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Summer Project: Funding a Solar Project at a School

| Tuesday July 7th, 2009 | 1 Comment

BorregoSolarSchools.jpg

Nationwide, K-12 schools spend over $6 billion per year on energythat’s more than textbooks and computers combined. While government-sponsored solar incentives hope to reduce that bill (and provide a fun educational opportunity for students), not all incentives are created equally.
When I asked Richard Raeke, Director of Project Finance at Borrego Solar Systems, to share his secret solar financing formula, he admitted his work is not easy: “I have a 17-page financial model to analyze the viability of any solar project.” He quipped he could work full-time just following all of the government incentive programs.
How can an average school district possibly keep up with changing trends? We offer a glimpse at incentive programs in two states and a few resources to get you started…


California’s Solar Initiative
California’s Solar Initiative offers two performance-based approaches.
First, the Expected Performance-Based Buydown (EPBB) offers a one-time, lump-sum payment to offset the cost of installation. The more Watts the system can produce, the larger the upfront payment. A Borrego Solar installation of this type at Marin Country Day School cut $240,000 off the installation price and is expected to save the school $2 million over the next 30 years!
Second, the Performance Based Incentive (PBI) provides a pre-defined $/kWh for every solar kWh produced over the span of 5 years. In 2007, government and non-profit entities could receive $.50/kWh.
However, this program has one Achilles’ Heel: The rates are designed to “step down” as more solar comes online. (The program assumed solar costs would drop over time which would allow rates to decrease accordingly.) As a result, the PBI has dropped to $.15/kWh in parts of California.
While California’s program has brought over 211 MW of solar capacity online, the EPBB and PBI incentive reductions have created challenges for California schools that want to invest in solar today. Raeke has seen a drop in deals because it is difficult to create solar contracts with a $.15/kWh PBI that are competitive with current electricity rates.
For that reason, Vermont’s feed-in tariff system provides a unique alternative.

Vermont’s Feed-In Tariff

In May, Vermont enacted the first statewide feed-in tariff (FIT) in the country. This program is going to be a very big deal when contracts are offered later this year. When Gainesville, FL, implemented a FIT, contracts were fully subscribed in the first day of their offering.
Why the popularity? A FIT is very lucrative. Here is how it works. Over a contract of 25 years, utilities are required to pay a premium price of $.30/kWh for every kWh of solar pumped into the grid. (Other renewables qualify for equally-lucrative rates as well.) With average electricity prices in Vermont at $.13/kWh, solar installations can generate a significantly positive cash flow!
Also, with a guaranteed price of $.30/kWh for 25 years, investor uncertainty is significantly reduced. In fact, FIT’s have been the driving force behind explosive solar growth in Germany, Spain, and some emerging European powerhouses (sorry about the pun..).
Finding Incentives for Your School
Don’t live in California or Vermont? The DOE’s Database of State Incentives for Renewables & Efficiency (DSIRE) offers state-by-state listings of solar initiatives. While it can be daunting for newbies, there is good news: Most incentive programs use some variation of an EPBB, PBI, or FIT. (See how much you know already?)
Many solar providers also have school-specific offerings. For example, Borrego Solar’s “Solar Schools” initiative has its own team with dedicated educational resources specifically for its K-12 customers. (They also have those 17-page financial models…)
The DOE even offers lesson plans with a solar energy and efficiency focus. Put those kids to work!


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