Methods to Finance Solar
Current federal tax credit: 26% in 2022 for both residential and commercial (decreases to 22% in 2023, 10% for commercial in 2024, 0% for residential)
Commerial businesses can also take depreciation, which means a business installing solar should be able to completely pay it off in 4-5 years depending on install cost
Homeowners should see it pay off with their tax credits and electricity savings in 9-10 years
Below is a table describing the different financing methods available for businesses, non-profits and municipal organizations (for schools, see also our solar on schools page)
| Method | Institution | Description |
| LLC of investors (or single investor) | Non-profits |
Individual or LLC of investors installs and owns the solar Takes federal tax credit and 100% depreciation (equivalent to >31% deduction) first year (split between investors) Institution pays LLC for solar via PPA Payoff time 7-10 years depending on desired profit LLC sells/gives solar system to institution at end Investors must have passive income (or be active in LLC) Tax credits can feed forward 20 years |
| Qualified Opportunity Zone Fund | In QOZ |
Same as above, plus: Investor gets 7-yr deferral of capital gains taxes, 15% step-up in basis (i.e. elimination of 15% of tax) Most useful for investors with capital gain & passive income Map of OZs is on-line |
| Commercial business | Business |
Commercial business installs and owns their own solar — normally pays off in 4-5 years Takes federal tax credit and 100% depreciation (equivalent to >31% deduction) first year Business must have sufficient income to soak up tax credits, but credits can feed forward 20 years Can get loan for install (payback rate greater than loan rate) |
| Taxable entity with non-profit | Non-profits |
A non-profit with associated taxable entity (e.g., real estate firm that owns building), that business can install and own the panels as above. Must have enough tax burden to use credits |
| Loan to installer or business | Any |
Loan can be made to installer or commercial business, which installs and owns panels, takes tax credits, paid via a PPA, can achieve 8-15 year payback depending on desired profit |
| RFP to solar financer/ installers | Any |
Commercial solar business installs solar for institution Companies like Suntribe, Solar City, Standard Solar, Secure Futures or Convert Solar can quote solar installation at no cost, payoff times 12-20 year time frame; paid via a PPA Many Virginia municipal school systems have used this Make sure installer is reputable (get multiple quotes) |
| C-PACE | Commercial property owners and developers |
Commercial Property Assessed Clean Energy financing Enabling legislation enacted in Virginia; local government must enact ordinance to use Commercial customers (and non-profits) can access 100% financing for solar PV (e.g., no down payment), pay back using savings on electricity |
| Crowd-funding | Any |
Example: https://localstake.com/businesses/secure-futures-solar/preview |
| Mission Energy | Catholic churches |
Catholic church network helps with financing: www.catholicenergies.org |
| Community Solar |
Example in Harrisonburg |
Advice:
When approaching an institution, bring everyone relevant to the table (leadership, development, finance, facilities, sustainability)
Motivate any interested groups (students, alumni, parents, faculty, congregation, members)
Lay out financial plan in detail, address details such as maintenance & insurance
Be patient but persistent
Notes:
Federal tax credit: 26% in 2022 (current schedule is 22% in 2023, 10% for commercial in 2024)
Virginia limits that may be removed by VA legislature:
PPAs with commercial entities limited to > 50 kW (non-profits any size, residential only with low income)
Roofs should be <5 years old (or renovated recently), not slate, flat or south-facing (within 45°), minimal shade 11 am – 3 pm.
Panel roof weight 2-3 lb/sq ft. Installs rated to 150 mph wind.
Can include battery backup for power to critical systems in a power outage.
Solar Renewable Energy Credit (SREC) market in Virginia makes solar payoff time much faster
Currently in VA 1 SREC = 1 MWh = ~$35
PPA = Power Purchase Agreement. Agreement by entity with solar installed to pay owner of solar system for power generated. Can be simple (1 page) to complex (50 pages).
LLC = Limited Liability Corporation. A way for a group of people to fund something together. Can be simple to start, and $50 per year to maintain.
Template LLC and PPA documents at http://solar.the-mcelroys.com/
Benefits from installation of solar:
Lower utility costs
Extend roof lifetime
Lower air conditioning costs
Lower carbon footprint
Mitigation of climate change / sea level rise
Example to others
Independence from utilities
Creation of high-paying, high tech local jobs
Potential barriers you may encounter that institutions worry about:
Maintenance
Insurance/liability
Future disposal
Risk
Damage to roof
Investor motives
Many of these barriers can be overcome by educating the customer using the Solar Resources page
