Free Engineer - Blog Post

How Can a Business Get Free ($0 Outlay) Solar Panels?

A typical comment from directors or managers on solar is “We want to do it, but it costs too much.” Or “It’d be great but the payback is still too long”, or similar.

What if you can get solar PVs that can pay themselves off? Then the payback may not be a concern anymore.

How it works

Use somebody else’s money to pay for your solar panels. YES you’ve heard it right!

By using alternative $0 solar scheme funding options such as lease, rental or Environmental Upgrade Agreement (EUA), businesses can continue to operate as they wish and conserve their cash, but still benefit from solar because the specialist financiers will provide the funds to fully supply and install the system.

This works because in many cases the return on investment (ROI) from solar can be as high as 20-35% and the cost of funding on solar rental or EUA option can be as little as <7%. This means, given the current increasing energy costs and the significant fall in solar panel costs, the average saving can be considerably more than the monthly repayment of the above options.

To illustrate this, the example below demonstrates how a manufacturer with a current $10,000 monthly power bill, can save through solar rental without capital outlay:

  • Avg. Monthly Bill (Pre-Solar): $10,000

  • Avg. Monthly Bill (Post-Solar): $ 5,000

  • Monthly Rental Payment (after-tax): $3,500

  • Nett Avg. Monthly Savings: $1,500

Finance chart 3.jpg

Why $0 solar for business can be great:

  1. Easier board or management approval compared to CAPEX process
  2. Should you use your capital for your new machines, hire new personnel or other business investments instead of solar? Well you won’t have this dilemma anymore.
  3. EUA and solar rental are typically off balance-sheet – which means less impact on your borrowing capacity or balance sheet
  4. Fixed repayment –more control on your future energy costs
  5. If you don’t outlay anything but get some savings, then what would be your Return on Investment (ROI)? Basically infinite!
  6. Your organisation can probably benefit from either full tax deduction or tax depreciation
  7. You don’t have to stress yourself with where to get the money from
  8. Easy process, particularly if the business has been operating for at least 2 years
  9. Can be transferred to another party
  10. Can own it at the end of the schemes (5-10 years typically)

"Which would you prefer - continue to PAY the $10,000 power bill each month and never own a Solar Power system, or SAVE $1500 each month and own the Solar Power system in a few years.??"

Differences between EUA, rental and capex options

An EUA is a special loan for environmental upgrade projects repaid through council rates, therefore longer terms and lower interest rate can be offered ensuring the project is cashflow positive. This was made available to solve the difficulty in landlord – commercial tenant situations because both the tenants and the landlord will benefit.

Comparison between these 3 options:

Comparison Table Finance 3.jpg

*Individual assessment required – contact us for more info

How to ensure you get a cashflow neutral/positive solution:

  1. Your actual blended electricity rate– Commercial electricity bills are not obvious. What parts of the bill will actually reduce?
  2. System sizing – too big of system can negatively impact your cashflow and too small of a system will undermine your savings
  3. Optimise the cost of install through technical assessment of the existing electrical and structural infrastructure
  4. Terms of financing/ rental – long vs short rental/ EUA terms
  5. Interest rate should be kept under certain level
  6. Not aggressive solar generation calculation – beware of some solar companies using unrealistic figures
  7. Performance guarantee –What if your system output is guaranteed? It’s a trump card to take away most of the risks. Free Engineer (FE) can organise this in most cases.

Clearly, to fully benefit from solar investment it’s more than just paying some tradies to slap panels on the roof. An engineered and financially-astute approach is a no-brainer.

Our team have done many assessments and calculations across different sites and different industries. What we've found is roughly 95% of solar-possible commercial sites in Australia can currently benefit from $0 solar.

We love the nitty-gritties so that you won’t have to go through the pain, stress and confusion. Let FE do the numbers, structure the best solution and source the best suppliers for you, while you still have the final say.

Notes: This is a general article and not specific to your case. Every site requires custom analysis and design prior to confirming expected saving. Actual tax implications will need to be confirmed with your accountants.

Posted on Jun 29, 2018

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