Solar would appear to be a perfect fit for NPOs as they typically strive for low operating expenses and work with limited funding. However, the fact is that its more complicated for an NPO to get solar than a for-profit business. Lets take a look at why NPOs and Solar are not as easily paired as you’d think…
Its no secret that incentives (Federal, State & Municipal) are an important part of the solar value proposition.
The largest incentive of all, the 30% Federal ITC (Investment Tax Credit), is realized against paid Federal taxes. For example, if a company owes or has paid $100,000 in taxes in the same year a $100,000 solar system is installed, then the company will receive a $30,000 ITC ($100,000 x 30%) which it can apply on the $100,000 in taxes it paid. The company only ends up paying $70,000 in taxes, because it effectively received a $30,000 tax rebate.
Additionally Federal and State depreciation are important vehicles to further recuperate costs and accelerate ROI.
And of course depreciation is applied against paid or owed taxes.
What about the non-profit down the street that uses $5,000/month in electricity and wants to save money with solar?
Being an NPO, they pay zero federal income tax and zero state income tax. Therefore the two largest incentives granted for going solar are off the table. Period.
Sure, they can go solar if they have the cash or benefactors to do it, but the solar value proposition is not nearly as attractive as it were if they had tax appetite.
Ok, so what about “leasing” their roof to a solar company?
Well, that doesn’t really happen in the realm of NPOs and Solar. I continue to hear folks allude to such arrangements, and it confuses me. If we are talking about the typical NPO needing between 100-250kW DC, then solar companies are not going to sign up to lease a roof to generate electricity. That’s just not a thing.
Then what options exist? There are two basic options:
- Work with a financier who will allow the non-profit to buy the system at 85% of its retail price – in this arrangement the financier splits the 30% ITC with the end-use organization. One such financier who does this is Collective Sun.
- Power Purchase Agreement (PPA). This is an arrangement where a financier foots the bill for installation, and the end-use organization buys electricity from the financier at a rate that is lower than the utility rate.
Option 1 will usually not work because the cost of the systems are typically prohibitively expensive for NPOs, even after a 15% break. Many NPOs simply don’t have the funding.
Option 2 is a great option, but there are qualifications. Specifically, most financiers offering PPAs require systems be larger than a minimum size (typically 200-250kW), and then the rate they offer the end-user will depend on the system’s efficiency. System efficiency is affected by shade obstructions and roof/array orientation.
In summary, it is possible for NPOs to go solar, but its not a simple and easy thing to do. The first step to determining an NPO’s solar viability is for the EcoMen team to examine recent utility bills to determine what size system would be needed, and to understand what kWh rate is currently being paid.
From there we can pretty quickly determine whether solar is something that makes sense for the location.
Also, here are a few EnergySage links that offer additional information on NPO solar:
Solar Solutions for New Jersey, New York, and Eastern Pennsylvania