Solar for nonprofits: Benefits, financing explained

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solar for nonprofits

The number of properties with rooftop solar panels is increasing every day, and it isn't just homeowners who are going solar to offset their electricity bills. Whether it’s a small business or a corporation as large as Google, the number of companies installing solar to decrease overhead costs and promote corporate social responsibility is growing. Now, nonprofit organizations are starting to explore their solar options as well.

Nonprofits have traditionally had a difficult time going solar because of limited resources. As a result of the falling cost of solar installations and the wider availability of specialized financing options, it’s now much easier for nonprofit organizations to take advantage of the benefits of solar energy.

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There are many advantages to installing a solar system when it comes to nonprofit organizations.

Financial benefits

Going solar decreases the cost of operations for nonprofits, leaving more funds to devote to their mission. The amount of savings a solar panel system can generate for an organization depends on many factors, including the size of the system, geographic location, and current electricity rates. On average, a system will generate tens of thousands of dollars in savings during its 30+ year lifetime by producing free electricity. Without a solar system, the nonprofit would otherwise have to pay a utility company for electricity every month in perpetuity.

Solar also insulates organizations from volatile electricity rates. Electricity prices have historically risen at around 3% each year nationwide, and price increases fluctuate depending on the cost of fuel. Solar provides a low fixed-price for electricity that never changes – or eliminates the cost completely – which has the added benefit of making it easier to project operating costs into future years.

Social & economic benefits

The adoption of solar energy reduces the U.S. economy's reliance on foreign energy and contributes to local economies by creating jobs. The solar industry employs more people in the U.S. than the oil, gas, and coal industries combined, according to a report from the Department of Energy.

Environmental benefits

Many nonprofit organizations are committed to cleaner, green energy, and going solar is one way to meet those goals. Installing solar decreases your organization's overall carbon footprint because carbon dioxide emissions are typically generated from coal or natural gas-based electricity. Solar power is emissions-free, and the increasing adoption of solar, along with other renewable energy technologies, decreases the overall emissions that large buildings generate over time.

Despite the many benefits of solar energy, many nonprofits lack the funding to install a solar panel system. Residential and commercial properties not only have an easier time obtaining capital or financing for the installation, but they can also take advantage of tax incentives for owning a solar panel system that nonprofits cannot.

The federal solar tax credit (ITC) is the biggest financial incentive for owning a system nationwide, offering a tax credit worth 30% of the cost of a solar panel system. However, since nonprofits don't have tax liability (which is generally good come tax time), it also means that they can't take advantage of local or federal tax credits for solar. For nonprofits, not being able to take advantage of the ITC leads to an extended payback period for owning a solar panel system and lower overall savings.

Because of this, many nonprofit organizations finance their solar installation through a lease or power purchase agreement (PPA) rather than owning the system outright. Many solar leases are zero-down, which means they don't require an upfront payment. With a solar lease or PPA option, a third-party financier owns the system and covers the cost of installation and maintenance over the duration of the agreement. In return, they receive tax credits and other financial incentives available to them as the system owner. While some solar installation companies finance leases themselves, many work with banks or lenders to secure financing for their nonprofit clients.

Typical solar lease or PPA agreements have a duration of 10 to 20 years, during which the property owner pays the leasing company each month for essentially renting the system and generating free electricity. On average, going solar can reduce an electric bill anywhere from 10% to 30%.

CollectiveSun solar financing

While most solar leasing agreements typically require monthly payments, there are also contracts that can be paid as an upfront lease or PPA. CollectiveSun, an EnergySage partner, provides a different approach to the classic PPA agreement.

CollectiveSun offers financing through a prepaid PPA in which the nonprofit organization pays for the entire term of the PPA upfront. CollectiveSun can take advantage of the 30% solar tax credit and pass half of those savings (15%) on to the nonprofit organization. After year 6 of the agreement, ownership of the system transfers to the nonprofit with warranties to cover maintenance. From then on, the nonprofit has free access to the electricity from the solar system. CollectiveSun financing is available to nonprofit and tax-exempt organizations in all 50 states.

For nonprofits, one of the hurdles with this type of financing can be coming up with the upfront capital to pay for the prepaid PPA. However, CollectiveSun offers financial assistance and a variety of ways to help secure the necessary funds. These can include soliciting donations from the members of the nonprofit, financing via property-assessed clean energy (PACE), a crowd-lending option, and more.


RE-volv is another organization devoted to making solar more accessible for nonprofits through innovative financing solutions. Its model, called the Solar Seed Fund, allows nonprofits to save 15% on their electricity bills through a solar PPA or lease. Over time, as a nonprofit makes its lease or PPA payments for the discounted solar electricity, money is reinvested into the Solar Seed Fund, helping to continuously finance additional solar projects for other nonprofits across the country. In RE-volv's own words, "It's a pay-it-forward model for solar energy."

If you work at a nonprofit interested in going solar, we recommend signing up on the EnergySage Marketplace to receive multiple competitive bids for a solar installation. It's a good idea to have a discussion with a decision maker at your organization to confirm they're on board with exploring solar options.

Before signing up, collect past electric bills and the electricity use history for your organization – installation companies use this information to appropriately size your solar panel system so that it can cover as much of your building's electricity needs as possible.

If you're seeking financing options for the installation, it's also a good idea to talk to your potential installer about the lenders they have relationships with and what their offerings are. You can also each out directly to organizations like CollectiveSun and RE-volv that are committed to helping nonprofits finance their solar projects.

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