Nonprofits are the backbone of our community. They provide houses of worship, educate our children and deliver vital services to the most vulnerable among us. These are the organizations that we should be going out of our way to help.
However, when it comes to renewable energy, nonprofits are among the lowest represented of any segment. Why? Simply stated, nonprofit organizations have no tax liability. As such, they are unable to take advantage of the tax benefits that are used by corporations and home owners who want to deploy renewable energy at their homes and businesses.
Community Funded PPAs
The solution to this problem is a well-established financial mechanism known as a Power Purchase Agreement (PPA). A PPA is a third party solar ownership structure that provides solar as a service to an underlying host. Selling electrons as a service allows the third party owner to monetize tax benefits, and then pass the savings through to the host in the form of low cost power.
Tax exempt organizations like government municipalities, water districts and universities have used the PPA structure with great success to fund large projects. However, for smaller nonprofits it has been difficult if not impossible to qualify for traditional PPAs. This typically happens because the organization does not meet rigid underwriting standards or the project size is simply too small.
We at CollectiveSun have worked to eliminate these problems. CollectiveSun is an impact investing platform for investors who want to support renewable energy projects and great nonprofits. We work with communities of faith (churches, synagogues, etc), schools and other 501c3 community service organizations who want to go solar. We are not installers. Rather, we help nonprofits organize their community to finance solar projects as an investment (not a donation) that rewards investors with annual principal and interest payments.
Doing Well By Going Solar
As an installer, serving nonprofits is more than just altruism. Nonprofits are deeply embedded in the fabric of a community and their members are a loyal group. A successful nonprofit project often leads to other referral opportunities with members of the nonprofit. In addition, the PR benefits of a community-based investment campaign are significant for both the nonprofit and the installer.
Helping nonprofits embrace renewable energy is also a great way to grow the solar industry. Without a mechanism to take advantage of tax incentives, these transactions would be non-economic and simply would not happen. A community-funded PPA is just the tool needed to demonstrate real savings for nonprofits who want to go solar, thereby making these projects possible.
CollectiveSun’s approach uses investments from a nonprofit’s own support network, offering another channel of engagement to develop new financial and nonfinancial supporters. Rather than donating money in an endless cycle to pay for electricity bills, installers can now offer nonprofits a pathway to taking advantage of the savings that solar energy provides and becoming energy self-sufficient.
Lee Barken, CPA, LEED-AP is the Chief Community Officer at CollectiveSun, LLP.
You can reach him at firstname.lastname@example.org.