Services

Commercial Solar Financing and PPAs

Commercial solar can be financed six main ways: cash, a loan, C-PACE, a capital lease, an operating lease, or a power purchase agreement (PPA). The choice decides who owns the system, who claims the Section 48E credit and depreciation, and whether the project sits on your balance sheet.

Ferrius Energy builds commercial solar and battery storage under every one of these structures in Massachusetts, New Hampshire, Connecticut, Rhode Island, Maine, Vermont, Florida, and Texas. We are an EPC contractor, not a lender: we model the structures side by side against your load data, and work with your chosen capital provider on the technical diligence. This page explains how each structure works. For worked cash flow math, see our commercial solar financing guide.

Compare Structures for Your Building →

Last reviewed: September 2026. This page is general information, not tax or legal advice. Tax ownership, lease classification, and PACE eligibility must be confirmed with your tax advisor, counsel, and program administrator.

The question behind every structure: who is the tax owner?

A commercial solar project carries two large federal tax benefits. The first is the Section 48E investment tax credit: a 6% base, rising to 30% for systems under 1 MW AC or where prevailing wage and apprenticeship requirements are met. The second is depreciation: 5-year MACRS, with 100% bonus depreciation made permanent in 2025. Timing rules changed under OBBBA; see our guide to the federal ITC and SMART.

Both benefits go to the tax owner of the system, which is not always the party whose name is on the building. Financing structures differ mainly in where they put tax ownership. An owner with taxable income that can use the benefits usually does best owning the system. An owner that cannot (a nonprofit, a REIT with limited appetite, a company with losses, a tenant with a short lease) can let a third party own it and take the value through a lower price.

Structures

Six ways to pay for commercial solar

Cash purchase

You pay the EPC price and own the system from day one. You claim the 48E credit and depreciation, keep all energy savings and incentive revenue, and carry O&M. Highest lifetime return where you have the capital and the tax capacity.

Commercial solar loan

Same ownership and tax position as cash, with the cost spread over a term. Secured by the equipment, the business, or the property. Debt service is set against energy savings; many owners use the tax credit to pay down principal early.

C-PACE

Commercial property assessed clean energy financing is repaid through a special assessment on the property, which stays with the building if it is sold. You own the system and claim the tax benefits. Terms can run long, which helps match payments to savings.

Capital (finance) lease

A lease structured so that you effectively acquire the system, often with a nominal buyout at term end. For tax purposes it may be treated as a purchase, putting the credit and depreciation with you, but that depends on the lease terms. Confirm with your tax advisor.

Operating (true) lease

The lessor owns the system, claims the tax benefits, and prices them into lower lease payments. You pay a fixed rent and have a fair market value purchase option at term end. No upfront capital.

Power purchase agreement

A third party owns, finances, and maintains the system on your roof or land, and sells you the electricity at a contracted rate per kWh, often with a fixed escalator. You pay only for what is produced. The owner claims the tax benefits.

Side-by-side comparison

Commercial solar financing structures compared
Structure	Upfront capital	Who owns the system	Who claims 48E and depreciation	O&M responsibility	Best fit
Cash	Full cost	You	You	You	Owners with capital and tax appetite
Loan	Low to none	You	You	You	Owners with tax appetite who want to preserve cash
C-PACE	None, typically	You	You	You	Building owners in participating municipalities, long hold or planned sale
Capital lease	Low	Lessor on paper, often you for tax	Depends on lease terms	Usually you	Owners who want ownership economics through a lease
Operating lease	None	Lessor	Lessor	Varies by contract	Owners without tax appetite who want a fixed payment
PPA	None	Third-party owner	Third-party owner	Third-party owner	Nonprofits, tenants, owners wanting no asset risk

Accounting treatment (on or off balance sheet under ASC 842) is a separate question from tax ownership and can differ from it. Your auditor decides the accounting classification.

C-PACE in our service states

C-PACE is state-enabled and usually requires the municipality to opt in, so availability is address by address.

Massachusetts: PACE Massachusetts

PACE Massachusetts is administered by MassDevelopment with technical support from the Department of Energy Resources. It covers commercial, industrial, and multifamily buildings of five or more units, and eligible measures include renewable energy systems such as solar. Financing is repaid through a municipal betterment assessment that transfers with the property, with terms up to 20 years. The municipality must opt in by vote of its city council or select board, and projects must meet DOER's savings-to-investment ratio requirements. DOER finalized revised program guidelines in December 2025. Check the current list of participating municipalities with MassDevelopment.

Connecticut: C-PACE through the Connecticut Green Bank

Connecticut's C-PACE is available to most commercial property types, including manufacturing, office, retail, nonprofits, and multifamily buildings of five or more units, in participating municipalities. Solar is an eligible measure, and financing is fully amortizing over terms of 5 to 25 years. The assessment lien is senior to property-secured debt, so existing mortgage lenders must consent.

Other states

Rhode Island, Texas, Florida, and other states we serve have their own PACE frameworks with different administrators, lender consent rules, and municipal participation. Confirm the current status for your property with the state or local program administrator before building a model around it.

Lender consent. Because PACE assessments typically sit ahead of the mortgage, the existing lender's consent is often the step that controls the timeline. Start that conversation early.

Selling the credit: transferability under Section 6418

Owning a system used to require enough federal tax liability to use the credit. Section 6418 changed that by letting an eligible taxpayer sell all or part of certain credits, including the 48E credit, to an unrelated buyer for cash. Under the final Treasury regulations:

Cash only. Payment must be in cash (bank transfer, check, or similar) within the defined period.
One transfer. The buyer cannot resell the credit.
Pre-filing registration. The seller must complete IRS pre-filing registration before making the transfer election.
Tax treatment. The cash received is not included in the seller's gross income, and the buyer gets no deduction for the price paid.
Penalty risk. An excessive credit transfer triggers repayment of the excess plus a 20% penalty unless reasonable cause is shown, so buyers conduct diligence on the project, including the EPC's documentation.

Transferability makes ownership (cash, loan, or C-PACE) workable for owners with limited tax capacity. Tax-exempt organizations may instead be able to use elective pay under Section 6417. The credit's value in a transfer depends on the buyer's confidence in its qualification, which is one reason sourcing documentation from your EPC contractor matters.

Decision Points

How to choose between a PPA, lease, and ownership

Tax capacity. Can you use or sell the 48E credit and depreciation? If yes, ownership usually wins on NPV.
Hold period. Planning to sell the building within a few years? C-PACE transfers with the property; a PPA or lease needs assignment terms a buyer will accept.
Roof life. A 20 to 25 year PPA on a roof with ten years left means a removal and reinstallation cost that someone must carry.
PPA terms. Compare the starting rate and escalator against a realistic utility rate path, and read the end-of-term options, buyout pricing, and removal obligations.
Incentive revenue. State incentives such as SMART in Massachusetts go to the system owner unless the contract says otherwise.
Balance sheet. Ask your auditor how each structure would be classified before you commit.

Our commercial solar ROI calculator gives a first pass, and our payback guide explains what drives the numbers.

Questions

Frequently asked questions

What is a commercial solar PPA?

A solar power purchase agreement is a contract in which a third party owns and maintains a solar system on your property and sells you the electricity at an agreed rate per kWh, usually for 15 to 25 years. You pay nothing upfront and the owner claims the tax benefits.

Who claims the tax credit in a commercial solar lease?

In an operating or true lease, the lessor owns the system and claims the Section 48E credit and depreciation. In a capital lease, the lessee may be treated as the tax owner depending on the lease terms. Confirm the treatment with your tax advisor.

Can C-PACE be used for solar in Massachusetts?

Yes. PACE Massachusetts, administered by MassDevelopment, finances renewable energy systems including solar on eligible commercial, industrial, and multifamily properties, repaid through a betterment assessment over up to 20 years. The municipality must have opted in.

Can I sell my solar tax credit?

Yes. Section 6418 allows an eligible taxpayer to transfer the 48E credit once to an unrelated buyer for cash after completing IRS pre-filing registration. The cash received is not taxable income to the seller.

Is buying or a PPA better for commercial solar?

Owning usually produces the higher lifetime return if you can use or sell the tax benefits and plan to hold the building. A PPA suits owners who want no upfront cost and no asset risk, or who cannot use the tax benefits. Model both against your own load data.

Sources

Mass.gov, Commercial PACE (Property Assessed Clean Energy). mass.gov
MassDevelopment, PACE Massachusetts. massdevelopment.com
Connecticut Green Bank, C-PACE FAQ. ctgreenbank.com
Federal Register, Transfer of Certain Credits (final regulations under Section 6418). federalregister.gov
Internal Revenue Service, Elective pay and transferability frequently asked questions. irs.gov
Internal Revenue Service, Clean Electricity Investment Credit (Section 48E). irs.gov

Keep Reading

Related pages and guides