Just like any residential or commercial customer, nonprofits must consider many factors before financing a solar project. Unlike homeowners and businesspeople, however, 501(c)3 organizations are tax-exempt and thus cannot directly benefit from the Investment Tax Credit (ITC) like their for-profit counterparts can. The ITC incentivizes taxpayers such that 30 percent of the dollar amount invested into eligible solar projects can be claimed as a tax credit. Nonprofits, without this same opportunity, remain relatively underrepresented in the renewable energy space as a result.
Even so, schools, places of worship, and other nonprofits can still source and benefit from on-site solar arrays. Through panels on the roofs of elementary schools or carports at community centers’ parking lots, solar installations can reduce and stabilize long-term electricity prices, and provide educational value–children are exposed to the science and environmental sustainability benefits of solar starting at a young age. However, are the projects viable from an economic and practical perspective? Unable to afford the high upfront costs, how can a school finance the desired project? Parents and school administrators will ask these, among other, practical questions. For schools and nonprofits in general, Sol Systems offers the option of third-party ownership in the form of a power-purchase agreement (PPA).
At the point of signing a PPA, many issues must be addressed: understanding the school’s pre-solar energy usage and related costs, providing power purchase rates that are lower than the grid’s cost of electricity, and determining any necessary changes (e.g. roof reinforcement, temporarily cleared parking lot) before installation can begin. These steps are needed to guarantee minimum production, accurate metering, and the selection of a competitive and reliable vendor from a request for proposal (RFP) process.
Once chosen, Sol Systems can work to deliver the school a reliable project that will provide the nonprofit with clean energy for the next 20 to 25 years. The school has two options at the end of the PPA term: 1) uninstall the project or 2) purchase the project from the owner. If the school has the necessary capital, the latter option may be attractive if the realized energy savings justify the purchase.
Sol Systems has successfully closed numerous projects using this model for academic institutions ranging from elementary schools to universities. In total, Sol Systems has closed on nearly 48MW of projects with tax-exempt offtakers. This includes not only schools and academies, but also churches and government entities. While ITC and other tax benefits (e.g. MACRS) seem to exclude nonprofits considering solar projects, Sol Systems’ track record with tax-exempt entities strongly proves otherwise.
Once their school engages in a solar PPA, students (eager for recess) won’t be the only ones excited by sunny days–the overall school community will also be looking forward to the continued environmental and economic benefits of its solar installations.
ABOUT SOL SYSTEMS
Sol Systems is a leading solar energy investment and development firm with an established reputation for integrity and reliability. The company has financed approximately 450MW of solar projects, and manages over $500 million in assets on behalf of insurance companies, utilities, banks, and Fortune 500 companies.
Sol Systems works with its corporate and institutional clients to develop customized energy procurement solutions, and to architect and deploy structured investments in the solar asset class with a dedicated team of investment professionals, lawyers, accountants, engineers, and project finance analysts.