Four ways to pay for an energy project, and who carries the risk in each one

It is not "how much does it cost?". It is who owns the asset, and who answers if it does not produce what was promised? Those two answers determine the price, the accounting treatment, the term and what happens when the contract ends.

Everything else —trade names included— is a variant of those two. And it is worth knowing, because the sector regularly produces new acronyms, and almost all of them fall into one of these four boxes.

You buy the system. You own it from day one, keep one hundred percent of the savings, and carry the performance risk: if it produces less than projected, the difference is yours.

It is the structure with the best return and the one that requires the most capital. It is also the one that depends most on the sizing being correct, because there is no third party with an incentive for the system to perform.

Here the contractual performance guarantee and the operating contract are not extras: they are what replaces the partner who in other schemes would have skin in the game.

A third party buys the equipment and you pay rent to use it, usually with a purchase option at the end. You keep the full savings, minus the rent.

The performance risk is still yours: the lessor collects the rent whatever the system produces. It is equipment financing, not results financing, and it is best not to confuse the two.

Its real advantage is on the balance sheet and cash flow, not on risk. And the accounting and tax treatment of a lease depends on how it is structured: your accountant defines that, and it is worth defining before signing, not after.

A third party invests, owns the system and sells you the energy it produces, at an agreed price per kilowatt-hour that is usually below your current tariff. You put in no capital.

Here the risk does shift: if the system produces less, the owner bills less. That is the real appeal of the scheme, more than the zero capital.

In exchange, you sign a long-term purchase commitment — fifteen or twenty years is common — and that is what must be read carefully. The price per kilowatt-hour, its escalation formula, what happens if you want to terminate early, what happens if you relocate or close the plant, and who owns the system at expiry.

And a regulatory point worth checking in any structure that contemplates selling surplus energy: the Electricity Sector Law (Ley del Sector Eléctrico) establishes that, in interconnected self-supply, surplus energy is sold exclusively to the state-owned public utility. If a scheme promises to let you sell energy to third parties, ask for the legal basis.

It is an extended PPA: the third party not only sells you the energy, it also operates and maintains, and commonly commits to availability. You pay for the service received.

It is the structure that shifts the most risk and, consistently, the one with the smallest savings margin for you — because risk has a price and someone is charging it.

It makes sense when continuity is worth more than savings, when you have no in-house team to operate the asset, or when the committee will not approve capital but will approve an operating expense with a committed result.

How long you will be at that site. A twenty-year commitment on a property leased for five is a problem discovered late. It is the question that should stop the most projects and is almost never asked at the first meeting.

Whether the savings are compared against the right tariff. A price per kilowatt-hour compared against your average cost looks better than it is. The honest comparison is against the effective cost of the energy that system actually replaces, in the hours when it replaces it.

What happens at the end. Asset transfer, renewal, equipment removal, the condition the roof is handed back in. It is in the contract and almost nobody reads it until year fourteen.

The accounting and tax treatment. We do not define it and we will not tell you a scheme is "one hundred percent deductible". Your accountant defines it with the contract in hand.

We size and execute. We are not a financial firm and we will not recommend a structure as if we were neutral about it.

What we do is two useful things: we tell you how big the opportunity is with the metering in hand, which is the data every structure depends on, and we introduce you to the financing channels we work with so you can negotiate directly.

And we tell you when no structure fixes the project. If the sizing is wrong, the best financial scheme in the world only spreads a disappointment over twenty years.

Electricity Sector Law (Ley del Sector Eléctrico), DOF March 18, 2025 · Regulations of the Electricity Sector Law, DOF October 3, 2025. Article 32, sections I to III, on the sale of surplus energy in interconnected self-supply.

The characteristics of each financial structure are market practice, not regulation. The only thing this article states on a legal basis is the exclusivity of surplus energy sales.