Tuesday, April 26, 2011

Solar Gardens Ownership Model - Community + Third Party Ownership = "C3PO"

The perfect community solar ownership model has yet to be devised, at least in the United States.  Navigating the maze of tax and securities law, while allowing subscribers to gain ownership by paying either up front or over time, is not a simple challenge.

In Colorado, the Community Solar Gardens Act specifies that solar gardens can be owned by third parties.  But a solar garden that stays owned by a third party in perpetuity could hardly be called a "community" project.

Anywhere in the U.S., third party owners can claim the 30% Investment Tax Credit (ITC) and accelerated depreciation (MACRS), which are not available to most potential subscribers.  This requires the investor to use a Power Purchase Agreement (PPA) rather than a lease, and to maintain ownership for at least five years.  Often investors will "flip" a solar array to the site host or a community partner in year 6.

In principle, a subscriber organization could be involved in such an arrangement.  There are several potential ways to do this, which I have referred to as "Community + Third Party Ownership", which suggests the informal and unofficial label "C3PO".  Since (for once) I can't grab the URL, I hope this term will come into general (informal and unofficial) use.

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