Learn About Three New Finance Models for Non-Profits Wanting to Go Solar

By Rahul Dutt


solarpic  Posted on April 22, 2014 by REC-Admin

There have generally been two main financial challenges for non-profits interested in going solar. First is the lack of funds or credit availability for purchasing a solar system. The second issue is taxes—or rather their tax-exempt status. Because non-profits don’t pay income and property taxes, they’re often barred by legislation from taking advantage of local and federal tax incentives, such as solar’s 30% Investment Tax Credit (ITC).

Having dealt with these customer issues in the past, REC Solar has developed new solar financing partnerships that are tailored to the needs of non-profits, such as churches, hospitals, HOA’s, and charitable organizations. All three finance solutions address solar’s upfront costs and the ability to indirectly capture tax incentives, while each is also designed to significantly reduce a non-profit’s electricity bills.

Financing Option #1: Solar Power Purchase Agreements (Solar PPAs) for Non Profits

Solar Power Purchase Agreements (Solar PPAs) have become the most popular option chosen by homeowners who install solar and have been used by businesses and utilities on large scale projects for many years. While non-profits are ideal candidates to benefit from PPAs, the size of many non-profit solar projects often doesn’t meet the minimum size requirements of most PPA providers. However, now there’s a new solar PPA model that both removes the size barrier and meets specific finance needs for non-profits.

As with typical solar PPAs, there are no upfront costs to the non-profit and any local or federal tax benefits are incorporated into a discounted rate for energy. In addition, the installation’s solar energy production is precisely metered, so the organization only pays for the amount of power that the solar panels generate. More importantly, the solar PPA’s kilowatt-hour (kWh) rate is always designed to be lower than the utility’s rates, and all maintenance is included.

Among the innovations, this new non-profit solution has a shorter term, typically 15 years instead of 20 to 25 years. It also provides organizations with flexibility in annual rate escalation and early buy-out options. All in all, this new solar PPA model provides a simple, turnkey solution that will allow non-profits to go solar for $0 down and still reduce their operating costs.

Financing Option #2: Commercial PACE Tailored for Non-Profits

As with solar PPAs, PACE (Property Assessed Clean Energy) programs for commercial businesses have been available for some time. With traditional PACE programs, the upfront cost of the solar system is added to a property owner’s property taxes and paid over 20 years through a special tax assessment. Typically, annual energy savings from the solar system is far greater than annual PACE payments. However, churches and other non-profits don’t pay property taxes, so PACE financing is often assumed to be unavailable, which is actually not true.

In fact, non-profit organizations in California may ‘opt-in’ to a PACE program and fund their solar installations via a voluntary property tax assessment.

The organization can structure the payments over 20 years, dividing payments into small chunks, and then own the system at the end of the term. Additionally, third-party ownership options such as a PACE solar PPA or solar lease are also available, allowing non-profits to increase their savings by indirectly capturing available local and federal tax incentives and receiving the lower long-term energy payments and all-included maintenance benefits of a PPA.

Financing Option #3: Crowd Funding for Solar Projects

Churches, temples, and other religious organizations often fund building improvements with specific fund-raising campaigns that rely on donations. Now there’s an innovative financing option that allows members of these organizations to crowd-fund a solar installation—and receive a return on their investment.

With this finance solution, the finance company works directly with the organization’s leaders to facilitate the ‘heavy lifting’ of educating and engaging their member base. Then, they structure and execute an agreement in which the organization receives a $0-Down solar system and a lower monthly payment via a PPA-style agreement.

This win-win scenario allows the organization to go solar and reduce their energy costs and engage its members with a mutually-beneficial investment opportunity over the term of the solar agreement. The arrangement also helps all participants to feel great about reducing the organization’s operating expenses while demonstrating environmental stewardship of their local community and the earth.

In addition to these three no-money-down solar options, REC Solar can also offer non-profits other financially beneficial alternatives to cash solar purchases, including prepayment solutions and long term solar system monitoring and management.

The above is a simple overview of these new solar finance solutions for non-profits. If you have questions or would like more details, contact REC Solar. We’ll go over each option and help you to determine the best solution for your organization.

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