Leasing

The lease model is an alternative to the financing of a construction project from your own capital. It is addressed in particular to small and medium-sized enterprises and private investors. It works like this: they lease a PV power plant from their local utility company („UC”) or from a „marketplace” supplier of PV power plants (the chart shows the involvement of a UC).

The lessee acts as the operator of the power plant. The lessee is responsible for the technical maintenance and insurance. The lessee alone bears the economic risk.
The UC is the owner of the PV power plant. It finances and constructs the power plant and, then, leases it to the customer (the lessee).

The lease model is closely linked with feed-in tariffs and is often as such an alternative model to use for the marketing of PV power plants.

• Possible advantages (depending on the regulatory framework and economic environment):

1. Reduction in power procurement cost
2. No levies and charges;
3. Flexible lease terms;
4. No tied-up capital („you keep your capital for your core business”);
5. In some cases: option to purchase the power plant after a certain number of years (might be subject to regulations on hire-purchase).

Since the profitability of the lease model is rather low, this model is of no relevance where a more favourable form of financing is available to the lessee. In such cases, direct purchase and operation of the power plant is preferable as it helps avoid the margin charged by the UC (lessor).