Many businesses are looking at installing solar panels as a way to help reduce their carbon footprint, cut down on electricity bills and provide them with protection against volatile energy prices.
However, during the current uncertain economic climate, there is understandably some nervousness about committing to major investment in technologies like solar, even if it forms a key part of a business’ decarbonisation strategy. For installers, this can mean that promising projects fall at the final hurdle due to lack of finance.
So, what are the funding options for a business that would like to install solar panels?
There are three key ways:
- Self-fund – this is where an organisation uses funds from within the business to cover the upfront cost of the installation without the need for a loan. However, at a time where there are competing priorities for CAPEX, or where spare cash is thin on the ground, this may not be a realistic option
- Finance with a loan or asset management – many businesses turn to additional sources of finance, such as a business loan, to help fund a project. However, the downside is that loan repayments may place an additional financial burden on the business
- Power Purchase Agreement (PPA) – A PPA is a long-term supply contract – typically over 15, 20 or 25 years – that enables a business to buy the electricity produced by the solar panels without the upfront cost of installing them.
For a business that has reservations about committing to upfront investment, a PPA is an attractive, low-risk solution as it also provides the organisation with electricity price certainty as well as helping support their decarbonisation ambitions.
AMP Clean Energy funds and develops low carbon heat and power assets, including solar PV, and is backed by a €1bn fund, with £100m already deployed in low carbon assets across more than 160 different projects.
We provide the funding for the installation of the solar project through a PPA with the customer, who then purchases the electricity back. We also own the asset, and take responsibility for all of the service and maintenance requirements for the duration of the contract, which means that the cost of the installation does not sit on the customer’s balance sheet.
The ideal customer for a PPA would:
- Use > 1,500 MWh of electricity per year
- Have the potential to install 150 KWp per site
- Have a roof or ground space with a min. of 1,500 sqm
- Have a turnover > £10 million per year
- Be paying at least 9p per kWh for electricity
- Have multiple sites
That said, we work with a variety of organisations, funding PPAs for SMEs through to industrial clients, from schools to large manufacturing corporates.
For installers, being able to offer a client a fully-funded solution at the outset of a potential project greatly increases the chances of that installation being commissioned.
For more information, or if you have any projects you think might be suitable for an AMP Clean Energy PPA, call us on 0800 157 7331 or email solar@ampcleanenergy.co.uk
