can unlock immediate access to renewable energy while delivering predictable costs, turning sustainability goals into achievable outcomes.
Model your options before you commit
Every financing pathway comes with trade-offs in ownership, incentives, and control. The best approach depends on your organization’s capital posture, risk profile, and operational priorities.
To decide which option is best for you, model the scenarios. A feasibility and financial modeling exercise led by an experienced team can quantify how each structure performs under your specific tariffs, tax position, and energy goals.
Early feasibility assessments not only quantify returns but also reveal operational benefits such as demand-charge reduction, resilience, and improved long-term budget forecasting. The right financing structure can turn onsite solar from a budget challenge into a strategic investment with measurable returns.
World Kinect can help
The energy experts at World Kinect have consulted on solar projects worldwide. We know how to help organizations of every size plan for their unique business needs. Our experts can provide preliminary layout designs, production estimates, and modeled projections of the economics for onsite solar solutions that fit your requirements.
Financing onsite solar FAQs
Q1: What are the main financing options for onsite solar?
The main financing options for onsite solar solutions include cash purchase, power purchase agreements (PPAs), and leases. Each has different implications for ownership, incentives, and risk. Cash purchases, or direct ownership, require a higher upfront investment, while PPAs and leases reduce initial costs.
Q2: What is a solar PPA and how does it work?
A solar PPA is a contract where a third-party developer installs and maintains the system onsite, and the business pays for the electricity generated, usually at a fixed rate. Find out more about PPAs here.
Q3: How long are typical contract terms for solar PPAs and leases?
Most PPAs range from 10 to 25 years, while leases typically span 10 to 15 years. The optimal term depends on your company’s energy profile, facility plans, and financing strategy.
Q4: Which is better: owning a solar system or using a PPA?
Ownership offers full control and access to tax incentives, while PPAs reduce upfront costs and shift performance risk to the developer. The best choice depends on your unique business needs and financial strategy.
Q5: Do I still get energy savings with a third-party solar model?
Yes, you can still get energy savings with a third-party solar model. All models, ownership, PPA, or lease, can reduce energy costs. The savings depend on system size, tariff structure, and contract terms.
Q6: Can I claim energy attribute certificates (EACs) with a PPA?
In many cases, you can claim EACs (also known as Renewable Energy Certificates (RECs)) with a PPA. Some PPAs include EACs, which can be used for sustainability reporting or sold for additional revenue.
Q7: Can I combine onsite solar with other energy solutions?
Yes. Many organizations integrate solar with battery storage or demand management systems. Combining these technologies can amplify savings and improve energy resilience, regardless of ownership structure.
Q8: What risks should I consider when choosing a solar financing model?
Risks when choosing a solar financing model include system performance, contract terms, and policy changes. Working with an experienced team can help mitigate these risks.
Q9: When should I involve experts in the process?
Ideally, at the feasibility stage. Energy experts can model multiple ownership scenarios, compare long-term costs, and ensure the structure aligns with your capital strategy and sustainability commitments.
