Once a school or district has a clear understanding of its needs and values – and those of the surrounding community – and has translated these into one or more goals for the solar project, it is ready to being the process of going solar. Though experiences with this process can vary in their details, there are a few steps common to most school solar projects. While not meant to be comprehensive, the process outlined below should provide readers with a general sense of the considerations and actions involved in pursuing a solar energy project.
Evaluate Energy Savings Potential
The first step toward becoming a solar school involves making a determination as to the energy savings potential a solar energy system can offer. Facilities staff should review school or district electric or gas utility bills over the previous 12 months to establish current energy usage and costs and provide a baseline to assess energy and cost savings. As the amount of energy that can be offset by solar is directly related to the size of the solar energy system, it will be necessary to estimate how large a system school rooftops or grounds can support. This can be done through a full solar site assessment, in which a solar installation company evaluates a number of site characteristics, including site orientation, available space, and amount of shading during peak solar hours. For rooftop systems, this process can involve determining roof condition and age and whether the structure can support the static and dynamic loads associated with the solar installation.
A school may not ready or able to commit to a full site assessment right away. In these cases, facilities staff can use a number of free online tools to develop a general sense of a school’s suitability for solar. Sun Number (www.sunnumber.com) provides users with a single score – based on building potential for solar, regional climate, utility electricity rates, and the cost of solar – demonstrating the potential for solar at a given site. While not currently available for the entire U.S., Sun Numbers are available for most sites in three dozen major cities and metropolitan areas. Another option is available through Geostellar (www.geostellar.com), which has mapped the solar potential of rooftops in some parts of the country and provides free access to heat maps showing how much sunlight each portion of a given roof receives. In addition, some state and federal agencies have developed resources outlining the site screening process.[1]
Having obtained a basic idea of the system size that can be supported, staff can evaluate potential energy cost savings using a number of free online tools, including the National Renewable Energy Laboratory’s PVWatts Calculator (pvwatts.nrel.gov) or the System Advisor Model (sam.nrel.gov).
Understand Solar Financing Options
Once the school or district has a general idea of site suitability for solar and how large a system can be supported, the next step in estimating energy cost savings is to understand the costs of solar and available financing options. Though the installed cost of solar has fallen quickly over the past few years, these systems still represent a significant investment and therefore often require some form of financing. Fortunately, a number of public and private financing options have been developed to help overcome this barrier. Because of the tax-exempt status of public schools and the local nature of some of these programs, however, not all options will be available in every case. For information on specific incentives or programs for which your school may qualify, visit the Database of State Incentives for Renewables and Efficiency at www.dsireusa.org.
Federal Incentives
The primary federal incentives supporting solar are the residential and commercial solar Investment Tax Credit (ITC), providing a federal income tax credit equal to 30 percent of total installed system costs, and the Modified Accelerated Cost-Recovery System (MACRS), which allows non-residential solar customers to recover the value of investments in solar through depreciation deductions on federal taxes. Because both are tax incentives and public schools and districts do not have tax burdens, these customers are unable to take direct advantage of these key financing options, which can pose significant challenges for schools in areas with few state, local, or utility incentives or without access to private financing. In states that allow for third-party ownership of solar energy systems (explained in greater detail on page 36), schools and other tax-exempt entities are able to leverage these credits indirectly by acquiring solar through a Power Purchase Agreement (PPA).
State Incentives and Financing
Recognizing the value of solar energy in helping meet state renewable energy goals, more than 40 states offer some form of incentive or other financing options for solar.[1] Common incentives or programs include tax credits, deductions, or exemptions and grants, loans, or rebates supporting public and/or private investments in solar energy. In addition, some states have chosen to promote solar through their Renewable Portfolio Standards (RPS) – requirements for utilities to derive a certain percentage of their retail electricity sales from renewable sources by a target year – by mandating that solar electricity constitutes a defined portion of this renewable requirement. In a handful of states with “solar carve-outs,” these requirements have given rise to Solar Renewable Energy Certificate (SREC) markets. These SRECs represent the environmental or non-energy attributes of solar electricity and can provide system owners with a significant additional project revenue stream.[2]
Utility Incentives and Financing
As with many states, utilities may also offer consumer grants, loans, or rebates for solar energy. In addition to or instead of these incentives and programs, some utilities provide performance-based incentives (PBIs) for their solar customers. Rather than being based on the cost of the investment in solar (as is the case with grants, loans, or rebates), PBIs are tied to the amount of electricity produced by a solar energy system. For example, some utilities arrange to purchase all the electricity produced by an eligible solar energy system at a rate higher than the retail price of electricity. In these “buy all, sell all” arrangements, solar customers receive larger total payments as their systems generate more electricity.
In addition to these incentives, utilities in 43 states and the District of Columbia are required to offer net metering programs to their solar customers.[1] With net metering, customers are credited by the utility for any excess energy exported to the grid. These credits can in turn be used to offset the cost of electricity used from the grid at night or other times when solar energy systems are not producing enough electricity to meet on-site needs. When classes are in session, schools consume the most energy at times when daily solar electricity production is greatest. Because demand tracks closely with system production during this period, it is possible that comparatively little electricity will be exported to the grid (versus a residential system, for which production peaks when on-site needs are low, as these building are usually unoccupied in the middle of the day). During summer months, however, when demand for electricity is much lower but system production is still high, net metering becomes much more important.
Other Public Financing Options
While schools may be limited in their ability to leverage certain solar incentives, they have access to other funding mechanisms unavailable to private solar customers. As a special-purpose district of a local government, school districts may issue certain types of bonds to cover the up-front cost of going solar. Energy cost savings can then be used to repay the principal and interest due to bondholders. Because municipal bond holders are usually willing to accept lower interest rates than on other debt investments, schools projects can be funded at a lower cost of capital compared with most private sources of debt.
To help further reduce interest payments on municipal bond debts, the federal government has authorized $3.2 billion in funding for state, local, and tribal governments to issue Qualified Energy Conservation Bonds (QECBs) to finance certain energy efficiency upgrades and renewable energy projects. Through these QECBs, the federal government provides bond issuers with direct interest rate subsidies. While the subsidy amount varies with U.S. Treasury Qualified Tax Credit Bond Rates, bond issuers have generally received subsidies between approximately 3-4 percent of the bond amount. In one example, a bond with a 6 percent interest rate received a 3.7 percent direct QECB subsidy, leaving the issuer to pay only 2.3 percent in net interest. More information on QECBs as well as updates on program changes and remaining bond authority can be found in a semi-annual report published by the Energy Programs Consortium.[1]
Schools are also somewhat unique in their ability to enter into a tax-exempt lease-purchase agreement. Also known as a “Municipal Lease”, this financing mechanism allows some local governments or districts to lease solar energy equipment from a solar company at lower payments and longer terms than other leasing options. Due to the inclusion of non-appropriation language, these agreements are usually not considered long-term debt, with lease payments made from operating rather than capital budgets. At the end of the lease term, ownership can be transferred to the municipal customer either outright or for a nominal fee. As with some other lease options, however, the school district is unable to take advantage of federal tax incentives through these arrangements. In considering this option, schools should weigh the benefits of low tax-exempt interest payments and a longer lease term against alternatives that do allow for tax incentives to be passed on to the solar customer.
Private Financing Options
In addition to the wide array of public financing options for solar, there exist a number of private alternatives. The leading private option for the last several years has been third-party ownership of solar energy systems. Under these arrangements, the solar customer serves as host for and receives the electricity from – but does not own – the installation. Instead, the solar developer retains ownership of the system, and either enters into a solar lease with the customer or sells them the electricity produced by the system outright through a power purchase agreement (PPA). One of the main advantages of third-party ownership for schools is that – because the solar developer is a tax-paying private enterprise (and is often partnered with other private entities with even larger tax appetites) – tax-exempt solar customers are able to benefit from federal (or state, where available) tax credits through lower lease payments or PPA rates. In addition, the financing offered by the third-party system owner can significantly reduce or eliminate the upfront cost of going solar. Availability of PPAs as a financing option, however, depends on the state utility legal and regulatory framework. To date, only 22 states and the District of Columbia have expressly allowed for third-party solar PPAs.[1]
In some cases, it may be possible to combine school district bond-issuing ability and third-party ownership into a bond-PPA hybrid (also known as the “Morris Model”, named after the New Jersey county in which the first hybrid deal was completed). Though reliant on a complex financing structure, the basic idea behind the model is relatively simple. Rather than using proceeds from a bond issuance to directly fund the installation of a solar energy system, the customer instead passes this capital on to the solar developer, providing them with lower-cost project capital than they would have otherwise been able to obtain. The developer then has the system installed and enters into a PPA with the customer, who receives the value of any tax credits in the form of a lower PPA rate. While this hybrid model can provide significant savings for the solar customer, these deals are often complex and replicability hinges on a number of different laws and regulations.[2]
Energy services performance contracts (ESPCs) can provide schools with another cost-effective means of investing in solar. Through these agreements, customers contract with an energy services company (ESCO) to assess the current energy use of one or more buildings and to propose a package of energy conservation measures to reduce consumption. The ESCO provides a customer with a guaranteed level of performance for these energy upgrades and ensures a minimum level of cost savings. A portion of these energy cost savings compensates the ESCO for their work in making the energy upgrades, with the remainder retained by the customer. While ESPCs have typically involved energy efficiency measures (such as energy efficient lighting, building envelope improvements, etc.) with a relatively short payback, these contracts can also include upgrades with a slower payback, such as solar PV. In states that allow for third-party ownership, tax-exempt customers such as public schools could enter into a PPA with the ESCO for the solar PV system included as part of the performance contract, allowing the customer to invest in solar with little or no upfront cost and for the ESCO to take any available tax credits and pass their value on to the customer. For more information on solar in ESPCs, see Integrating Solar PV into Energy Services Performance Contracts: Options for Local Governments Nationwide from the North Carolina Clean Energy Technology Center (www.nccleantech.ncsu.edu).[3]
While not in itself a financing mechanism, net-zero building can provide schools with another opportunity for investing in solar. The “net-zero” in this term refers to energy use – that is, the building produces and/or collects as much energy as it uses in a typical year of operation. Energy strategies for net-zero construction can include use of highly efficient equipment, building envelopes that minimize energy losses, passive solar design, and renewable energy generation technologies (such as solar PV), among others. Richardsville Elementary School in Warren County, Kentucky illustrates how net-zero building can provide great benefits to schools. The first net-zero public school in the nation, Richardsville Elementary has managed to not only reduce its energy costs to zero, but generated 47.8 MWh more energy than it consumed in 2012, earning the school more than $40,000 that year. Such a dramatic savings was achieved through a combination of energy efficient systems, a high-performance building envelope, a geothermal HVAC system, daylight harvesting, and other measures, including a 208-kW thin film rooftop solar PV system and a 138-kW solar PV parking canopy.[4]
Obtain Approval for Project
Once a clear understanding of the energy savings potential, costs, and financing options for a solar energy system have been developed, the next step is to obtain approval for the project. This process not only involves making the case for solar to decision makers within the school district, but to demonstrate to external stakeholders (including students, parents, and other community members) the value of an investment in solar and how such a project can help attain community goals or otherwise reflects local values. Community Power Network (www.communitypowernetwork.com), a non-profit organization working to promote locally-based renewable energy projects and policies, outlines a step-by-step process for community engagement in the short guide Solar Schools: A Resource Guide to Help Your School Go Solar.[1]
Draft and Issue Request for Proposal
While the solar procurement process shares many similarities with the steps involved in many other large equipment purchases, the unique nature of solar energy necessitates the inclusion of particular elements in requests for proposals (RFPs). A list of potential solar-specific RFP elements may include, but is not limited to:
- Protection of Roof Integrities and Warranties
- Provisions for Performance Monitoring/Guarantees
- System Technical Specifications
- Assigning Responsibilities to Contractors for Obtaining Permits for Interconnection Agreements
- Requirements for an Operation and Maintenance Plan
- Local Equipment or Labor Requirements
- Leveraging Project Educational Value
Not all of these elements will be included for every project. Rather, different provisions will be included or omitted based on the goals set by the school for the project. For example, a project focused on tapping the economic development potential of solar deployment may include requirements for local materials or labor, whereas a system pursued mainly for educational purposes might place greater emphasis on how well the respondent leverages the project to enhance students’ learning experiences. The Solar Foundation’s Steps to a Successful Solar Request for Proposal (RFP) discusses many of the key elements of a solar RFP, as well as best practices in overall RFP development, in greater detail.[1]
Additional Resources
Coughlin/ National Renewable Energy Laboratory, J., & Kandt/ National Renewable Energy Laboratory, A. (2011). Solar Schools Assessment and Implementation Project: Financing Options for Solar Installations on K-12 Schools (TP-7A40-51815). Retrieved from National Renewable Energy Laboratory website: www.nrel.gov/docs/fy12osti/51815.pdf
Community Power Network. (n.d.). A Resource Guide to Help Your School Go Solar. Retrieved from http://communitypowernetwork.com/sites/default/files/Solar percent20Schools_P2 percent20 percent282 percent29.pdf
Kinman/ Environment California Research & Policy Center, M. (2012). Making the Grade with Clean Energy: Case Studies of California Solar Schools. Retrieved from www.kcet.org/news/rewire/MakingtheGradewithCleanEnergy.pdf
Sandry/ Mosaic, J. (2013, June 12). Solar on Schools: Report Card - Mosaic Blog. Retrieved from https://joinmosaic.com/blog/solar-schools-report-card/
The Solar Foundation. (n.d.). Solar on Schools Resource Guide for K-12. Retrieved from http://thesolarfoundation.org/sites/thesolarfoundation.org/files/Solar percent20on percent20Schools percent20Resource percent20Guide_FinalDraft.pdf
Taylor/ Architecture for Humanity, Z., Jacobs/ Architecture for Humanity, G., Roth/ Dyan Roth Design, D., & Wiedower/ U.S. Green Building Council, J. (2013). Green Schools Investment Guide: for healthy, efficient and inspiring learning spaces. Retrieved from Architecture for Humanity website: http://centerforgreenschools.org/Libraries/Green_School_Investment_GUide...
[1] The Solar Foundation. (2012). Steps to a Successful Solar Request for Proposal. Retrieved from http://thesolarfoundation.org/sites/thesolarfoundation.org/files/TSF_Steps percent20to percent20Successful percent20Solar percent20RFP_Final.pdf
[1] Community Power Network. (n.d.). A Resource Guide to Help Your School Go Solar. Retrieved from http://communitypowernetwork.com/sites/default/files/Solar percent20Schools_P2 percent20 percent282 percent29.pdf
[1] DSIRE Solar. (2013, February). 3rd-Party Solar PV Power Purchase Agreements (PPAs)[Map]. Retrieved from http://dsireusa.org/documents/summarymaps/3rd_Party_PPA_map.pdf
[2] Kreycik/ National Renewable Energy Laboratory, C. (2011, December 13). Financing Solar PV at Government Sites with PPAs and Public Debt | Renewable Energy Project Finance. Retrieved from https://financere.nrel.gov/finance/content/financing-solar-pv-government-sites-ppas-and-public-debt
[3] North Carolina Solar Center. (2014). Integrating Solar PV Into Energy Services Performance Contracts: Options for Local Governments Nationwide. Retrieved from Solar Outreach Partnership website: http://solaroutreach.org/wp-content/uploads/2014/04/NCSC-Solar-ESPCs-FINAL.pdf
[4] ICMA. (2014). Solar Powering Your Community Workshop: Owensboro, Kentucky | icma.org. Retrieved from http://icma.org/en/icma/knowledge_network/documents/kn/Document/306104/S...
[1] Energy Programs Consortium. (2014, June). Qualified Energy Conservation Bonds. Retrieved from www.naseo.org/Data/Sites/1/epc-qecb-paper-june-2014-.pdf
[1] DSIRE. (2013, July). Net Metering [Map]. Retrieved from http://dsireusa.org/documents/summarymaps/net_metering_map.pdf
[1] DSIRE Solar. (2013, February). Financial Incentives for Solar PV [Map]. Retrieved from http://dsireusa.org/documents/summarymaps/PV_Incentives_Map.pdf
[2] More information on SRECs can be found via SRECTrade (www.srectrade.com) or Flett Exchange (www.flettexchange.com)
[1] Leading by Example Program. (n.d.). Solar Site Selection Survey. Retrieved from www.mass.gov/eea/docs/eea/lbe/lbe-solar-site-select-survey.pdf; U.S. Environmental Protection Agency. (n.d.). Screening Sites for Solar PV Potential. Retrieved from www.epa.gov/oswercpa/docs/solar_decision_tree.pdf