Owning the Benefits of Solar+Storage: New Ownership and Investment Models for Affordable Housing and Community Facilities
This policy paper examines five models for financing solar PV coupled with battery storage (solar + storage) with the aim of identifying solutions for increasing access to renewable energy in affordable housing and community facilities serving low- to moderate-income (LMI) communities. Solar + storage can reduce utility bills, increase the resilience of power systems, and, in some cases, can lead to revenue from grid services. For these reasons, solar + storage is seen as an equity strategy that can benefit LMI communities. While much of the literature on the subject has advocated for direct-ownership models, this paper suggests that additional models should be considered that can improve the economic feasibility of solar + storage in LMI projects while still retaining economic benefits for residents.
The paper describes each of the five models, explaining what it looks like, how it is financed, and how LMI communities would benefit:
- Immediate Direct Ownership: Property owners purchase a solar + storage system outright. This model provides the owner the most flexibility. Also, all utility savings are retained by the owner. This model is often operationalized through tax-incentives, which are not available to tax-exempt organizations like government and nonprofit entities. In new construction of affordable housing, solar + storage can be financed through low-income housing tax credits. However, financing for real estate improvement is more difficult.
- Third Party Ownership Flip: This model allows the project to capture tax-incentive benefits while also securing the long-term benefits of direct ownership. A third-party entity owns the solar + storage until the tax-equity investor’s tax incentives have been exhausted. At that point, ownership is flipped to a property owner such as a nonprofit developer. This model is currently being used in six California schools. While the solar + storage equipment is owned by the third-party, the property owners pay for electricity through the system under a power purchase agreement.
- Third-Party Ownership Flip Using an Affiliated Entity: This is similar to the previous model, but instead of transferring ownership to the property owner, it is transferred to an affiliated public purpose entity. The advantage of this is that the affiliated entity can enter into a power purchase agreement with more favorable terms. Additionally, the third-party entity may aggregate multiple solar + storage projects, creating a pipeline that may make it easier to find investors.
- C-PACE Financing with Third Party Ownership: PACE or Property Assessed Clean Energy financing is “a means of securing loan payments through an assessment on real estate property that is equivalent in terms of lien priority to property taxes or other public improvement assessments.” PACE is increasingly being used by nonprofit property owners. This financing mechanism works through a for-profit special purpose entity that can attract tax equity investment and owns the solar + storage. PACE can be used to secure more favorable power purchase agreements.
- Utility Ownership or Third-Party Ownership under a Utility-Contracted Payment-for-Services Agreement: In this model, the utility would purchase the solar + storage and house it somewhere like a school or affordable housing property. In states where utilities cannot own generation, an alternative ownership model using a third-party can be used. This can benefit LMI communities by providing resilient backup power and providing revenue (through rent payments) to the property.
Publication Date: February 2018
Authors or Affiliated Users:
- Robert Sanders
- Lew Milford
- Funding program
- Policy analysis/recommendations