Third party owned energy projects are one of the most popular ways to finance solar technology, and it’s easy to understand why. If your organization is low on or unwilling to spend its capital, third party owned energy projects provide a realistic and relatively stress-free alternative to solar energy installation. With a third party owned energy project, organizations have the ability to grow and improve sustainability at no cost of their own.
What are third party owned energy projects, and how do they work?
There are three forms of third-party solar financing: solar leases, solar power purchase agreements (PPAs) and energy as a service or (EaaS). The solar lease model involves collaboration with an installer/developer. With a solar lease the customer is responsible for paying for the use of the solar system over a specific time period as opposed to paying for power generated.
In a solar PPA model, the energy system offsets the customer’s utility bill. The third party or developer can sell the power generated to the customer at a rate typically lower than the local utility one. This is not a lease agreement.
Third party owned energy projects can also be funded by a model called Energy As a Service (EaaS). This is a type of PPA that allows energy solutions to be installed with no upfront capital investment. Instead, the customer pays a subscription-based energy service payment each month or billing term. In this instance, the “customer” can be a commercial business, government entity or nonprofit organization.
In this agreement, the project is fully funded by a third party owner, often a bank or an investment firm. Both day to day management and long-term operation are overseen by the third party owner in collaboration with the design-build contractor responsible for the project install. These third party owned energy projects are also not lease agreements. They are facilitated using either an Energy Service Agreement (ESA) or Solar Service Agreement (SSA). The EaaS model is arguably the most beneficial for both the customer and the third party owner.
Benefits of third party owned energy projects with an EaaS model
There are many benefits and incentives of third party owned energy projects for both the customer and the owner with an EaaS model. These benefits are outlined below.
Customer benefits
1. Growth without capital expenditure
Third party owned energy projects allow customers to keep their capital while continuing growth. With collaboration from third party owners, customers have the capability of installing better equipment with no upfront capital investment.
2. Avoid ownership hassles
Third-party ownership offers a relatively stress free alternative for renewable energy installation. As previously stated, it is the owner who is responsible for day to day and long-term project management. The customer has no responsibility for operations and maintenance of the energy system, along with no risk or design concerns regarding the project.
3. Sustainability
Collaboration with third party owners makes installing renewable and energy efficient technology a realistic way for organizations to reduce CO2 emissions resulting from operations and improve their sustainability overall. Renewable energy installation will also help the organization lower
Third party owner benefits
1. Cashflow
Third party owners can expect steady cash-flows as a predictable source of income with SSA or ESSA agreements.
2. Tax incentives
Tax credits area available to third part owners investing in renewable or energy efficient projects. These credits can translate into quick ROI on owners investments.
Interested in third party owned energy projects?
EnergyLink is a design-build firm full of experts that can help facilitate third party owned energy projects. Click the button below or speak to a team member at (866) 218-0830 to get started.
