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Funding shared renewables — how the Inflation Reduction Act pays cities and schools to go renewable [1]

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Date: 2023-02-13  

Solar Installation at the Maine School of Science. The Inflation Reduction Act’s direct incentives will help build thousands of similar systems across the U.S. — Photo: Public Domain Courtesy of Flickr Creative Commons – September, 2022

“Solar will only go mainstream when access to it is democratized…” — Forest Watkins, Solstice Website

Wouldn’t it be nice, and simple, if we could completely convert to renewable energy by putting solar panels on everyone’s roofs? Unfortunately, the popular “millions of solar roofs” idea won’t do the trick, because there aren’t enough roofs to meet the need.

Let’s start with the need. To achieve the new Inflation Reduction Act’s (IRA) goal of reducing U.S. greenhouse gas emissions to net zero by 2050, we will have to generate 45% of our energy from solar photovoltaic (PV) panels, along with renewable energy from wind, geothermal and other sources. That will require 1,600 gigawatt hours (GWhs) of PV production per year.

In 2021, the U.S. produced 92.7 GWhs from PV panels, encouragingly up from just one GWh in 2011. Still, that’s less than 100 GWhs increase in that decade. Adding 1,500 new GWhs by 2050, or about 500 GWhs each decade, means we’ve got our (well-paying) work cut out for us.

The problem is exacerbated by a “shortage of roofs” — specifically, roofs on private homes that some of the IRA’s incentives target for solarization. According to an article on the website Solstice, “80 Percent of Americans Can’t Access Rooftop Solar…” because they don’t own their homes, don’t have enough income or adequate credit ratings to buy a PV system, even with tax credits, or their home’s solar orientation or other factors preclude installations. That leaves only about 15 million homeowners who could install PV systems, and many of those might not want to. And because it takes about 750,000 residential PV systems to produce just one GWh of power, America’s total residential PV production potential is somewhere south of 200 GWhs, whereas 1500 new GWhs are needed.

Of course, the experts at the National Renewable Energy Lab, Department of Energy and elsewhere who designed the energy provisions of IRA understood this. Thus, the majority of the bill’s incentives target what are called “Shared Renewables.”

I discussed one form of shared renewables, “community solar,” in my last post. Community solar systems, shares of which are owned or leased by both homeowners and renters who pay electric bills, are almost always “off-site,” typically installed on public land or leased farmland, above parking areas or on public buildings such as schools. The IRA has strong tax incentives to encourage investment in community solar, especially for underserved and tribal communities.

However, while this will increase solar capacity and make it more equitably accessible, community solar, as currently envisioned and incentivized, is predicted to grow only about one GWh per year, not nearly fast enough to meet our emissions goals.

So, where will the rest of the PV power come from?

Counterintuitively, some of the IRA’s strongest “tax incentives” are for tax-exempt organizations, such as local governments and public universities. These can receive direct cash reimbursements for 30% to 50% of the cost of renewable-energy projects.

How does that work?

The IRA, for the first time in American history, allows for cash rebates from the U.S. Treasury (through the IRS) for renewable-energy installations made by not-for-profit entities. Under the Act, the projects are considered business expenses, as if the not-for-profits were in fact for-profit businesses that had overpaid their taxes and earned a refund. So if, say, the small town of Prineville, Oregon, installs a PV array behind its high-school, or electric vehicle charging stations or an emergency power storage system, it can now claim it as a “tax write-off “and receive a cash reimbursement for 30% of the cost from Uncle Sam.

With this much of a system’s cost already waiting in a sort of escrow account, it will be far easier for cities and towns, colleges and other non-taxable to raise the rest through municipal bonds, grants or other financial instruments including private investment by local citizens or institutions such as credit unions or commercial banks.

There are a lot of towns and colleges in the U.S., with enough combined solar potential to easily meet our emissions goals. And, as the IRA proves, where there’s a will, there’s a way for America to go renewable.

Tagged Community Solar, Community Solar and the IRA, Federal solar tax credits, Inflation Reduction Act homeowner incentives, Renewable Energy Tax Credits, Renewable tax credits for non-profits, solar schools USA, Solar towns USA

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[1] Url: https://www.dailykos.com/stories/2023/2/13/2152790/-Funding-shared-renewables-how-the-Inflation-Reduction-Act-pays-cities-and-schools-to-go-renewable

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