FAQs – SPPA vs. Lease
Q:How much will the system cost my organization?
A:Nothing. The system will be owned by an entity managed by RSB Funds. All capital necessary for the installation will be provided by the system owner. Our systems are generally funded either as Solar Power Purchase Agreements (SPPA), in which case the system owner will additionally pay all the expenses necessary to keep the equipment in good working order; or as Operating Leases. Operating Leases are not dependent on production and will require you to keep the system in good working order, but are typically less expensive than SPPA’s increasing overall savings.
Q:What is an SPPA?
A:The Solar Power Purchase Agreement (SPPA) is an alternative to owning the solar system. It offers you an opportunity to install solar power at your facility without paying upfront costs or worrying about system operation and maintenance. The SPPA will specify the price you will pay for power, typically at least 5% less than what you are paying today, in addition to other important contract terms.
Q:What is the difference between and SPPA and an Operating Lease?
A:An operating lease is not dependent on energy production like an SPPA, nor does the system owner pay to keep the system in good working order. While both of these are the responsibility of the leasee the system installation warranty, typically ten years, will reduce this expense significantly as well as reduce the production risks associated with system failure. Operating leases are typically less expensive than SPPA’s and are a beneficial alterative for organizations who would like to own their own system but prefer to increase their savings by leasing the system rather than utilizing their own capital to buy the system out right.
Q:Can I buy the system after entering into an SPPA or Lease?
A:Your SPPA or Lease will contain an option for your organization to purchase the system prior to the end of the contract. This option will begin starting in year seven of a SPPA and year twelve of a lease – and be available every year until the end of the contract. The option price will be specified in your contract as the listed price or “fair market value,” whichever is higher as determined by a process approved by the IRS.
Q:Do I have any other options other than to pay cash to acquire the system?
A:While you may simply choose to allow your SPPA or lease to mature at its term, if you choose to exercise the pre purchase option RSB Funds will work with you to ensure funding of the option price. We can assist you with a Tax Exempt Lease Program (if buying out an SPPA) or securing other financing all at no cost to your organization.
Q:Is it possible for the SPPA provider or Leasor to donate the system to my organization?
A:Under current tax law it is possible for the system owner (SPPA Provider or Leasor) to donate the system to your organization. In fact due to the proprietary structures used by RSB Funds, in some circumstances this provides a better financial outcome for all parties than either an early buyout or allowing the contract to mature to term. RSB Funds will work will all of the parties involved beginning in year six of an SPPA and year twelve of a lease to determine if this is the appropriate option for your organization.