A Power Purchase Agreement (PPA) is a financial agreement in which a property owner allows a solar developer to build, own and maintain a solar system on his or her property with the obligation to sell that electricity back to the owner at a substantially lower rate than the local utility’s electric rate over a 25-year term.
The Clean Energy PPA® uses C-PACE (Commercial Property Assessed Clean Energy) financing which leverages the property value to secure funding, not the credit rating of the property owner. This allows property owners to realize property improvements and energy savings without any upfront cost or personal or corporate guaranties.
Borrowing amount is based on the property value, not the credit rating or balance sheet of the property owner.
PPA payments are processed as a voluntary assessment on your property tax bill.
Commercial Property Assessed Clean Energy (C-PACE) is an innovative financing mechanism that makes it possible for property owners to access low-cost, long-term funding for renewable energy, energy efficiency, water conservation and building hardening projects.
C-PACE is a national initiative, but requires state approval. For a current list of states with active PACE programs and programs in development, visit PACENation.
PACE assessments are similar to local public benefit assessments for schools, sidewalks, sewers and roads. However, C-PACE is financed using private capital.
C-PACE lets property owners fund projects with no out-of-pocket costs. The program’s long financing terms – typically 25 years – make it possible to undertake capital-intensive projects that have meaningful impact on the bottom line. The increased working capital can be redeployed as cash reserves or for other capital projects, budgetary expenses or business expansion.
In addition, the financing obligation is easily transferred in the case of a property sale.
C-PACE is an Economic Development initiative that lowers the cost of doing business in a particular community – which benefits both local governments and the community at large.
C-PACE projects have a positive impact on air quality, creating healthier, more liveable neighborhoods.
It depends on the type of financing solution works best for your company. For the Clean Energy PPA®, financing is primarily tied to the property value and NOT to the business or individual. This means that nearly every property can qualify, and rates associated with the cost of the project are not influenced by financial standing. Luminia focuses on maximizing savings for the property owner regardless of their situation.
Eligible upgrades include renewable energy (solar), energy storage, roofing, efficiency measures (HVAC, LEDs, windows, water, etc.), resiliency (seismic, fire, storm strengthening) and qualified improvements related to new construction. Many property owners will either layer these items into a solar financing or will use the solar savings to help fund additional improvements. In other words, Luminia owns and operates the solar system, but can also offer low interest, off-balance sheet extended loans for other types of improvements.
All savings increase net operating income (NOI). Approximate valuation increase estimate can be calculated by taking NOI gain from savings and dividing by a cap rate of roughly 5.5%. (e.g., $100K savings would equate to $1.8M property value increase.)
The Clean Energy PPA® and C-PACE financing is billed as a line item on the property tax bill and paid through the normal property tax collection process. Luminia has created a collection process where these payments are directly applied to the cost of the solar system without any extra work on the part of property owners.
Luminia finances and owns the actual system and contracts top-rated partners to design, build, and maintain the system over time. The annual payment schedule allocates a portion of proceeds to Luminia to monitor and service the system at the highest levels each year for the full term of the contract. In effect, the contractual arrangement requires and funds annual system support.
We guarantee electricity production levels outlined in the final proposal. If the system were to fall short, Luminia is responsible for compensating the property owner equal to that shortfall. Reconciliation on production commitments occurs on an annual basis.
It depends on the financing solution you chose.
With the Clean Energy PPA® property owners can easily sell the building at any time and the agreement is simply transferred to the new owner who then continues to benefit from a lower overall cost of electricity relative to purchasing from the utility.
Regardless of your business or personal financial situation, the effective cost of funds is approximately 6%.
Nearly all non-residential real estate assets can finance sustainability improvements using Luminia’s solutions, including: manufacturing facilities, cold storage plants; office buildings; warehouses and distribution centers; houses of worship; K-12 schools, colleges, and universities; agricultural operations; retail facilities and commercial malls; golf courses; multifamily housing; shopping centers; hotels and resorts; and more
The solar system is fully insured, including panels, inverters and racking.
Our warranties protect you against any risk of roof damage associated with the installation of our systems. We perform a roof inspection during the sale process and determine the roof condition for solar installation. We can also incorporate roof repairs or roof replacement into project pricing should that be a benefit to the property owner.
In many markets, energy storage is rapidly deployed for resiliency and energy saving measures. In markets like California, New York and MA local incentive make energy storage even more financially attractive You may qualify for energy storage. Luminia will complete an assessment to determine if energy storage would be in your best interest.
Solar systems are estimated to have a 25-year useful life. In reality, these systems often continue to perform for longer than 25 years. At the 25-year mark, the property owner has the option to extend the energy savings arrangement or can opt to have the system removed without cost.