As schools across Minnesota look for ways to cut costs, enhance sustainability, and provide valuable educational opportunities, solar energy emerges as an ideal solution. But while the benefits are clear—lower energy bills, reduced carbon footprint, and long-term energy stability—the big question remains: how can schools afford to go solar?
Luckily, there are numerous funding options designed to help schools make the leap to renewable energy without breaking their budgets. From grants and tax incentives to creative financing options like power purchase agreements (PPAs), Minnesota schools have more opportunities than ever to install solar energy systems. Let’s dive into the programs and resources available to help your school harness the power of the sun.
Minnesota’s Solar for Schools Program
Minnesota’s Solar for Schools program has undergone significant updates, making it an excellent option for schools statewide. The program provides grants to K-12 schools for the installation of solar energy systems. This program is designed to help schools reduce their energy costs and educate students about renewable energy. The grants can cover a significant portion of the installation costs, making solar energy more accessible to schools across the state. Here’s what you need to know:
Who is Eligible for Solar for Schools?
As of January 2024, a wide range of schools statewide are eligible to apply for funding through the Solar for Schools program:
- Independent and Special School Districts
- Tribal Contract Schools
- Cooperative School Districts
- State Colleges and Universities
Schools within these categories can apply for grants covering 40% to 70% of the costs to purchase and install a solar energy system.
Grant Amounts by Institution Type
The percentage of grant funding varies depending on the type of school and its location:
- State Colleges and Universities: Up to 50% of project costs.
- Tribal Contract Schools: Up to 60% of project costs.
- Cooperative School Districts: Up to 40% of project costs.
- K-12 Schools: Funding is determined by Adjusted Net Tax Capacity (ANTC) divided by Adjusted Pupil Unit (APU).
In addition, there are lifetime caps on grant amounts for school districts:
- Schools Outside Xcel Energy Territory: Maximum grant is $500,000.
- Schools Within Xcel Energy Territory: Maximum grant is $675,000, accounting for additional incentives like tax credits and PV demand credits.
This funding makes it easier than ever for schools to afford solar energy systems, but the benefits don’t stop there!
Stacking the ITC with Solar for Schools
One of the most exciting developments for schools going solar is the ability to combine state Solar for Schools grants with the federal Investment Tax Credit (ITC). Thanks to recent changes under the Inflation Reduction Act, schools can now take advantage of the ITC through the direct pay (or elective pay) option.
- The ITC offers 30% of the total project cost as a refundable payment from the IRS, even for tax-exempt entities like schools and 501(c)(3) organizations.
- When paired with Solar for Schools grants, this can reduce the total cost of a solar installation by nearly 100%!
For example:
- A school district installs a solar energy system for $150,000.
- Since they are in Xcel territory, they receive a grant for 50% of the project cost, reducing the cost to $75,000.
- The project is also eligible for the 30% ITC, which provides an additional $45,000 refund.
- Net project cost for the school? Just $30,000—an incredible deal for a long-term energy solution.
Power Purchase Agreements (PPAs)
A Power Purchase Agreement (PPA) is a popular option for educational institutions to go solar – because the school does not pay anything!
That’s right—the school benefits from solar energy for no upfront costs. Under a PPA, a third-party developer (like Cedar Creek Energy) installs, owns, and operates the solar energy system on the school’s property. The school then agrees to purchase the electricity generated by the system at a fixed rate, typically lower than the current utility rates. Additionally, because the third-party developer retains ownership of the system, they are responsible for maintenance and repairs, further reducing the burden on the school.
Property Assessed Clean Energy (PACE) Financing
Schools can also take advantage of Property Assessed Clean Energy (PACE) financing. PACE financing allows schools to bundle solar installation costs with other energy efficiency upgrades, such as HVAC or roofing projects.
While schools don’t pay property taxes, PACE programs allow schools to benefit from energy upgrades through innovative agreements with municipalities. PACE financing covers the upfront costs of solar installation and allows schools to pay back the loan over time through energy cost savings.
What’s especially appealing about PACE is its cash-flow-positive model: savings on energy bills often outweigh the financing costs from day one. That means schools can start reaping financial benefits immediately—no need to wait years to see a return on investment. And, since PACE funding is a special assessment on the property tax, the payments are only made twice a year.
Other Financing Options
Solar Power Grants for Public Schools
Grants provide financial support to help schools reduce the upfront costs of solar installations. Many public schools qualify for state and federal grants designed specifically for renewable energy projects. These grants can cover a significant portion of the installation cost, easing the financial burden on schools.
Solar Leases
Similar to a PPA, a solar lease allows educational institutions to install solar panels without paying the full cost upfront. Under a solar lease, the school leases the solar energy system from a third-party provider and makes fixed monthly payments over the term of the lease. The advantage of a solar lease is that it provides predictable energy costs, which can make budgeting easier for schools. However, unlike a PPA, the lease payments are not tied to the amount of energy produced, which can be a consideration depending on the school’s energy usage patterns.
Want Solar at Your School? We Can Help!
Funding and financing solar projects in educational institutions can be complex, but with the right approach, schools can access the resources they need to invest in renewable energy. By taking advantage of renewable energy grants, solar project financing options, and research funding opportunities, educational institutions can reduce their energy costs, enhance sustainability, and provide valuable learning experiences for students.
Whether you’re looking to install solar panels at a K-12 school or a higher education institution, there are numerous resources available to help you achieve your goals. At Cedar Creek Energy, we specialize in helping educational institutions navigate the process of financing and implementing solar projects. Contact us today to learn more about how we can help your school or university take advantage of the many funding and grant opportunities available for solar energy.