Blog
Federal Funding to Support Solar for Schools
December 6, 2024
Overview
The U.S. Department of Energy estimates that K-12 schools spend over $6 billion annually on energy, a cost that is often worsened by aging, inefficient buildings. To address this cost, many schools have turned to solar energy as a way to modernize their facilities. Today, nearly 1 in 10 schools use solar power. While many schools rely on third-party funds to support solar projects, there are additional opportunities to scale renewable energy adoption through federal programs, state legislation, and local partnerships. These financing options can play a crucial role in expanding the use of solar energy on school campuses
Federal Funding Mechanisms
Direct Pay
Federal funds and incentives, like direct pay, make it more affordable and accessible for schools to go solar. Direct Pay is one of the most innovative concepts to come out of the Inflation Reduction Act. This new tax mechanism allows entities without tax liability – like schools, local & state governments, and nonprofits – to take advantage of the value of clean energy tax credits. These projects can encompass wind, geothermal, electric vehicle charging, clean fleets, utility or small-scale solar, heat pumps, and more.
Although state legislators are not the entities to apply for Direct Pay reimbursement, it is a way to get legislative priorities funded, such as solar for schools, all-electric state vehicle mandates, and much more. You can learn more about the state legislator’s role here.
State Energy Financing Institution (SEFI) & DOE’s Loan Programs Office (LPO)
A State Energy Financing Institution (SEFI) is an entity, established by a state, Indian Tribal entity, or Alaska Native Corporation to provide financing support or credit enhancements for eligible clean energy projects. SEFIs can be instrumental in expanding solar energy projects for schools by providing access to affordable financing and credit enhancements. Through a SEFI, state legislators can create dedicated funding sources, such as green banks, which offer lower-cost loans and financial support specifically for clean energy initiatives. Schools, often limited by budget constraints, can leverage this financing to install solar panels without the upfront financial burden.
Greenhouse Gas Reduction Fund (GGRF)
The Greenhouse Gas Reduction Fund (GGRF) is a $27 billion investment from the Inflation Reduction Act. This fund is being used to finance clean technology deployment nationally, and finance clean technology deployment in low-income and disadvantaged communities while simultaneously building the capacity of community lenders that serve those communities. State legislators can leverage GGRF resources by creating or supporting green banks, which can, in turn, provide affordable financing for schools to adopt solar technology. Additionally, by establishing a “state competitiveness fund,” states can attract GGRF investments and further increase the ability to leverage private capital for projects like solar on schools.
Legislation Supporting Solar for Schools
Minnesota (H.F.6 ) and Pennsylvania (H.B.1032) have emerged as unique examples of establishing Solar for School programs. Minnesota’s program was so successful that further legislation (MN H.F.2310), was passed in 2023 to give an additional $29.3 million in funding to expand the program. Pennsylvania’s program is not only grant funded by the state but specifically was designed to leverage federal tax credits like direct pay.
Another unique way to support solar for schools without creating a grant program can be seen in Connecticut (H.B.5524). This legislation requires the Public Utilities Regulatory Authority to initiate a docket to develop a program to encourage the installation of solar photovoltaic systems and energy storage systems at public schools.
Utilizing Federal Funding for Clean Energy Project
By blending federal funding opportunities like direct pay, SEFIs, and the GGRF, states will be able to reduce the overall cost of capital for clean energy projects. These funds can be an extremely useful way to get legislative priorities funded when there are limited state funds. By utilizing federal incentives and state-supported programs, schools can transition to clean energy in a way that is both financially feasible and environmentally responsible. State legislators can play a key role by crafting supportive policies that align with federal programs, helping to scale solar adoption and create long-term savings.
Additional Resources
- Roadmap for Navigating Federal Funding for Public Buildings | Blue Green Alliance
- Clean Energy Tax Navigator | Lawyers for Good Government