Solar developers and contractors are in the unique position of being able to educate non-profit organizations about solar energy and bring its benefits to their communities, says Keith Cronin, an instructor for numerous HeatSpring courses and founder of SunHedge.
“The underserved market is non-profits: Churches, foundations and others,” says Cronin, co-instructor of the HeatSpring course, Solar PV Finance for Non-Profits: Things You Need to Know Before You Pitch to Your Clients.
Non-Profits Need to Understand the Economics and Risks of Solar PV
It’s important to keep in mind that board members of non-profits are often focused on their organization’s mission and unaware of the vocabulary, economics or politics surrounding solar PV, says Christopher Lord, managing director of CapIron and the other instructor of the course.
Working with non-profits requires developers and contractors to expect a conservative and sometimes plodding decision-making process, Lord says.
Be Patient but Understand the Urgency of the ITC Phase-Out
That’s why patience–and persistence–are important, especially given that the solar tax credit, an investment tax credit (ITC), is phasing out. It’s now at 30 percent of a project’s cost, but beginning Jan.1, 2020, it will drop to 26 percent, followed by 22 percent in 2021 and 10 percent in 2022. While non-profit groups can’t directly take advantage of the tax credit because they don’t pay taxes, there are some states in which non-profit groups can sign power purchase agreements (PPA) under which a third party owns the system. The third party can then pass along some of the value associated with the tax credit to help lower the cost of electricity from the solar system. Under the PPA, a non-profit makes monthly payments for the solar power generated from the solar system sited on their roof or adjacent parking lot or land. Often, those payments are lower than the cost of utility power. The third parties can pass along the savings associated with the ITC.
“If we could get the ear of the boards of non-profits, they’d understand the urgency of the tax credit,” says Cronin. “Boards are slow to make decisions and meet monthly and the education cycle can be long and take months. Add in competing proposals from other developers and now the layer of complexity goes up multifold. And when boards are tasked with sifting through the various proposals, they can be easily confused trying to compare apples to apples.
An Aggressive Rush to Get Projects Done
“With the ITC slated to drop after 2019, there is going to be an aggressive push by developers to get as many projects signed up as possible this year,” says Lord. “At some point, the resulting demand for solar equipment and workers will start to push prices up, as available supply drops. That is why it is better for non-profits to move on solar as early as possible in 2019.”
When working with non-profits, contractors and developers need to ask these important questions to help the organizations identify the risks and rewards of solar PV:
- Who owns the building? Is the building owner or landlord open to solar? “You want to make sure there are no encumbrances on the property. You want to make sure the economics support solar,” says Lord. “And landlords need to understand it’s a 20-plus-year deal, maybe 25 years.”
- Is the roof suitable for a solar system? Will it stand up over the 20- or 25-year duration of a contract? Is it surrounded by trees or buildings that would block solar radiation?
- Does the electrical usage justify a solar system? If a church, for example, is only used a few days a week, it’s possible an investment in solar won’t pay off within a reasonable period of time. Be sure to ask for the non-profit’s utility bills to identify the electrical usage.
- What is the local utility price? This helps you calculate and explain the savings. If a flat price contract for the solar output is offered to the non-profit, the organization needs to feel comfortable with the fact that prices may be slightly higher than the local utility’s during the first few years of the contract.
- How can the non-profit organization feel comfortable with the contractor? Consider having the organization issue a request for proposals. Keep in mind that unusually low bids generally are a red flag about the bidder.
Along the way, keep in mind that non-profit organizations have a different way of making decisions.
Non-Profit Experts Aren’t Solar Experts
“For non-profits, the decision-making and sale process tends to be long and slow because the people who run non-profits are experts in their fields, but not experienced with energy purchases,” says Lord. Or they could be CFOs who understand numbers but have limited budgets and are focused on their mission.
Be patient, ask the right questions, and be prepared to educate non-profit organizations about all that’s entailed in solar PV–and all its benefits to the people the organization serves.