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Best-Fit Ownership and Finance Models
This section briefly describes three models that currently offer opportunities for community energy ownership in the Northwest. It is possible that changes in incentives, available financing, law, or other factors will result in new, better models. Project coordinators are encouraged to explore all options during the initial phase of the project.
City, County, Nonprofit
Publicly owned projects cannot take advantage of Business Energy Investment Tax Credit (ITC) or Accelerated Depreciation. However, they may be able to access lower-cost public financing and Clean Renewable Energy Bonds. Public entities may also have lower financial return requirements. Municipalities may have internal resources to manage many of the phases of a project, lowering costs and adding control.
Multiple Local Investors
In this model, local investors join to form a Partnership, LLC, or SCorp that owns and operates the project. Income, deductions, and gains and losses flow through to partners or members, who report these amounts on their individual tax returns. In this model, depending on the “tax credit appetite” of the individuals, some or all of the BETC and Accelerated Depreciation benefits can be realized. However, individuals would need other passive income (for example, from other Partnerships) and may run up against Alternative Minimum Tax constraints.
“Flip” Structure
A local investor without tax credit appetite brings in a tax-motivated corporate equity partner to own most of the project for the first years (i.e., the period of tax credits), and then “flip” project ownership to the local investor thereafter. This structure has been popularized with Community Wind projects, particularly in Minnesota (Bolinger et al., 2004). The Pacific Habilitation Center Northwest (PHC) in Portland, Oregon employed a similar approach for the development of an 870 kW PV system.
