How Utilities and Municipalities Can Take Advantage of Community Solar

May 18, 2020 || Read Time: 5 minutes

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Patrick Smith

Vice President, Business Development

As VP of Business Development, Patrick Smith was instrumental in establishing IGS Solar in 2014. Under his leadership, IGS Solar is a top 10 developer in the U.S., with a portfolio of over $200 million in commercial and utility assets across 20 states.

We want clean energy. A 2018 poll showed that over 70% of registered voters want utilities to focus their efforts on offering solar to their customers. For a growing number of municipalities and utilities, community solar is that solution. This model allows residential customers and area businesses to participate in a subscription-based solar model. They pay their share to join in the solar farm and support renewable energy, while receiving credits for utility bill reductions in return.

Why are municipalities suited to offer community solar?

Municipalities can effectively reach residents and business owners through existing communication channels and community programs. This open forum creates an opportunity to explain how community members can participate in a solar farm without installing or paying for systems themselves.

Which customers can benefit the most from community solar?

Community solar systems make renewable energy accessible to a larger number of residential and commercial customers. In particular, those who:

Do not own their home or building
Do not have the right conditions to host a solar system, due to conditions such as roof size, insufficient sunlight, etc.
Are unable or unwilling to install solar for financial or other reasons

What should municipalities and utilities consider when deciding to offer solar?

It's important to decide what ownership model would make the most sense, either direct or third-party ownership. Here are a few considerations:

Direct	Third-Party
Pay for and own the system	Separate entity (such as a solar developer) installs and owns panels
Receive financial benefits from all energy produced	Municipality/utility pays the third-party for the energy produced
Handle maintenance	Utilities purchase the energy produced and sell it to customers
Coordinate construction, operation, and maintenance	Handle maintenance
May incur additional financial risk	May incur less financial risk

How can tax-exempt status be used as an advantage?

While it’s true that municipalities and public utilities can’t take advantage of the investment tax credit (ITC), the story doesn’t end there. In fact, when a tax-exempt entity enlists a third-party solar provider or solar financier to install the system, the provider can often monetize the incentive for your benefit.

However, the ability to take advantage of tax incentives can depend on various factors, such as the type of entity. For instance, electric co-ops, municipal utilities, and public utility districts are exempt from federal income taxes and can’t receive federal tax incentives. Do your homework to determine if there are other ways monetize the incentive to benefit your municipality or utility.

Wondering where to start?

When it comes to adding solar into your power mix, partnering with an experienced provider can make all the difference. By offering solar, you can also help foster positive engagement with residents and businesses in your community and increase the demand for renewable energy.

Learn more about solar for energy service providers.