The second event of a three-part Solar Opportunities Series, Fresh Energy’s community solar event introduced community leaders and institutions to this promising new solar-development model, providing an objective update on the detailed rules currently being written. Learn more at fresh-energy.org/solarseries.
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Community Solar Project Challenges
1. Community Solar
Challenges and Opportunities
Presented by:
Sarah Johnson Phillips
October 24, 2013 ● Fresh Energy Solar Opportunities Series
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2. To order any of these books please contact
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3. Project Development Challenges
• Community Solar Garden Program Design:
– Minn. Stat. §216B.1641
– Xcel Energy Filing – PUC Docket No. E-002/M-13-867
– Value of Solar
• Community Solar Garden Project Design:
– Partners: Developer/organizer, host site, utility, subscribers,
equipment supplier, financing partners, contractor, other experts
(engineering, legal, tax, accounting, design).
– Siting
– Tax Incentives
– Securities Regulation
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4. Project Development Challenges
• Siting
– Need affordable, long-term site access, solar access,
and grid access.
– Rooftops, otherwise low-value land.
– Site leases tend to more challenging to negotiate
when the host is not the off-taker.
– Local ordinances vary widely (setbacks, street-facing
roofs, height restrictions, screening).
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5. Federal Tax Incentives
• Federal Tax Benefits:
– High value for solar projects.
– High transaction costs/complexity to fully utilize.
• Investment Tax Credit (ITC) –
– Available for solar if placed in service before 2017.
– Credit = 30% of qualified costs of facility (in the year placed in
service).
• Accelerated Depreciation (tax losses) –
– Creates tax losses that may be claimed by owners
– 5-year depreciation for solar
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6. Federal Tax Incentives
• General rule: must be an “owner” to be entitled to tax benefits
– Tax benefits cannot be “sold” under U.S. tax law – only available to
owners.
– An owner must have tax appetite to make use of tax benefits.
– Creative tax structures allow “investors” to claim these tax benefits.
• Who is an owner?
– Partner are owners (partnership flips)
– Owners are owners (sale/leasebacks)
– Lessees can be treated as owners (inverted lease; tax credits, not tax
losses)
• Tax-driven project structures can be complex, but likely critical for
financing larger community solar gardens.
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7. Securities Regulation
• What are “securities”?
• How are securities regulated?
– State and federal registration and disclosure (anti-fraud) requirements.
– Compliance can be costly and time-consuming.
– Non-compliance can result in civil or even criminal liability.
• Why are securities regulated?
– Protection against fraud.
• Policy Considerations:
– Being subject to securities regulation increases transaction costs.
– But securities regulations also protect investors from unscrupulous
actors.
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8. Securities Regulation
• Potential Strategies for Community Solar Gardens”
– Structure subscriptions not to be “securities”.
• Various possible strategies, lots of uncertainty.
– Qualify for exemptions from securities registration requirements.
• E.g., Regulation D, public entities
• But: Exemptions from registration requirements are not exemptions from
disclosure requirements (full and accurate disclosure of all material
information about a securities offering).
• But: qualifying for exemptions may come with limitations, including the type
and number of investors and the amount raised.
– Register securities.
• Transaction costs are significant.
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