Challenges of Taking Your School Solar

What are some of the challenges for schools going solar?

Schools interested in going solar face a few unique challenges. Most significantly, because schools are nonprofit entities that do not pay taxes, they cannot take advantage of federal and state tax credits for solar systems. Because federal tax credits can amount to almost 50% off the total cost of a system, this can be a lot of money to leave on the table, particularly for large projects. To get around this issue many schools have gone solar via a Power Purchase Agreement (PPA), in which a for-profit entity owns the solar system installed on a school and the school pays that entity for the solar electricity that the panels produce.  The for-profit entity is able to take the tax credits for the solar system and pass those savings onto the school via a lower cost of electricity. PPAs are a good option for schools, too, because the system owner is responsible for any maintenance or repairs for the lifetime of the contract.

Each state also has different regulations and incentives regarding solar installations, so it is important to research your state's the rules, regulations, policies, and incentives.

Another challenge for schools interested in going solar involves contracting. Public schools are often subject to a “deficiency clause” that prevents them from entering into multi-year contracts that appropriate funds. This is the case because only state or federal legislatures are allowed to appropriate funds (so school districts don’t have the authority to make multi-year commitments).

The good news is that many federal and state agencies have now signed PPAs and by working with a good lawyer your school may also be able to do so. Many schools have succeeded in signing PPAs because they present them as another form of utility contract. Schools have been signing contracts to pay for electricity and gas for years, so doing so with a PPA should not be a problem. The challenge is making sure that your solar PPA is treated as a utility contract.

Finally, once your school has installed solar it may be difficult for your building to capture the money that it is saving by going solar—especially if you are a public school. This is because solar offsets electricity bills that are usually paid out of the district’s general fund. If that money isn’t used to pay electric bills, it is usually allocated for other uses. When getting approval to install a solar system from the school board you should have them agree to set aside some or all of the saved money for your school. This is often a great way to get the PTA or parents involved in advocating for a solar system, since the solar system will create a pot of funds that can be used by the PTA for other initiatives.

This guide from the Clean Energy Resource Teams gives a good overview of some best practices schools in Minnesota have used to both acquire and finance solar systems.