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November 2016 Featured Article
Public School Budgets Saving Average of $21,000 Per Facility with Solar Power
The struggle to balance budgets for public schools is never easy. Making the situation worse, funding for new school construction doesn’t often consider the operating costs of the facility on local taxpayers after the doors have opened. For most, utilities remain as the second largest expenditure in a school district’s budget, following personnel costs. Combatting these figures, more than 3,700 K-12 schools in the United States have installed photovoltaic (PV) systems according to the 2014 Solar Energy Industries Association (SEIA) report. In fact, the electricity generated by solar in one year is saving school facilities on average $21,000.
Today, a school district can directly purchase, own and operate PV systems using a variety of financing mechanisms. These include using existing reserves available from the general fund, traditional tax-exempt bond financing, proceeds from state transfers of funds (e.g., state school construction and modernization funds), other forms of grants (e.g., from foundations and private businesses) and a variety of tax credit bonds.
A more popular path is the Clean Renewable Energy Bonds (CREBs) program that allows municipalities to access low-cost financing opportunities to invest in renewable energy projects. These project types can take schools a step further, and include wind and geothermal options as well. CREBs differ from traditional tax-exempt bonds in that the tax credits issued through CREBs are treated as taxable income for the bondholder. The tax credit may be taken each year the bondholder has a tax liability so long as the credit amount does not exceed the limits established by the federal Energy Policy Act of 2005.
For many, third-party financing of solar energy is another great option. Municipalities have typically two options: power purchase agreements (PPAs) and solar leases. In the PPA model, the solar energy system is provided to the school at no cost. The solar energy system offsets the district’s electric utility bill, and the developer sells the power generated to the customer at a fixed rate. This rate is typically lower than the local utility resulting in cost savings. In the lease model, a customer will sign a contract with an installer/developer and pay for the solar energy system over a period of years or decades, rather than paying for the power produced.
At the end of the PPA contract term, property owners can extend the contract or take the option to purchase the solar energy system from the developer. As for solar leases, they can be structured so customers pay for either no up-front costs, some of the system cost or purchase the system before the end of the lease term. Similar leasing structures are commonly used in many other industries, including automobiles and office equipment.
School districts across the U.S. are continuing to take advantage of these opportunities to help the environment while saving tax dollars. If we were to look at total savings from all 3,700+ schools with active PV systems, in one year alone enough dollars are saved to hire nearly an additional 2,200 new teachers nationwide.
Published November 2016.