(updated 11/3/2025)

Solar Power Agreement (SPA) is a generic term given by CleanFi for third-party-owned solar and/or storage financing structures that allow an Investment Tax Credit (ITC) to be monetized expeditiously in situations where it otherwise would not qualify or would take an excessive period of time to transfer to a buyer.

SPA structures might differ slightly from one another, but they are a new, more IRS-compliant version of what used to be called a “Pre-Paid PPA/Lease”  (See our Knowledge Base article on that structure which is no-longer presented on CleanFi).  However, as a financing mechanism, a Solar Power Agreement (as CleanFi defines it) is entirely different from a Power Purchase Agreement (PPA): the latter commits both parties to the full yield (measured in kiloWatt hours) from the contracted power plant and is designed to last for the entire term, while an SPA generally operates closer to a lease by making the equipment available to the off-taker (the property owner) and providing a clear path out of the agreement early in the term.

The important aspect of these corporate structures is that they can apply to both residential and commercial installations.  Here are scenarios where an SPA is a mechanism that delivers savings and speed of transaction:

  • Residential installations, because they are wrapped into a pre-packaged structure that allows them to be treated as commercial, and thus derive some value from the tax benefits associated with a commercial installation.
  • Commercial installations, in those circumstance where a) the host property-owner cannot take advantage of the tax benefits and b) the value amount of the installation cost is too small to sell easily and expeditiously in the open Transferability market. Sub-$2million projects are generally best off using the SPA mechanism because it offers speed and predictability, whereas the open Transferability market offers neither.

 

The tertiary Solar Power Agreement structures that are presented on CleanFi share five features in common:

  1. They offer a pre-formatted legal structure into which a residential or commercial project  can be folded to allow the monetization of the ITC through the sponsoring investors.
  2. They provide, or create a structure to provide instant ITC liquidity.  Said structure qualifies projects for ITC.
  3. They offer a set investment value into the project by a 3rd-party titular sponsoring investor, who then becomes owner-operator of the energy system for a set term.
  4. They require the property owner to contribute all the funds necessary, beyond those brought by the investor, to meet the contracted cost of the energy system’s installation and activation.
  5. They provide a path, deemed by the investor to be legally compliant, for the property-owner to take possession of said energy system early in the Term of the agreement without a “Fair Value  Buy-out” requirement.

 

CleanFi presents Solar Power Agreement (SPA) products from investors who have self-vetted their structures and demonstrated a capital capacity to fund their share of the project financing in a Solar Power Agreement.

The need for structures like the SPA’s featured on CleanFi arises from the One Big Beautiful Bill Act of 2025, which put a sunset on residential solar tax benefits affirmed by the Inflation Reduction Act of 2021.

CleanFi is neither a tax authority nor a direct funder, nor does it participate in the ownership and operation of any of the products presented by funders on the CleanFi.com platform.  It is a search engine which delivers then qualifies financing options for any particular building improvement scenario, focusing on clean energy and resource efficiency projects.

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