Solar for municipalities
Solar energy benefits us all. For individuals, organizations, and businesses, going solar can create real opportunities for cost savings and community development. This is especially true for municipal governments. Given their high electricity costs and access to sunny real estate, municipalities are uniquely primed to take advantage of the benefits of going solar.
Why go solar?
By generating their own electricity from solar power, municipalities can reduce their monthly electric bills. And that means serious cost savings. Powering schools, libraries, municipal office buildings, and maintenance centers requires a lot of energy. For the typical local government, energy expenditures are the second largest budget item. So, saving money on electricity can significantly cut operating expenses.
Thanks to net metering, solar owners – including municipal governments – will receive full credit for every unit of electricity produced by their panels. That means their electric bill will go down with every bit of solar electricity they produce. In extra sunny months when solar electricity production outpaces total electricity consumption, solar owners will earn credits they can apply to future monthly electric bills. Whether a municipality installs solar on a single building or an entire fleet, the reductions in their monthly electric bills will translate into savings that can be applied somewhere else.
Going solar can benefit municipalities in many ways. Below are some highlights:
- Cost savings: Solar is now cheaper than buying power from the grid in most places across the country. Solar costs have fallen significantly – more than 60% – since 2010, and are expected to drop another 35% by 2022. As solar costs fall, electricity costs are on the rise. Installing solar allows municipalities to reduce their costly electric bills by producing their own electricity. Those savings can be re-invested elsewhere in municipal budgets. What’s more, by exporting less of their electricity bill payments to out-of-state utility holding companies, municipalities can keep that money local. For more information on how going solar can save you money on electric bills, visit our solar economics page.
- Job creation: The solar industry now employs more than 250,000 people. The solar industry employs twice as many people as the entire coal industry. As many Americans work in solar as in natural gas. Solar jobs are diverse, ranging from installation to manufacturing to sales. By installing solar on one or more buildings, municipalities can fuel solar job creation in their local community.
- Local economic development: Installing solar panels on one or more of their buildings can help municipalities jump-start the local clean energy economy. You can leverage your community outreach resources to educate constituents about renewable energy systems during installation, growing the local customer base. Municipalities can boost local clean energy employment by opting to work with local contractors for installation. Municipalities can pair their solar installation with updates to their internal solar permitting practices. This can signal to the community that your municipality is committed to growing the local clean energy economy.
- Sustainability commitments: Installing solar can help your municipality meet its sustainability goals by decreasing its consumption of fossil fuel-powered electricity and offsetting its carbon emissions.
- Resiliency: As battery technology drops in price, many municipalities are considering solar plus storage to use during power outages. These projects are often designed to protect the most vulnerable citizens in times of crises. See the Clean Energy States Alliance for more on this topic.
Municipalities can go solar by installing photovoltaic (PV) panels on a single site or a fleet of buildings. For either option, you will need to understand solar technology, installation procedures, costs, and incentives. To get started, visit our Solar FAQ.
Municipalities can choose from two models of ownership: direct ownership and third-party ownership. Under direct ownership, the municipality pays for and owns all solar PV equipment. It reaps the full financial value of the electricity produced by its panels. With third-party ownership, a separate entity owns the solar panels installed on the municipal building, and the municipality pays that company for the electricity produced by the panels. Municipalities pay two separate electric bills under third-party ownership: one to the utility company and one to the third-party solar owner.
The most common third-party arrangement is called a Power Purchase Agreement (PPA). For a step-by-step guide on how to pursue a solar PPA, download Solar Power Purchase Agreements: A Toolkit for Local Governments. For extensive resources on clean energy for municipalities, check out the Clean Energy States Alliance website.
When looking to go solar, municipalities should consider the following:
- Tax-exempt status: Municipalities are not eligible to apply the 30% federal tax credit to their solar installations because they do not pay taxes. That said, municipalities can install their systems through solar financiers or third parties who will monetize the tax credit on their behalf. Those third party investors will incorporate their tax credit savings into the cost they charge the municipality.
- Long-term project timeframes: With numerous departments, stakeholders, and staff teams involved in a municipality’s solar installation process, the installation timeframe will be longer than for an individual home. It is important for the municipal project lead to communicate with fellow municipal offices and staff about the installation in its early phases, to avoid hold-ups down the line. Bringing together environmental, facilities, permitting, communications, and education departments at the outset of the solar planning process will help streamline the work process and maximize engagement across all municipal offices.
- Opportunity for constituent participation: Municipal governments are uniquely situated to leverage their PV installation(s) to their constituents’ interest in going solar. Through their listservs, email blasts, and community programming, municipalities can help their residents see solar in action and learn how it can benefit their businesses and households.
Alternative solar project models for municipalities:
Partner with Solar United Neighbors on a solar co-op for your constituents
If your municipality doesn’t want to install solar on its own buildings but wants to help its residents go solar, your government can partner with Solar United Neighbors to launch a local solar co-op. Solar co-ops bring together interested homeowners and business owners, educate them about solar, and leverage their bulk purchasing power to secure the most competitive installation pricing in the area. To learn more, check out Solar United Neighbors’ solar co-op model.
Launch a municipal property assessed clean energy (PACE) financing program
Municipal governments can also help their residents go solar by enacting a local PACE financing program. PACE programs connect building owners with long-term, low-cost financing for energy upgrades, include solar installations. The building owner pays off PACE financing over time through an adder to their property tax. PACE financing makes energy upgrades cashflow positive from day one. This is because the annual PACE repayments are lower than the energy savings associated with the project. Once a state allows PACE financing, your municipality can pursue PACE programs for its constituents. To see if your state has passed PACE legislation, check with Pace Nation. For more information on municipal PACE programming, visit our PACE financing page.
Aggregate demand through Community Choice Aggregation (CCA)
A third option for municipalities interested in making solar accessible to their constituents is Community Choice Aggregation (CCA). Under CCA, municipalities aggregate their residents’ electrical demand and procure their own electricity through direct contracts with energy producers. Residents then may continue buying their electricity from the utility company or from the municipality. By enabling local communities to procure their own electricity, CCA helps localities purchase and distribute more renewable energy than what’s often available from the utility company. At present, only a few states have passed legislation allowing for local CCAs and only one state, California, has operational CCA programs. For an overview of the California program, check out UCLA’s study: “The Promises and Challenges of Community Choice Aggregation in California”.