Third-party ownership is one of the primary ways schools finance solar energy.
Third-party ownership is growing in popularity. It allows third parties to generate tax savings and presumably pass along some of those savings to the school. Schools -- because they lack the tax liability -- are unable to directly take advantage of federal or state tax credits or accelerated depreciation for solar equipment. However, they can indirectly take advantage of tax savings by allowing a third-party to own the solar system. To do so, states must allow third-party ownership, which is currently allowed in about half of all U.S. states.
With third-party ownership, a school can have solar with little to no upfront capital costs. The third party finances, builds, owns, and maintains the solar system under a lease or PPA. PPA arrangements enable the host to avoid many of the traditional barriers to the installation of on-site solar systems: high upfront capital costs, system performance risk, and complex design and permitting processes. In addition, solar PPAs can be cash flow positive for the school from the day the system is commissioned. Recently, due to lower rates and more mature contracts, which provide better protection for schools, PPAs have become the most popular option. Nearly 90% of all installed school solar systems over the last three years for which data is available are utilizing PPAs.
Kern High School District in California, which developed one of the largest school solar projects in the country (22.7 MW), financed the project through a PPA. The district’s consultant, Tom Williard of Sage Renewables, has been advising more districts to consider PPAs in the past three years. In California, he says about two-thirds of districts are opting for PPAs.
“PPA offerings have improved significantly. Lower installed cost and financing innovations have resulted in PPA base prices well below utility energy costs."
Toolbox for Renewable Energy Project Development: For more information on third-party ownership, the EPA developed several resources to help you understand third-party ownership financing structures as a means to facilitate your solar project development. READ MORE →Solar for Nonprofits: RE-volv can help you go solar. RE-volv trains volunteer college students and community members across the country to identify nonprofits in their area that could benefit from solar energy. RE-volv then covers all the upfront costs for these nonprofits to go solar with local solar installers, and the nonprofits immediately save on their electricity bills. As our nonprofit partners pay us back over time through a Solar Lease or Power Purchase Agreement, their payments are invested in a revolving fund we call the Solar Seed Fund. This fund then helps to pay for the next nonprofit’s solar system – a first-of-its-kind, pay-it-forward model for solar energy. READ MORE →
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Last Updated: 1/15/2021
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Generation180 has toolkits, guides, reports, and more to help your school go solar. Visit SolarForAllSchools.org for even more resources.