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Challenges in Solar Equipment Finance

By Jennifer L. Howard and Kenneth P. Weinberg

In recent years, in certain parts of the country, solar electricity generation systems have become increasingly popular for all sorts of consumers, including commercial landlords and tenants. (For ease of reference, this article will refer to such systems, including solar photovoltaic panels, inverters, racking and related equipment as “solar equipment.”) Growth in solar-generation capacity has not been evenly distributed across the country, however, as some states' policies and laws are solar-friendly, while those in other states pose barriers. One such barrier in many states is the lack of access to financing.

Although the costs of solar equipment have decreased dramatically in recent years, many businesses and individuals need access to financing in order to pay the upfront costs of such equipment. In response to this need, many companies active in equipment leasing and finance — some long-standing members of the industry as well as new ones — have stepped in to offer financing solutions for solar equipment. However, many states have laws that limit such participants' flexibility to use certain financing structures. Some states limit financing mechanisms structured as sales of electricity (power purchase agreements), either expressly or because of lack of clarity in the application of existing laws. State laws can also be ambiguous in their application to leases of solar equipment.

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