Universities and Academic Institutions
The time is right for universities and academic institutions to implement solar, wind, and other onsite power
The cost of electricity is accelerating upward—this is the result of decommissioned coal and nuclear plants, rising natural gas prices and the uncertain future of coal due to aggressive long term federal efforts on coal emissions. The cost differential between renewable energy and fossil fuels is narrowing dramatically and the ability to fix the price of an institution’s electricity with a renewable energy installation of renewable is increasingly attractive.
Much of the growth in solar is also caused by the decreasing cost of photovoltaic cells and solar-power plants. And yet, reduced costs are just part of the equation. Innovative financing strategies are also driving the growth in the use of solar energy. The correct structure can reduce the cost of debt and maximize the valve of state and federal tax credits.
Universities and academic institutions are uniquely positioned to reap the benefits of solar:
- School buildings, often with large, flat roofs are naturally a good fit for solar panel installation. Using this space makes an impression on current and prospective students, and on the community.
- The cost savings over the long run can contribute to sustained financial stability of an academic institution.
- Solar implementation creates a rich learning experience. For example, Cedarville University in Cedarville Ohio has stated that the process of implementing solar allowed students to see firsthand how it works. Students can become partner to the daily monitoring and correlation of energy consumption and costs while learning about green energy.
- Using solar energy demonstrates leadership in energy efficiency, sustainability, and environmental stewardship. Beyond costs savings, solar power is part of a larger sustainability strategy that can reduce a school’s carbon footprint in the future.
Universities and academic institutions can benefit from the installation of wind generation projects. Wind projects have the ability to generate power 24 hours per day. In addition, with the wide deployment of wind projects across the world, costs for wind generation projects are generally lower than for some other renewable projects. Using wind energy can be part of a facility’s overall sustainability plan.
Financing for Energy Projects
Proper legal and financial structuring is critical to project success. One of the pieces of this financing puzzle is the structuring of tax credits. The solar boom can largely be attributed to state rebates and federal investment tax credits that can cover 30 percent of the cost of installing solar equipment.
Renewable Energy Tax Credits
Federal Investment Tax Credits for renewable energy property (Renewable Energy ITCs) were created to encourage investment in renewable energy property. The Renewable Energy ITC is a federal tax credit of either 30 percent or 10 percent of expenditures on eligible energy systems, depending on the type of technology adopted. Solar technology, fuel cells, and small wind turbines qualify for a 30 percent credit and geothermal systems, microturbines, and combined heat and power qualify for a 10 percent credit.
The Renewable Energy ITC generally offsets taxes dollar-for-dollar and is claimed in the year the renewable energy property is placed in service. Typically, in a renewable energy project utilizing Renewable Energy ITCs, the transaction is structured so that a private investor, such as a bank or another publicly-traded company, makes an equity investment in the entity undertaking the renewable project in order to capture the incentive provided by the investment tax credit generated by the project.
The purpose of the Renewable ITC program is to encourage investment in renewable energy property. The Renewable Energy ITC is a federal tax credit of either thirty percent (30%) or ten percent (10%) of expenditures on eligible energy systems, depending on the type of technology adopted. Solar technology, fuel cells, and small wind turbines qualify for a thirty percent (30%) credit and geothermal systems, microturbines, and combined heat and power qualify for a ten percent (10%) credit. The Renewable Energy ITC generally offsets taxes dollar-for-dollar and is claimed in the year the rehabilitation of the subject renewable energy property is placed in service.
Renewable Energy ITCs benefit a real estate project by providing equity capital to the entity undertaking the renewable energy project. Typically in a renewable energy project utilizing Renewable Energy ITCs, the transaction is structured such that a private investor, which is a bank or another publicly-traded company, makes an equity investment in the entity undertaking the renewable project due to the incentive provided by the Renewable Energy ITCs generated by the project. The compliance period is five years from the date that the subject renewable energy project was placed in service.
Why McDonald Hopkins + Enerlogics
McDonald Hopkins currently represents numerous institutions of higher education in all aspects of their development projects, including multi-million dollar rehabilitations of historic buildings, construction financing, state and federal historic tax credit syndication and new markets tax credits allocation and funding.
Our experience representing institutions of higher education and nonprofit organizations gives us an excellent understanding of the challenges of financing capital projects. We provide guidance as to how the project can be financed through construction and permanent financing, public sector financing, and/or various tax credits. We are focused on the development of solar photovoltaic systems for colleges, universities and other educational and nonprofit institutions. We believe the solar growth opportunity is exponential as it incorporates lower costs, government incentives, as well as economic, environmental and social benefits.