How can I finance my PV system?

In principle, the financing of solar power plants by banks and credit institutions is easy to present. Depending on the project, creditworthiness and the type of financing, borrowed capital ratios of 75% to 90% are standard practice. In some cases full financing of the project may even be possible, in other words, financing with 100% borrowed capital and totally without owner equity.

For the banks (as for the operators) the financing is an interesting business because it is relatively low-risk. Due to the legally fixed and guaranteed feed-in compensation over 20 years, a relatively safe forecast regarding the liquidity and profitability situation for the lifetime of the facilities is possible. Thus, with the appropriate financing terms and conditions, as compared to financing in other industries or segments, the bank is assured of a high level of security that the debt service (sum of interest and repayment amounts) will be paid punctually.

The financing programs of the federally owned Förderbank KfW (Kreditanstalt fuer Wiederaufbau = Reconstruction Credit Institute) have been established as the standard for the financing of solar power plants. They offer state sponsored interest-subsidized loans (www.kfw.de).

In the case of larger solar projects, especially in open spaces, the financing is frequently represented as pure project financing. This so-called “non-recourse financing” refers to financing instruments in which the liability of the borrower is limited to the solar installation itself and to the cash flow of the project. The borrower is thus no longer liable to the bank with all of his/her assets. The solar plant is pledged as “collateral” to the bank by way of security. In the event that the borrower can no longer pay the interest and repayment amounts, the bank has recourse only to the solar facility (and could conceivably turn it to account) but not the personal assets of the operator of the facility. In return, such non-recourse financing have somewhat less favorable credit terms from the perspective of the debtor. This could conceivably mean that shorter loan periods are approved, higher risk surcharges levied on the loan interest and/or a higher equity share demanded than for ‘conventional’ financing methods.