Solar Energy Financing

FINANCING MUNICIPAL, TRIBAL AND SCHOOLSOLAR PROJECTSother funding sources. Brown and Dane counties, OneidaDirect BuyTribe, City of Madison and Lakeland Union High SchoolMunicipal governments can directly fund and ownare among nearly 50 jurisdictions that own their own solartheir solar systems and have them installed on citysystems. More than 125 of their solar electric and solarbuildings, structures and land. The municipality puts outthermal projects are listed in Appendices 1 and 2.a request for proposal (RFP) for the project with basicUW-Extensionelements including: design, permitting,interconnection, equipment, installa-Over 125Owned SolarSystemstion, commissioning and timeline.Before issuing the solar RFP, themunicipality has work to do to: identifypotential sites and projects, collectdata to inform the choice of project and consult with itslocal utility about system size and connection options.The RFP should specify: That professional contractors must have a validWisconsin license or credential. One suchGround-mounted solar array owned by the OneidaNation of Wisconsin in Brown Countycredential is North American Board of CertifiedEnergy Practitioners (NABCEP) certification forDirect Buy Case Study That the system meet requirements for WisconsinFocus On Energy incentives. Including perfor-UW-Extensionphotovoltaic (PV) and solar heating installation.Pole-mountedsolar arraymance expectations about the amount of energythe system will generate is a preferred approachto specifying types of equipment. Also specifythat the photovoltaic panels and inverters arelisted on the Go Solar California prequalifiedequipment list, that warranty information isBrown County Sheriff’s Office pole-mounted PV systemprovided and that the systems meet national,state and local electrical and building codes.BROWN COUNTYSome municipalities that have a goal of growing localsolar jobs include in their RFPs a requirement that products and labor are locally sourced. This broadens theirevaluation criteria from simply lowest price and projectcompletion time.With direct purchase, the municipality funds the solarsystem and can offset the cost with Focus on EnergyBrown County installed a 22.5 kilowatt (kW) PVpole-mounted array at its sheriff’s office in 2011,which generated 65 MWh of electricity and saved 7,200 in energy costs during its first 2 years ofoperation. The system cost of 153,500 was fullyfunded through a federal grant, a Focus on Energyincentive and a grant from Wisconsin PublicService.incentive money, utility funding, federal grants andUW-EXTENSIONSolar Energy Financing Guide –EMPOWERING WISCONSIN LOCAL GOVERNMENT5

Direct Buy Case StudiesVILLAGE OF FOX CROSSINGDANE COUNTYThe Village of Fox Crossing, formerly theTown of Menasha, is an Energy IndependentCommunity in the Fox Valley with over 18,600residents. The community installed a 28 kWground-mounted solar system in 2010. TheVillage leveraged funding from Focus onEnergy and We Energies to reach a 15-yearreturn on investment. While the cost of solaris far lower today, the municipality’s detailedprocess toward making the project succeedis instructional for any municipality. Viewtheir process in a presentation from the 2011WAPA/WI-ASLA Conference.Dane County invests in solar electric generation along with theconversion of landfill gas to usable biofuel as part of its EnergyIndependent Community commitment. Its 2017 budget includes 2.4 million in new solar development, more than tripling thecounty government’s entire solar energy production portfolio.It funds new solar systems for Dane County’s Job Center andAlliant Energy Center. Together, the County will own and operate770 kilowatts (kW) of solar generation and avoid 777 tons ofcarbon dioxide (CO2) emissions per year. This will save over 2.1 million in direct energy costs over the next 20 years. Existingsolar arrays produce electricity at the Dane County RegionalAirport maintenance facility and its East District Campus.The City of Madison was designated a Solar America City in 2007by the U.S. Department of Energy and has been investing in energyefficiency and solar power since then, including incorporatingpolicies and procedures to facilitate energy independence. The citymade it standard practice that all fire stations have solar hot waterheating. Together, systems installed on 11 existing fire stationssave over 3,400 therms of natural gas and 18 tons of CO2 each year.Monetary payback varies with the relative cost of natural gas.City of MadisonMADISONFire Station 6 solar hot water system and the SolarShade Canopy at Goodman Community PoolMadison’s Fire Station 12 was designed and constructed using the LEED green building rating system (Platinumcertified) to optimize performance. It has geothermal heating and cooling systems, solar hot water heating andenhanced energy efficiency.Among Madison’s many renewable energy projects, the 2.1 kW solar shade canopy at the Goodman Community Pool servesseveral purposes. It generates 2,600 kWh per year of electricity that runs the freezer at the concession stand while shadingchildren from the sun. Its high visibility educates the community while affirming the city branding as a Solar City.LAKELAND UNION HIGH SCHOOLLakeland Union High School (LUHS), located in Minocqua (Oneida County) with700 students, installed a 280 kW solar electric system on its field house roof,making it the largest school solar system in Wisconsin. It was paid for underAct 32 legislation that allows school districts to levy additional property taxesto pay for energy efficiency projects that exceed state revenue limits without goingto referendum. The solar project is one of more than 20 energy saving projectsLUHS, which operates year round, is undertaking at a cost of 14.6 million.Field house roof solar arrayThe PV system cost approximately 631,000 and became operational in December 2016. It was installed by SunPeakwith Schneider Electric as the energy service company (ESCO) for the overall project. The electricity generated willdirectly offset school electricity use (rather than flow into the grid given the small remuneration the school district wouldget from WPS for the electricity). The solar array should offset 20 percent of the school’s electricity use annually.The first year savings on electricity will range from 15,400- 18,000 with a guaranteed cost savings by SchneiderElectric of at least 291,400 over 15 years. In 30 years, cost savings on the solar alone should net the school district 264,600. Prior to the big installation, LUHS had 30 solar thermal panels to help heat the school pool as well as 10 PVpanels as an educational tool. Classes will incorporate solar energy education as part of career training.6UW-EXTENSIONSolar Energy Financing Guide –EMPOWERING WISCONSIN LOCAL GOVERNMENTS

For more case studies detailing energy efficiency and renewable energy projects, financingand costs, view “Power Through Partnerships,” a short UW-Extension video of BrownCounty and the Oneida Tribe working toward energy independence.and installation. Typically the local government hiresPublic-Private Partnershipa consultant that identifies investors and developersApublic-private partnership (P3) is an agreementand helps put the project financing together. The solarbetween a public entity and a private company thatdeveloper owns, operates, maintains and repairs theattracts private sector investment in a public infrastructure project. This can be for a single project or a bundle ofsmall to medium-sized projects. P3s provide long-termfinancial benefit to the private partner in exchange. One ofsolar system located on municipal property.There are two main forms of third-party financing:1. Through a solar power purchase agreement(sPPA), the municipality buys electricity fromthe main forms of P3s is the power purchase agreement.the TPO over a fixed period of time, usually at aP3s incentivize the use of solar due to lower upfront costslower rate than what they would pay to theof installation. They require the municipality to consultutility because the TPO passes along some ofwith attorneys and negotiate with solar developers.the tax benefit savings.THIRD-PARTY FINANCING2. Another option is for the municipality to enterinto a solar lease that is a service contract toOne form of P3 is third-party financing. Municipalitiespay for the use of the solar system rather thanand schools can work with a third-party private businessfor the electricity it produces.(third-party owner [TPO]) to finance solar projects ontheir property and avoid the initial costs of purchaseBusinesses are motivated to enter into these agreementsto take advantage of the 30-percent federal RenewableEnergy Investment Tax Credits.Half Moon Ventures and the City of JeffersonPartnership Case StudyActual cost differences between a direct solar buy and athird-party financing arrangement are exemplified inAppendix 3, which summarizes a study for the City ofFitchburg for a 100 kW solar array for a fire station roof.A third-party financing bid should include: The PPA price for electricity. A fixed rate or a rate at which the priceincreases over the life of the contract.Half Moon Ventures’ 1 MW solar park in Jefferson, WIJEFFERSON SOLAR PARK: A BUSINESS MODEL Production guarantees.The City of Jefferson contracted with Half MoonVentures in 2013 to develop a 1MW, 3,600-panelsolar park and sell the electricity to an electricprovider. Half Moon Ventures owns the project overits lifetime and pre-paid the city 123,000 for a20-year lease. The power is sold to WPPI Energyand distributed by Jefferson Utilities, the city-ownedmunicipal utility. The project is expected to generate1.57 million kWh annually, and provide 4-5 percentof the city’s electricity needs. Ownership of solar renewable energy creditsUW-EXTENSION(SRECs) (see glossary). Buy-out options, should the municipalityseek to purchase the system after a specifiednumber of years at a depreciated value. Operations, maintenance and repairs. Performance monitoring. Revenue from land/roof leasing.Solar Energy Financing Guide –EMPOWERING WISCONSIN LOCAL GOVERNMENT7

WISCONSIN STATE POLICY ON THIRD-PARTYFINANCING OF SOLAR PROJECTSWisconsin’s interconnection rule (PSC 119) sets forth theterms and procedures for connecting customer-sitedelectric generation equipment to the utility grid. It does notentity whether primary, second party or third party).Wisconsin’s Public Service Commission has not made aformal ruling on the legality of third-party financingand whether the third-party owner should be regulatedas public utilities.address the issue of third-party ownership of renewableAs a result, there are third-party solar projects in Wis-energy systems (i.e. what constitutes ownership for anyconsin as exemplified in the two case studies below, butPartnership – Third-Party Financing Case StudiesCity of MononaCITY OF MONONAThe City of Monona, at very little upfront cost, installed156 kW of solar PV arrays on roofs of four municipalbuildings in 2014. These solar systems generate approximately 30 percent of the buildings’ electricity use andare estimated to save the city 75,000 in utility billsduring the first 6 years of co-ownership. This puts thecity halfway to its Energy Independent Community goalby producing renewable energy locally and eliminating187 tons of CO2 emissions a year.The systems are interconnected by local utility MadisonGas & Electric (MGE). MGE monitors the energy use andelectricity output of those buildings every 15 minutes andshows the balance of electricity generated over electricityconsumed on the city’s monthly bill. Monona worked withLegacy Solar Co-op’s Solar Connections, a Madison-basedcompany, to put the project together. The city entered intoa solar service partnership agreement and leased its roofsto Falcon Energy Systems (FES) for 6 years. FES, out ofMonona hosts 156 kW of solar across four municipalrooftops in a third-party financing arrangementDenver, CO, is the investor and receives the federal taxcredit. Monona buys solar renewable energy credits (SRECs)from Falcon rather than electricity at a cost less than MGE’scurrent electricity rate. After 6 years, Monona can buythe system at a depreciated cost.DARLINGTON SCHOOLSThe superintendent and school board of Darlington CommunityReal-time energy kioskSchools conceived of and initiated the solar project. HoffmanPlanning Design & Construction and Madison Solar Consulting worked with the schooldistrict to put the financing and project together. Law firm Boardman and Clark draftedthe third-party contract. Green Minded Partners were the investors and Current Electricthe solar installer. The head of facilities for the school district was a key player as well.Darlington School District’s goals were to provide hands-on education to students andthe community, promote clean energy and greenhouse gas reductions and the wise useof natural, financial and social capital. A kiosk that shows real-time energy productionand savings (above right) is at each school and linked on its website.8UW-EXTENSIONSolar Energy Financing Guide –EMPOWERING WISCONSIN LOCAL GOVERNMENTSSherrie GruderDarlington Community School District installed the largest solarenergy system of any Wisconsin K-12 school district in 2016.Energizing the elementary and middle school buildings, the156 kW rooftop solar PV system generates 20-30 percent ofthe electricity used by each. The school district used innovativefinancing with co-ownership, where a solar developer installedand operates the system for the first 15 years, limiting thedistrict’s upfront costs.Solar ribbon cutting ceremonyat Darlington School

they are not nearly as common as in the 20 states thatclearly support these agreements and have realizedBrown Countystrong solar market growth as a result.AN ANALYSIS by the EnvironmentalLaw & Policy Center in 2015, followinga 2014 Iowa Supreme Court case thatprotected third-party solar generationthere, shows that third-party owners ofdistributed generation systems thatprovide electricity to a limited class ofcustomers (rather than to the generalpublic) are not “public utilities” as defined by Wisconsin law. Therefore, theyshould not be subject to being regulatedas a utility.Solar power at Barkhausen Waterfowl Preserve, Brown CountyPartnership – Third-Party Financing Case StudiesMOLE LAKE CHIPPEWA TRIBEThe U.S. Department of Energy awarded the Mole Lake Tribeof Lake Superior Chippewa in Forest County a 1 millionmatching grant for the installation of 600 kW of solar PVon all 17 of the Tribe’s commercial buildings. Thebuildings include the casino lodge (106kW), the elderlycenter (60kW) the wastewater treatment facility (45.5kW)and the cultural building (11.9kW) (see Appendix 1 for allbuildings). Most of the solar systems are larger than the20kW net metering cap of the Tribe’s utility, WPS. Thosewill be set up behind the meter to provide electricity directlyto that facility. The smaller installations will feed into thegrid and receive the net metering rate credited againstthe Tribe’s bills.The project leverages private funds to help finance thesolar systems. The private investor will leverage thefederal solar energy investment tax credit as 99-percentowner but will provide those funds to the SokaogonChippewa community.The Tribe formed the Sokaogon Solar Authority, LLC byworking with Godfrey and Kahn law firm. The LLC thenentered into an energy service agreement with the Tribe.The Tribe negotiated a design-build agreement betweenthe installer and its LLC that has a capped price, includesa 6-year warranty on parts, labor, insurance, roof analysisand indemnities. The installer obtains the interconnectionapproval. An important component of the contract withthe installer for the Tribe is that it provides training andinstallation experience to Sokaogon Chippewa HousingAuthority employees.This project incorporates training and job opportunitiesfor tribal members and substantial cost savings onelectricity. In addition, the solar systems provide clean,emissions-free energy to help safeguard treaty fishingwaters and sacred wild rice beds while moving the Tribetoward energy independence.The Forest County Potawatomi community installedback in approximately 5 years. Early data show that the15 solar projects totaling 923 kW in 2016. Fourteenpayback will be faster.solar systems are on tribal buildings in Crandon.Almost half of the 923 kW is on the Milwaukeecasino (see Appendix 1). The Tribe received agrant from U.S. Department of Energy thatcovered 50 percent of the cost and partneredwith a private entity that was able to takeadvantage of the federal solar tax credit to fundthe rest of the project. Based on this structure,before the project started, it was estimatedA 447.6 kW solar array on the Bingo A 62.3 kW solar system on the tribe’sthat the tribe would have its investment paidCasino Event Center in Milwaukee Forest County recreation centerUW-EXTENSIONSolar Energy Financing Guide –EMPOWERING WISCONSIN LOCAL GOVERNMENTForest County Potawatomi CommunityFOREST COUNTY POTAWATOMI COMMUNITY9

FINANCING RESIDENTIAL & COMMERCIAL SOLARtimeframe and a competitive bidding process to get a bulkSolar Group Purchasingprice from one or more providers on the solar equipmentSol

The Solar Energy Financing Guide is a resource designed to fuel local governments and stakeholders with ideas and approaches for financing solar systems. The Guide explores financing models for solar energy used success-fully by Wisconsin municipalities, tribes and school districts for their own installations and for their residents and businesses.