Solar on Multifamily Affordable Housing

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Financing options

Financing your SOMAH project

SOMAH program participants may choose from different financing options. One pathway is to purchase the solar system outright with a combination of participant’s own capital or by self-financing. A second pathway is financing the solar system through a third-party ownership model such a power purchase agreement (PPA) or solar lease. For both pathways additional incentives may be available through federal, state and local government agencies.

SOMAH technical assistance is available to help participants make informed decisions about the most viable financing pathway for their solar project, including leveraging available incentives and exploring financing solutions for energy efficiency improvements.

If you decide to purchase a system, you may use one or a combination of options: cash, loans or the federal investment tax credit.

A one-time federal investment tax credit (ITC) is available for residential solar PV systems. The credit is based on a percentage of the total solar PV system cost. If the system is placed in service before Dec. 31, 2019, a federal tax credit of 30% of the total system cost is available. After Jan. 1, 2020, the tax credit will start to decline.

Placed in Service

Tax Credit Percentage

By 12/31/2019

30%

1/1/2020 - 12/31/2020

26%

1/1/2021 - 12/31/2021

22%

Other financing options include leasing a system or entering into a PPA. With both agreements, the system is third-party owned and you pay per month. In a lease, you pay a fixed monthly rate no matter how much electricity your system produces. With a PPA, you pay a fixed amount for each kilowatt-hour (kWh) the system produces. The third-party owner will receive the SOMAH incentive, lowering or even eliminating the monthly payments.

Both a lease and a PPA typically are contracted for a 20-year period. Be sure to read and understand the entire lease or PPA agreement before you sign as these contracts will contain many terms and conditions that will remain in place for up to 20 years.

 

Purchased

Third-Party Owned

What you are buying?

An asset

A service, usually with an option to purchase

What is included in the purchase?

Generally will not include inverter replacement, operation and maintenance or insurance, may include monitoring

Generally includes operation and maintenance, inverter replacement, insurance and monitoring

What are the tax implications?

Need to have the tax liability to make use of the federal investment tax credit (ITC); a home equity loan may be eligible for a tax deduction

Solar services provider has the tax liability for the 30% ITC and can make use of commercial depreciation tax benefits

What are the risks?

Responsible for operation and maintenance

Longevity of the solar services provider

What are the financial benefits?

Return on investment in the form of lower electricity bills

Little or no upfront cost, usually cash positive or neutral in first year

The SOMAH program provides financial technical assistance for eligible property owners.

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