Financing a solar farm: cash, leasing, project finance or ESCO?
The financing model changes equity returns on a solar farm more than most technical parameters. Cash is the simplest structure, leasing and project finance raise equity IRR through leverage, and ESCO moves the capital outlay to a third party at the cost of part of the upside.
Comparison
| Model | Who funds the capex | Main advantage | Main limitation |
|---|---|---|---|
| Cash | investor in full | simple, full control | high capital need, lower equity IRR |
| Leasing | lessor, investor adds equity | fast decision, smaller equity | cost of financing, size limits |
| Project finance | bank + equity in SPV | high leverage, non-recourse debt | DSCR requirement, full documentation, longer process |
| ESCO | third party | no capex for the offtaker | lower long-term benefit for the owner |
When to use which
- Cash: capital available, simplest structure or a quick sale of a finished project.
- Leasing: smaller plants, fast decisions.
- Project finance: large farms with predictable revenues, ideally under a PPA.
- ESCO: industrial offtakers wanting renewable power without capex.
Run it for your project
The Enedeal calculator runs all four models on identical assumptions and shows equity IRR, NPV and capital committed. If a model is unavailable (e.g. project finance with DSCR below 1.20) it tells you why. See the methodology.
Preguntas frecuentes
- Which financing model gives the highest IRR?
Where debt is available, leveraged models (leasing, project finance) usually give higher equity IRR than cash, at higher risk. The calculator shows the result for a specific project.