Nicholas School Internship Blogs

Financing Solar Energy: A Model for Congregations
by -- June 10th, 2013

Potential site for solar panels. Photo by Helen Wu

On the evening of May 21st, the Board of Trustees at First United Methodist in Salisbury met with two associates from the Appalachian Institute for Renewable Energy (AIRE), Jeff Deal and Dave Harman, to discuss the prospect of installing solar panels on their church. The cost of such projects has been one obstacle for churches to make this investment, but this meeting brought forward an innovative financing model to negate this problem. Helen and I were invited to sit in on this meeting by Rev. Haines, the pastor of the church.

If you haven’t heard about it, it’s called tax-equity finance. Yes, it’s a fiscally responsible and empathetic entrepreneurial investment strategy. The upshot is that nonprofits can take advantage of tax benefits that only apply to for-profit companies, and that is good news for faith communities who are dealing with high overhead due to the variable costs associated with heating, cooling, electricity, and water. Renewable energy reduces not only financial costs but also external costs like climate-disruptive emissions from fossil-fuel combustion. Rev. Haines is keen to mitigate such costs, finding inspiration in Genesis he maintains that “creation is not to be abused. We are caretakers, and we are supposed to be responsible.”

First UMC Salisbury’s Senior Pastor, Rev. Steve Haines in sanctuary. Photo by Helen Wu

AIRE is helping nonprofits take the federal government and the state of North Carolina up on their renewable energy offer. They mediate between the for-profit investors and nonprofit to make sure the whole process runs smoothly. The offer looks like this:

Federal Tax Credit- 30%

NC Renewable Tax Credit- 35%

Charitable Donation

MACRS Depreciation

The combined federal and state tax credit cuts off 65% of the cost of the system for for-profit entities. This for-profit LLC will be composed of people who pay enough taxes for the tax credit to benefit them. The LLC buys the solar panels and owns them for 6 years with a lease on the nonprofit’s property where the panels are to be installed, at which point the tax-benefits are absorbed. Using a somewhat complex plan, the owners of the LLC can then make a charitable donation of the system to the nonprofit. The nonprofit then owns the system and benefits from its energy production for the rest of its lifetime, which is expected to be around 25 years and results in the nonprofit keeping up to 80% of the economic benefit.

The sum total of these components means that the investors are happy and the nonprofit is happy. The church, if they choose to move forward with AIRE’s plan, has the opportunity to use these financial savings to pursue mission and outreach as well as other renewable or energy efficiency projects.

This financing model is a resource to congregations throughout the state and AIRE is helping to open the door to those interested, such as First UMC of Salisbury.

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