Transferability (hit link for more info)
At the small ITC level, this tool works best for transactions between parties that know each other, or to transfer the ITC value between related corporate entities. In the open market, it is very difficult to transact swiftly with sub-$1,000,000 ITC values.
Pros:
– Highest price per DC-watt
– Bonus depreciation remains with the seller.
Cons:
– No control over the transaction date.
– Requires insurance coverage on the transferability risk and third-party engineering analysis
– Illiquid under a minimum of $2,000,000
– Needs to be ganged with other similar projects to attain threshold value
– No predictability as to the possibility of a future transaction for most projects.
– Payment not presented until Permission To Operate (PTO) is issued to the project.
Solar Power Agreement aka “Prepaid Lease”, as offered on CleanFi
(hit link for more info)
Pros:
-Instant Liquidity via a standard firm offer on CleanFi
– Document-light application process
– Fast underwriting
– Project returns to property owner at year six.
– Low Minimum ITC value of $100,000 approximately
Cons:
– Project is third-party-owned, so bonus depreciation goes to the buyer.
– Payment not presented until Permission To Operate (PTO) is issued to the project.
– Offer price is 10 to 25% less than Transferability market.
– UCC-1 Lien makes it difficult to borrow the balance of the project using most loans or capital leases. Alternative financing is needed that leverages real estate, such as C- PACE, second mortgage, or business line of credit.
Power Purchase Agreement (hit link for more info)
Pros:
– No need to transact the ITC. Value is reflected in the terms offered.
– Finances 100% of the project – Progress payments start at Permit issuance
– Can measure liquidity over a matter of days using CleanFi’s BidDesk
– A few investors will bid on projects as low as $500,000/200kW
Cons:
– Project is third-party-owned, so bonus depreciation and all incentives go to the buyer.
– Demanding underwriting of both the off-taker and the EPC/Contractor
– Must negotiate Fair-Market-Value for early buyout
Mid-Term Operating Lease as offered on CleanFi
Pros:
– Instantly quoted on CleanFi as a 10-year product
– Value reflected in the monthly payments as a very low interest-rate equivalent
– Option for a low nominal buyout at the end of Term
– Possibility of buyer keeping state and local incentives.
– Finances 100% of the project. Progress payments start at permit issuance.
Cons:
– Project is third-party-owned, so bonus depreciation goes to the buyer.
– Significant underwriting of both the Applicant and the EPC/Contractor.
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