The renewable energy market, particularly solar energy, has seen tremendous growth over the past decade, driven by increased consumer demand, government incentives, and advances in technology. As the cost of solar installation continues to decrease and environmental concerns become more pressing, many consumers are eager to adopt solar power for their businesses. However, upfront costs can remain a barrier for some, even though the long-term savings are substantial. Solar installers are uniquely positioned to bridge this gap by offering Power Purchase Agreements (PPAs) and asset financing options.

Here’s a look at how solar installers can potentially benefit from offering PPAs and asset financing, both in terms of growing their business and increasing their customer base.

Expanding Market Research

One of the most significant advantages for solar installers when offering PPAs and asset financing is the potential ability to target a broader customer base.

Many commercial clients are hesitant to invest in solar systems due to high upfront costs. With a Power Purchase Agreement, customers can avoid the initial expense and instead agree to buy the energy produced by the solar panels at a fixed rate for a specified period (usually 15-25 years). This means they can start saving on electricity bills from day one, without the burden of purchasing the system upfront.

Asset financing, on the other hand, allows customers to secure a loan or lease to finance the purchase of solar panels. This reduces the initial financial outlay, making it an attractive option for customers who want to own their system but lack the immediate funds.

By offering these financing solutions, solar installers can tap into markets that may have been previously out of reach, such as small businesses, and renters who would otherwise struggle to pay for a solar system in full.

Increased Sales Volume and Revenue

PPAs and asset financing can significantly increase the volume of solar installations, leading to higher overall sales and revenue for solar installers. With customers able to spread out payments for solar equipment over several years, they may be more inclined to proceed with installation. The immediate reduction in monthly electricity bills will likely make it a more feasible option for them, and as a result, installers can expect to see a rise in demand for solar systems.

Moreover, offering financing options creates a competitive edge. Many customers are attracted to businesses that provide flexible, customer-friendly financing options, which could set one solar installer apart from others that only offer the traditional upfront payment model.

Increased Customer Loyalty and Long-Term Relationships

By offering PPAs and asset financing, solar installers can build longer-term relationships with customers. PPAs, for instance, typically last15-25 years, and the installer may retain a role in maintaining and servicing the system during that period. This provides a steady stream of ongoing revenue from service contracts, system monitoring, and repairs, and strengthens customer loyalty.

Additionally, installers may be able to offer customers upgrades or performance optimisation services over the life of the system, further solidifying their role as a trusted partner in the customer’s energy needs.

Asset financing models also tend to establish long-term financial relationships. When customers finance their solar systems, they often return to their installer for support and future projects, such as system expansions or additional energy-saving technologies.

Increased Profit Margins and Repeat Business

While solar equipment sales typically account for the majority of an installer’s profits, offering financing solutions can open the door to new revenue streams. For example, when offering a Power Purchase Agreement, installers can enter into a long-term partnership with customers. The revenue generated through selling energy under the PPA provides installers with continuous income, improving their cash flow and long-term profitability.

Additionally, solar installers may be able to negotiate favourable terms with financiers or third-party investors, thereby receiving a commission or fee for facilitating financing arrangements. These extra revenue opportunities can significantly improve an installer’s profit margins and overall financial health.

Access to Government Incentives and Financial Programmes

Governments and utilities in many regions are providing incentives for solar adoption, including tax rebates, grants, and other financial programs. Offering PPAs and asset financing can make installers more eligible for participating in these incentive programs, as they often align with government goals of increasing renewable energy adoption.

In addition, financiers who work with solar projects typically have experience in navigating these programs and can help installers and their customers maximize available incentives. This could make financing options even more appealing to potential customers and enhance the installer’s ability to deliver competitive pricing.

Diversifying the Installer’s Revenue Stream

Solar installers are not limited to offering installation services alone. With PPAs and asset financing, installers can diversify their business model and engage in energy generation and performance monitoring. For instance, when a PPA is in place, the installer could offer energy production and efficiency monitoring services for the duration of the agreement. Additionally, installers can potentially offer maintenance, cleaning, and system upgrades, ensuring they remain engaged with customers for years to come.

This diversification can help protect installers from market volatility in equipment sales and foster resilience against market fluctuations, ensuring they have multiple sources of income even as the market matures.

Building a Positive Reputation as an Innovative, Customer-Centric Company

By offering flexible financing options, solar installers can enhance their reputation as customer-focused and innovative businesses. Consumers increasingly value companies that provide solutions to reduce financial barriers, and offering PPAs or asset financing can position an installer as a thought leader in the renewable energy space. This positive perception can result in increased referrals, positive reviews, and an overall stronger brand reputation.

Furthermore, as the renewable energy sector becomes more competitive, standing out as a company that understands its customers’ needs and provides tailored solutions can be a key differentiator.

Solar installers can significantly benefit from offering Power Purchase Agreements and asset financing. These solutions not only enable installers to reach a broader customer base, but also increase revenue, foster long-term customer relationships, and diversify business models. As the solar market continues to grow, offering these flexible financing options can help installers stand out in a competitive market, providing a win-win for both the installer and the customer.

*This article gives a general overview of how solar installers can potentially benefit from offering Power Purchase Agreements and asset financing and is not recommending or endorsing any specific product, business, or investment decision or giving specifically tailored information.  For further information contact powergreen@renewableconnections.co.uk