If your business is considering solar, one of the biggest decisions is how to pay for it. There are three common options: buy it outright, finance it, or enter a long-term agreement to buy the energy it produces.
Each option has pros and cons. The right choice depends on your size, cash flow, risk tolerance, and long-term goals.
At PSC, we guide businesses through choices. You have options when it comes to solar, and they each affect your bottom line in different ways.
In this article, you’ll learn about the following:
- What Is a CapEx Commercial Solar Panel Purchase?
- What Is a Lease or Finance Agreement for a Commercial Solar Panel System?
- What Is a Power Purchase Agreement (PPA) for Commercial Solar Panels?
- Pros and Cons of Each Payment System for Commercial Solar Panels
- What Types of Businesses Choose Each Commercial Solar Energy Payment Option?
By the end of this article, you’ll understand the three main pathways to saving energy costs and other factors you’ll need to know about.
What Is a CapEx Commercial Solar Panel Purchase?
CapEx stands for capital expenditure. In this option, your business buys the solar system outright. You use your own funds to cover the full system cost. You own the system from the day it is installed.
CapEx is the most straightforward pathway. You pay once. You keep all the benefits. That includes energy savings, tax benefits, and increased asset value.
It usually delivers the highest return over time. You avoid interest and finance charges. There are no monthly payments. The savings go straight to your bottom line.
But CapEx comes with upfront cost. You need to spend your own money. You must also handle system maintenance and performance monitoring. That can have a bit of a learning curve to it.
This option suits businesses with healthy cash flow and a long-term view. Small and medium businesses often choose CapEx because they value ownership and faster returns.
Most CapEx systems pay for themselves in four to six years. Some pay back even faster. In businesses with high electricity rates, the payback period can be as short as three to four years. This can make solar one of the fastest returning capital investments available to them.
There are a few risks to consider. If you sell your property, the system stays behind. But it can increase property value. You must also plan for regular system servicing. If you own the system, you are responsible for keeping it running.
If you’re interested in learning a bit more about whether your business is a good fit for solar, you might want to check out the following article titled, Is Your Business a Good Fit for a Commercial Solar Energy System?
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What Is a Lease or Finance Agreement for a Commercial Solar Panel System?
Finance options let you spread the cost of your solar system over time. Instead of one big payment, you make smaller monthly repayments to a lender. These terms usually last from seven to ten years.
This approach works well for businesses that want to protect their cash flow. You can keep your capital in the business and still benefit from solar.
In many cases, the energy savings from the solar system will exceed the monthly repayment. That means you can have positive cash flow from day one. The solar system saves more than it costs each month.
You still get ownership benefits. Your business owns the system at the end of the loan term. You may also be able to claim tax deductions depending on your location and loan structure.
There are some trade-offs. Finance comes with interest costs. The total amount you pay will be more than a CapEx deal.
You also carry some performance risk. If the system stops working, your repayments continue.
That makes maintenance plans very important. If you choose this option, make sure your installer offers reliable service support.
PSC Energy has a full time service department to handle support. A poorly maintained system can break down and continue drawing payments from your account.
If the system underperforms or fails, your business will still owe monthly repayments. This can turn a cost-saving investment into a liability. To avoid that outcome, you need a strong operations and maintenance plan with fast turnaround times.
A good solar installer like PSC Energy will monitor your system and respond quickly if it stops working.
Finance options are available from a range of lenders. Your team should review the repayment terms and interest rate carefully before moving forward.
If you’re interested in learning a bit more about commercial solar installation, you might want to check out the following article titled, Commercial Solar Panel Feasibility Study: How Businesses Can Assess Energy Benefits.
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What Is a Power Purchase Agreement (PPA) for Commercial Solar Panels?
A Power Purchase Agreement is different. You do not buy the solar system. A solar provider like PSC Energy installs it on your site and sells you the energy it produces.
You pay for the electricity in cents per kilowatt-hour, just like you do with your utility company. But the rate is usually lower than what your retailer charges.
You don’t pay anything upfront. You don’t own the system. You only pay for the energy you use. If the system underperforms, your cost goes down because the output goes down.
The solar provider owns, operates, and maintains the system for the life of the agreement. These contracts typically last ten to twenty years.
A PPA is often the best option for large businesses that want to avoid capital spending. These businesses often have lower electricity rates and longer decision cycles.
A PPA lets you lock in cheaper power without taking on the risks associated with owning or leasing your system.
Many large businesses compare the return from solar with other internal investments. A new piece of equipment might deliver an 18-month return. Solar might take six years.
You might choose to invest in your operations and let a solar provider like PSC Energy deliver your energy through a PPA. This lets you avoid distraction and keeps your capital focused on what matters most.
The biggest downside is ownership. You do not own the system during the contract. That means you miss out on asset value and tax benefits.
If you want to own it later, you may need to pay a buyout fee. These contracts delay ownership from the beginning.
For some businesses, that does not matter. They only care about energy savings. As long as they receive cheaper electricity and reliable supply, they see the agreement as a success.
You can focus on your core operations and let the us handle the system.
If you’re interested in learning a bit more about PPAs, you might want to check out the following article titled, Power Purchase Agreements (PPAs) for Commercial Solar: A Practical Explanation for Businesses.
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Pros and Cons of Each Payment System for Commercial Solar Panels
CapEx
- You own the system from day one
- Fastest return on investment
- No interest costs
- Requires upfront capital
- You handle maintenance
Lease or Finance
- Spreads cost over 7 to 10 years keeps capital in your business
- It’s often cash-flow positive from day one
- Interest adds to total cost
- Repayments continue even if system underperforms
Power Purchase Agreement (PPA)
- No upfront cost
- Only pay for energy you use
- Solar provider handles everything
- No ownership benefits
- Long contract term
If you’re interested in learning a bit more about working with a solar installer, you might want to check out the following article titled, Top Questions to Ask Your Solar Installer Before Hiring Them.
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What Types of Businesses Choose Each Commercial Solar Energy Payment Option?
Small and medium businesses often prefer CapEx. They tend to have faster internal approval processes. They want full control of their system. Many also pay higher electricity rates, so the savings add up quickly.
Mid-sized businesses often choose leasing. They want to hold onto their capital but still want to own the system eventually. They value the cash flow benefit and like the idea of predictable repayments.
Large corporations often choose PPAs. They have access to cheap finance already. They want to avoid managing another asset. For them, buying solar is less attractive than focusing on their main business.
They also prefer simplicity. Under a PPA, the solar company owns the asset, manages performance, and bills the business for energy use only. The business receives a lower power bill without needing to think about what happens on the roof.
If you’re interested in learning a bit more about the importance of a good installer for your solar (the most important component of any system, seriously), you might want to check out the following article titled, In-house Installers vs. Subcontractors: Which is Better?
Let’s go solar today. Click here.
Wrapping Things Up: You Must Choose, and Choose Wisely
There is no one-size-fits-all answer. Your best option depends on how your business handles capital, risk, and long-term planning.
No matter which path you take, solar can offer strong savings and long-term certainty.
At PSC Energy, we guide businesses like yours through every consideration and option for energy savings. We model each option and help you choose the best fit for your unique energy needs and goals.
If you’d like to learn a bit more about our aftercare, you might want to check out the following article titled, Penrith Solar Centre’s Service Department Safeguards the Future of Your System.
