Financing for Nonprofits

There are two approaches your nonprofit organization can use to pay for going solar:

  1. Direct ownership, where you own your system outright; or

  2. Third-party ownership, where another entity, such as a solar developer, owns and operate the PV systems on behalf of your organization.

Direct Ownership

Owning the system outright means you see an immediate reduction on your organization’s electric bills. You also retain the rights to all of the project’s solar renewable energy certificates (SRECs) and other local incentives. However, because your organization is a nonprofit, you can’t take advantage of the 30% federal tax credit if you purchase a system outright.

Direct ownership of a system makes sense for your organization if you are able to fundraise the cost of the project. It also makes sense if there is a specific grant available for you to purchase the system or if local community members will donate in-kind goods and services.  Typically organizations will fundraise to purchase a small demonstration project (3 to 5 kW), since the overall cost of a small system is fairly minimal.

DC SUN has online fundraising tools that local nonprofits, congregations, and community organizations can use at not cost. We’ll create an online fundraising page for you to fundraise for a project and you’ll do the outreach and advertising for the campaign. If you’re interested contact us to learn more.

Third-party Ownership

With third-party ownership, another entity (usually the installer) owns the solar system installed on your roof. You then pay the installer for the power that the solar panels produce, typically at a rate lower than what you are currently paying Pepco. This arrangement is called a Power Purchase Agreement (PPA).

PPAs makes sense for nonprofits and community organizations because it allows you to take advantage of significant federal tax credits. The federal government currently provides a 30% federal tax credit, as well as and accelerated depreciation tax credit that, in total, reduce the cost of solar system by about 50%. But, because your organization is a nonprofit and does not pay taxes, you’re not able to take advantage of that credit. With a PPA, the installer is able to take the tax credits and then pass that savings onto you. PPAs are typically structured to last for 10 to 25 years. At the end of your contract you can then (1) renew your contract, (2) have the installer remove the system, or (3) purchase the system from the installer at fair market value. If you opt for a PPA contract you should make sure that it includes language that requires the developer to remove the system at no additional cost at the end of their contract, which will allow them to avoid additional expense if they choose not to purchase the system at the end of the contract.

DC PACE

There is also an exciting new funding mechanism known as DC PACE, or “Property Assessed Clean Energy”. This allows you to pay for your solar system over time on your property tax bills, saving you money from day 1! Urban Ingenuity is the program administrator through the DDOE, and they have successfully helped at least one nonprofit (a church) navigate this method of financing. Check out their website and contact Urban Ingenuity to learn how your building can take advantage of this financing structure.

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