Solar for nonprofits: Benefits, financing explained

The number of properties with rooftop solar panels is increasing day by day, and it isn't just homeowners who are installing solar panels to offset their own electricity bills. Businesses as small as your local general store and as large as Google have installed solar onsite to decrease overhead costs and promote corporate social responsibility. Now, nonprofit organizations are starting to explore their solar options as well.

In the past, nonprofits have had a difficult time going solar because of constrained resources. The falling cost of solar installations and the wider availability of specialized financing options are making it easier for nonprofit organizations to take advantage of the benefits of solar energy.

There are many benefits to installing a solar panel system, especially for nonprofit organizations.

Financial benefits

Solar can decrease the cost of operations for nonprofits, leaving more funds to devote to their mission. The amount of savings a solar panel system can generate for an organization depends on many factors, including the size of the system, geographic location, and current electricity rates. On average, a system will generate thousands of dollars in savings during its 30+ year lifetime by producing electricity that the nonprofit would otherwise buy from its electric utility.

In addition to day-to-day financial benefits, solar also protects organizations from volatile electricity rates. Electricity prices have historically risen at around three percent per year nationally, and price increases fluctuate depending on the cost of fuel. Solar offers a fixed low price for electricity, which has the added benefit of making it easier to project operating costs into future years.

Social & economic benefits

The adoption of solar energy reduces the U.S. economy's reliance on foreign energy and contributes to your local economy by creating jobs. According to a report from the Department of Energy, the solar industry employs more people in the United States than the oil, gas, and coal industries combined.

Environmental benefits

Many nonprofit organizations are committed to cleaner, green energy; solar is one way to meet those goals. Installing solar decreases your organization's overall carbon footprint because carbon dioxide emissions typically generated by using coal or natural gas-based electricity from the grid would be replaced with renewable energy. Solar power is emissions-free, and the increasing adoption of solar, along with other renewable energy technologies, decreases the overall emissions that buildings generate over time.

Despite the many benefits of solar energy, many nonprofits lack the funding to install a solar panel system. Residential and commercial properties not only have an easier time obtaining capital or financing for the installation but also are able to take advantage of numerous financial incentives for owning a solar panel system that nonprofits cannot.

The federal investment tax credit (ITC) is the biggest financial incentive for owning a system nationwide, offering a tax credit worth 26 percent of the cost of installing a solar panel system. However, nonprofits don't have tax liability; while this is generally good come tax time, it also means that they can't take advantage of local or federal tax credits available for solar.  For nonprofits, not being able to take advantage of the ITC leads to an extended payback period for owning a solar panel system and lower overall savings.

Because of this, many nonprofit organizations finance their solar installation through a lease or PPA rather than owning the system. Many solar leases are $0-down, which means there's no up front payment required. With a solar lease or PPA option, a third-party financier owns the system and covers the cost of installation and maintenance over the duration of the agreement. In return, they receive tax credits and other financial incentives available for the system's owner. While some solar installation companies finance leases themselves, many work with other banks in order to generate these types of arrangements with their nonprofit clients.

Typical solar lease or PPA agreements have a duration of 10 to 20 years, in which the property owner would pay the leasing company monthly payments for essentially renting the system and generating free electricity. On average, these savings are in the neighborhood of 10 to 30 percent off of the electricity bill.

CollectiveSun solar financing

While most solar leasing agreements tend to be paid out on a monthly basis, there are also those that can be paid as an upfront lease or PPA. CollectiveSun, an organization EnergySage has partnered with, offers a different approach to the classic PPA agreement.

CollectiveSun offers financing through a prepaid power purchase agreement (PPA), in which the nonprofit organization pays up front for the entire term of the PPA. CollectiveSun is able to take advantage of the 30 percent tax credit and passes half of those savings (15% total) on to the nonprofit organization. After year 6, ownership of the system is transferred to the nonprofit (with warranties to help with maintenance). From that point on, the nonprofit has free access to the electricity that the system generates. CollectiveSun financing is available to nonprofit and tax-exempt organizations in all 50 states.

While one of the hurdles with this type of financing may be generating that upfront capital to pay for the prepaid PPA, CollectiveSun offers assistance and a variety of methods to help generate that capital. These can include soliciting donations from the members of the nonprofit, financing via property-assessed clean energy (PACE), a crowd-lending option, and more.

RE-volv

RE-volv is another organization devoted to making solar more accessible for nonprofits through innovative financing solutions. Their model, called the Solar Seed Fund, allows non-profits to save 15 percent on their electricity bills through a solar PPA or lease. Over time, as a nonprofit makes their lease/PPA payments for their discounted solar electricity, their money is reinvested into the Solar Seed Fund, helping to continuously finance additional solar projects for other nonprofits throughout the country. In RE-volv's own words, "It's a pay-it-forward model for solar energy."

If you work at a nonprofit interested in going solar, we recommend signing up on EnergySage in order to get multiple competitive bids for a solar installation. It's a good idea to first have a discussion with a decision maker at your organization to confirm they're on board with exploring solar options.

Before signing up, collect past electric bills and electricity use history for your organization – installation companies use this information to appropriately size your solar panel system so that it can cover as much of your building's electricity needs as possible (given available roof space).

If you're seeking financing options for the installation, it's also a good idea to chat with your potential installer about financiers they have relationships with and what their offerings are or reach out to organizations directly (like CollectiveSun and RE-volv) committed to helping nonprofits finance their solar projects.