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financing and project models
Financing and Project Models
The concepts of financing and structuring ownership of a community solar system are interrelated. There are many different types of policies and incentives aimed to move solar projects forward. Often certain incentives pertain to certain ownership models (e.g. public versus private) or to different project scales (e.g. 5 kW versus 500 kW).
There is also no one-size-fits-all model for a Community Solar project. The size and structure of the project depend on the resources and requirements of the community.
Community Solar Project Models
People have many reasons for organizing or participating in a community solar project. Just as their motives vary, so do the possible project models, each with a unique set of costs, benefits, responsibilities, and rewards. This section reviews several project models:
- Utility-Sponsored Model, in which a utility owns or operates a project that is open to voluntary ratepayer participation.
- Special Purpose Entity (SPE) Model, in which individual investors join in a business enterprise to develop a community solar project.
- Non-Profit “Buy a Brick” Model, in which donors contribute to a community installation owned by a charitable non-profit corporation.
This website hopes to illustrate the pros and cons of different sponsorship models, as well as the variations within project models, so that project planners can select the model and variations that best suit their situation and goals. Before selecting a project model, every planner should consider the following issues:
Allocation of Costs and Benefits. Who will pay to plan, construct, and operate the solar system? Who will have rights to benefits, including the electricity produced, RECs, revenue from electricity sales, tax benefits, other incentives, and ownership of the project’s assets (such as the solar system itself)?
Financial and Tax Considerations. Will money be raised through a solar fee on electricity bills, by equity or debt financing of a business entity, through charitable donations, or various other options? What kind of tax implications will there be for participants–e.g., will the project generate taxable income for participants? Will it generate tax credits or deductions for participants?
Other legal issues. How will the project design address securities regulation, utilities regulation, business regulation, and the complexity of agreements between various project participants?
This chart compares aspects of the three sponsorship models (click to enlarge):
