Although local ownership is the gold standard for maximizing the benefits of clean energy projects for households and communities, many barriers remain for prospective projects. Local clean energy ownership occurs when local groups or residents own and/or have meaningful decision-making power over key aspects of clean energy projects, including construction, operations, and the distribution of benefits. As shown in selected episodes of the Local Energy Rules podcast, all over the country, some local groups and residents are finding ways around the barriers to take control of their energy futures.
Common Barriers to Local Ownership
High upfront costs and limited access to financing can make rooftop solar hard to afford, even though it saves money over time. For people who rent their homes, it usually doesn’t make sense to install solar on a building they don’t own and may move out of — if their landlord allows it in the first place. Even homeowners who have the discretion and capital to afford rooftop solar may be disincentivized by inadequate state and utility net metering policies, which lower their return on investment. And most of these barriers are more impactful for low-income households and people of color.
Although community solar and other shared renewable projects can address many of these barriers for individuals, they face their own challenges too. Not all states require utilities to operate community solar programs that allow non-utility organizations and businesses to build projects and offer subscriptions. Where programs and opportunities do exist, limits on community investment, difficulties finding fair financing, and hard-to-access federal tax incentives can put local owners at a disadvantage.
Nevertheless, local renewable energy projects around the country have found creative ways around these barriers. The Local Energy Rules episodes below tell their stories.
Overcoming State Policy Limitations
Communities have found creative ways to develop locally owned projects that still offer shared benefits, even if their state policy environment doesn’t allow them to provide subscriptions or bill credits to individual households.
Local Energy Rules Episode 147 chronicles Olympia Community Solar’s triumph over bad solar policy in Washington. State law didn’t require utilities to participate in community solar projects or provide virtual net metering — so instead of a traditional community solar subscription, the nonprofit sold “solar units” to local community members, who would then receive revenues representing their portion of the locally owned solar array. In 2022, the state passed a new law making community solar projects easier to develop in the future. Olympia Community Solar was also featured in ILSR’s flagship Advantage Local report on local clean energy ownership.
People Power Solar Cooperative — also featured in Advantage Local — had to find an alternative to the state’s challenging program to bring community solar to Oakland, California. Local Energy Rules Episode 94 tells of how the co-op decided to pursue community ownership by pooling investments from its members to install solar on a household’s roof — using net metering credits to lower the household’s energy costs and provide dividends to local investors. By limiting investors to California, People Power Solar Cooperative was also able to avoid prohibitively complex federal securities regulations.
Community members in Keane, New Hampshire, also chose an alternative to the typical community solar subscription model for their locally owned solar project on the roof of a beloved grocery cooperative — inviting local investors to help fund the project and receive returns on their investments. As discussed in Local Energy Rules Episode 44, the project faced and ultimately found ways to work effectively within state limitations on the number of individual investors allowed, as well as other challenges around accessing federal tax incentives.
Advocating for New State Policies
Some locally owned clean energy efforts may find they need to lobby their state government to pass new or updated legislation in order to make their projects a reality. Local Energy Rules Episode 96 delves into the story of the Oregon Clean Power Cooperative, which started collecting investments from co-op members to develop locally owned projects after a 2014 state law exempted renewable energy cooperatives from certain securities regulations. The 2014 law also established Oregon’s first community solar program, which allowed Oregon Clean Power Cooperative to begin offering community solar subscriptions and shares alongside other investment opportunities in their locally owned projects.
Accessing Capital
Although some projects are fully funded by small community investors, many larger efforts must find other sources of capital, such as bank financing or tax equity investors. Local Energy Rules Episode 127 highlights People’s Solar Energy Fund’s work to aggregate community-owned solar projects to make them more attractive to investors and improve access to affordable financing.
Using Federal Tax Incentives
Federal tax credits for wind and solar projects have been the most important national incentives for clean energy — but many locally owned projects have had a hard time benefiting from these credits. Historically, tax-exempt entities like nonprofits and local governments were not able to use the credits, because they only reduced a taxpayer’s tax liability. Entities that were able to claim the credits still needed enough applicable tax liability to get the full benefits. To capture the tax incentives, local projects often have had to give up ownership or work with tax equity investors.
Local Energy Rules Episode 4 features Green Energy Farmers, a group of local Iowa investors that took advantage of a period of time after the 2008 recession during which the federal government allowed clean energy projects to receive a cash grant in place of clean energy tax incentives. Green Energy Farmers used these cash grants to develop several community-owned wind turbines in Iowa without jumping through the typical hoops to access the tax credits.
Changes in the 2022 Inflation Reduction Act have made it easier for locally owned projects to access these tax incentives — by making tax-exempt entities eligible and making it easier to transfer credits to equity partners — but barriers and complications remain.
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