How the Inflation Reduction Act Makes Solar More Affordable for Minnesota’s Schools 

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Solar Is More Affordable for Your School Under the New IRA

All this excitement about the new Clean Energy Credit for commercial solar projects may seem less exciting for you if your organization does not pay taxes. But we have great news for all the schools and other tax-exempt organizations – the IRA includes new ways to benefit from solar tax credits – even if you have no tax burden to begin with. Is it time to start considering solar panel installations for your school?

Why choose solar for schools?

According to MnSEIA, powering public school campuses is the second-highest cost for Minnesota school districts, after payroll. On-site solar, MnSEIA estimates, could save school districts hundreds of thousands of dollars a year. But solar power has a much deeper significance when it comes to our schools. Schools are where the next generation comes to learn – the generation who will inherit the planet from us. Students and their parents are increasingly asking questions about their schools’ sustainability policies. Installing solar panels at your school instantly reinforces your commitment to this issue. As well as helping the planet and lowering costs, your decision to go solar could be the defining factor for certain students choosing your school.

What can the IRA do to make solar more affordable for your school?

In the past, as tax-exempt entities, schools have often needed to enlist a third-party PPA or lease to capture any kind of benefit from solar tax credits. The IRA changes all that by enabling non-taxpayers to essentially cash in these tax exemptions. For projects placed into service on, or after December 31, 2022, tax-exempt organizations, like school districts, can now take a direct payment equal to the value of a tax credit, through the IRA’s new ‘Direct Pay’ option. As we explore in our previous blog post on the IRA’s benefits for commercial solar projects, this can amount to a staggering 60% of the cost of a commercial solar project. This means up to $60,000 of every $100,000 spent on a solar power installation for schools can be reclaimed! The Act also improves the returns on tax-exempt bonds, which some Minnesota schools have used to fund solar projects. The credit reduction rate drops from 50% to either:

  1. 15% of capital expenditures, or (calculators at the ready!!),
  2. the fraction of the bonds’ proceeds used to finance the project over the project’s total cost (whichever is less!)

When you consider these improved financial terms alongside existing tax breaks and rebates – not to mention commercial solar power installations’ impressive ROI! – do you need any more reasons to explore solar?

A new golden age for solar in Minnesota’s schools?

There has never been a better time for your school to install a solar power system. Ahead of the IRA, 2021’s Minnesota’s Solar for Schools legislation created financial incentives worth $8 million for the state’s public schools to install solar power systems. Covering school districts inside and outside Xcel Energy’s territory, for projects of up to 1 MW AC, it is anticipated that ultimately a total of $21 million in funding will create 200-400 solar projects for Minnesotan schools. This, combined with the many other financial incentives available and the instant monthly energy savings available, show us there has never been a better time for your school to go solar. Cedar Creek Energy’s recent solar project for Minnesotan non-profit learning center, A Chance to Grow will save the organization over $200,000. If the project were undertaken today, the savings could potentially be more!

At Cedar Creek Energy, we can design a comprehensive solar energy system that will fit your school – whatever the size of your campus or its energy usage. Not sure whether solar is right for you, or what the IRA means for your financing arrangements? Give us call today and our expert team will be happy to work things out with you!