How to build zero-cost on-site solar and storage projects
Download our guide to leveraging financing and incentives to access energy solutions that cut energy costs, generate revenue, and meet decarbonization goals.
In this Q&A session on financing on-site solar and battery storage projects, find out about clean energy incentives, tax credits, and financing mechanisms available to organizations. Learn how partnering with an experienced energy provider can help your organization implement clean energy projects without upfront costs, aligning with your economic and sustainability goals.
Capital expenditures (CapEx) are the initial investments that organizations need to make to develop a new renewable energy project, such as an on-site solar and battery storage system. Unfortunately, significant upfront costs often deter organizations from pursuing clean energy projects, despite their benefits and growing demand within the industry. Luckily, many energy solutions financing mechanisms and incentives are available today, allowing organizations to build an on-site solar and storage system without an initial investment.
On-site solar and battery storage systems benefit organizations by reducing energy costs, cutting carbon emissions, and offering revenue opportunities.
Generating solar power enables organizations to consume less electricity from the grid, resulting in energy costs savings. In addition, as a renewable energy source, solar helps organizations reduce their carbon emissions, advancing their decarbonization targets.
Battery storage unlocks more flexible energy use by allowing organizations to shift energy use to cost-effective times, thus reducing charges and utility bills. Organizations can also take advantage of revenue opportunities through demand response programs, where they get paid for reducing their energy demand during times of stress on the electric grid.
An integrated solar and battery storage system is the go-to solution for many organizations because the synergy between these technologies is key to capturing the most financial and sustainability benefits:
In addition to the sustainability and flexibility value, solar and battery storage offers:
To get started, explore incentives designed for organizations interested in renewable energy solutions and battery storage. For instance, the Inflation Reduction Act of 2022 has facilitated the emergence of new market opportunities spurred by these incentives.
While they can significantly reduce upfront costs, incentives typically will not cover the entire cost of your solar and battery storage system. That’s where financing comes into play, allowing you to determine how to fund the remaining balance of the system after incentives are considered. Luckily, there are various energy solutions financing options that your organization can leverage.
The Inflation Reduction Act provides almost $400 billion in federal incentives for clean energy and technologies, including the Investment Tax Credit (ITC). The ITC reduces upfront costs for solar or battery storage systems installed during the tax year and is structured as a tiered credit system.
At the minimum, project owners are eligible for a base rate of 6%. But if they meet additional requirements – prevailing wage and apprenticeship requirements – they unlock the full credit of 30%. Projects may also earn an additional bonus tax credit of 10%, if they meet a “domestic content” requirement, are in “energy” or “low-income” communities, or can qualify as a “low-income” project. Stacking these bonus adders together means a project – given that it fits all eligibility criteria and is accepted to receive the low-income adders – could achieve a maximum 70% ITC.
Once you take advantage of available incentives, consider financing options available to your organization to fund the remaining balance of the system. There are three primary options that we typically see in the market:
Choosing a developer financing option for your on-site energy solutions with an experienced and reputable energy partner eliminates upfront costs and financial risks for your organization. Enel, for instance, wraps all project costs within our zero-CapEx financing mechanisms so that organizations do not have to put up any capital. Instead, Enel puts up the capital.
Direct purchase: From a value perspective, direct purchase offers potential high returns but carries significant risk. When you opt for direct purchase, you are putting up the capital and yes, there is a significant rewards potential. However, it also means that you’re shouldering all the risk. Imagine owning a storage or solar asset. What if the sun doesn’t shine as much as you hoped, or you can’t fully leverage your asset’s value streams? In such cases, your expected value might fall short, and your return on investment (ROI) may fail to meet your initial projections.
Developer financing: Here you and your project partner share the value and risk, with your partner optimizing asset performance. You both benefit from the rewards, but you do not have to worry about the risk – you offload that to your partner. Your partner also handles maintenance, operations, and asset deployment, working alongside you to ensure they recoup their investment and optimize every possible ounce of value from that asset. This option offers a more dependable upside, even if you’re sharing it with your developer.