Solar Clearinghouse

Financing Models for Congregational Solar Photovoltaic Installations

Click here for a PDF version of IPL’s SOLAR FINANCING FOR CONGREGATIONS

Why Solar for Congregations?

People of faith embrace their cathedrals, churches, mosques, synagogues, and temples as sacred. In the best of scenarios, houses of worship hold a community together and serve as a central focus for community life in general. Symbolically and in reality, people of faith strive for their sacred spaces to be the center of good works and community service.

In today’s hyperactive, business-oriented, electronic world, our houses of worship continue to be placed of retreat, where the faithful come for worship, study, fellowship, and community engagement.

As people of faith have become more deeply engaged in environmental stewardship they have begun to recognize that rapidly accelerating climate change has become one of the greatest challenges that civilization has ever faced. Some are doing energy audits and making steps to reduce energy use, some are designing new buildings and additions that are highly energy efficient. These actions are taken out of love for the beauty and goodness of Divinity and the desire to fulfill our responsibility to preserve and protect it.

How it Works

The most common way congregations can provide renewable energy to their houses of worship is by installing solar panels. The sun’s energy is converted into electricity, which can be used directly by the congregation by a technique called net-metering¹, where the meter runs backward when the congregation is using less electricity than the solar system is generating, or runs forward when the sun isn’t shining or if the buildings are using more electricity than the system is generating. Alternatively, the congregation can have a conventional hook-up meaning that the electricity that is generated by the solar panels goes directly to the electricity grid, which acts like a huge battery, and the congregation continues to get its electricity from its usual supplier.

The financial benefits of using net metering or a conventional hook-up will depend on many factors, such as the electric utility company in the congregation’s service area and other factors that are discussed in other sections below.

In some circumstances a faith community may have a need for a significant amount of hot water. In such instances, the community may wish to install solar thermal panels, which convert the heat into hot water.

FINANCING OPPORTUNITIES

Direct Donation Model

Members directly donate to the congregation, which installs the solar system. The members get a pro-rated (percentage share of project) tax deduction on their state taxes and a regular charitable contribution on their Federal taxes if they itemize deductions.

As of January 1, 2008 the State of North Carolina has enacted among the most generous and accessible renewable energy technology incentive programs in the USA. Through this incentive, the State of North Carolina will return 35% of the cost of qualifying renewable energy projects through tax credits. This credit extends to individual taxpayers, businesses, and now, to taxpayers who donate to NC registered 501c3 non-profits for renewable energy property installed by the non-profit within the state. The congregation’s project costs up to a maximum of $7.1 million can qualify for the tax credit.²  

For example, 10 donors each give $10,000 to the congregation for a solar electric project. These donors each receive $3,500 (35% of the cost of qualifying renewable energy projects) as a state tax credit.  The state tax credit is taken in five installments over a five-year period. Donors also can deduct their contribution on their federal tax return as a charitable donation the same year of the donation. It is important to note that this credits are set to expire unless they are re-instated in 2015.

Success Stories:

Temple Emmanuel, Greensboro dedicated their 5 kW solar system on October 16, 2011 at their Jewish Festival.  Temple Emmanuel has had a very active Teva Committee for many years. Teva is the Hebrew word for nature. The Teva Committee worked for several years shepherding the solar project through the congregational administrative structure, culminating in unanimous approval by their Board of Trustees. Both Rabbis Fred Guttman and Andy Koren were fully supportive.  Each donor receives a proportional share of the tax credit on their North Carolina return, depending on the size of their donation to the total cost of the project. They were also able to take a deduction on their federal return for their charitable contribution. Teva committee members estimate that donors received about 40-50% of their donations back in the form of these credits and deductions.

The congregation came to the table in an amazing fashion, with 58 families donating to the project. Donations ranged from $10 to $3000, allowing people of all income levels to share in the sense of ownership. The solar system has a direct tie to Duke Energy, and sells all of its electricity to Duke and the Renewable Energy Credits to NC Greenpower, thus reducing their gross expenditures on electricity. The project costs about $25,000, but again this expense was absorbed by the donors, not the congregation, and Teva committee members estimate that after taxes, the project probably costs about $13,000.

Within the first year of operation, the array brought in the congregation $1,200. Teva members point out that the congregation “made all of the money back for the congregation on the first day that we started generating electricity—because the congregation did not directly invest any funds in the project.”

As the members of Teva remind us, it is important to understand that “this project cost Temple Emanual $0.” 

Myers Park Baptist Charlotte – solar array

Myers Park Baptist Church, Charlotte dedicated their 5 kW system on October 2, 2011 in a ceremony after worship services. A church Energy Committee, created at the request of their Earthkeepers Group learned about a matching grant using federal stimulus funds that was administered through the State Energy Office and applied for the funds in the fall of 2009.  In order to make their grant application more attractive to the state, the church proposed putting a display in their Learning Center that tells people about energy and carbon savings generated by the solar system. They also proposed conducting quarterly classes on energy related topics in their Learning Center. The Committee simultaneously began the process of educating their faith community about the value of solar and moving the process through the proper administrative channels at the Church. The grant was awarded early in 2011, and the Earthkeepers had no difficulty in raising the matching funds, although the project was scaled down in size due to the economic downturn. The solar system was installed in August 2011, and has been producing clean energy from the sun since then. The system was placed on the Learning Center, and is supplying electricity directly to the Church through a behind the meter installation, thus saving directly on energy costs. The donors will receive a proportional share of their donation as a tax credit on their North Carolina tax returns and a take the donation as a contribution on their federal tax return.

LLC Funding Model

Members of a faith community form a Limited Liability Corporation (LLC), a legal entity that allows shareholder/investors of the LLC to take advantage of all state and federal tax incentives. In addition to the 35% N.C. State Tax Credit outlined above, the IRS has a 30% tax credit that is taken in the year the renewable energy project is placed into operation. The solar system is also depreciable business expense. The LLC will also have a revenue stream provided by selling the Renewable Energy Credits and electricity to available buyers. The LLC leases the congregational property on which the solar project is sited. At the appropriate time, the LLC will sell or donate the project to the congregation, after the investors have achieved their return on their investment (ROI). In general, as the LLC is composed of moral empathetic investors whose primary objective is to make the project available to the congregation as soon as their ROI is achieved, the project will be donated or sold to the congregation within about 6-7 years. At that time the congregation receives the full financial benefit described above in model 1, either by a behind the meter installation, net metering, or selling the RECs and electricity.

This model differs from the Direct Donation Model is several important ways. Because the investors in the LLC anticipate being able to recoup 100% of their investment in within 5-6 years, they often can afford to finance a much larger solar array than through the direct donation model.  Many of these investors consider this a form of socially responsible investing, but with the knowledge that the investment is remaining in their local community, providing jobs to the renewable energy industry.  They understand that while the direct benefit of reducing energy costs to their faith community is delayed for a number of years, the long term benefit of that investment will endure for decades. The investors also know that as their ROI accrues, they can use that money for direct donations to their congregation. Finally, if part of the terms of the LLC contract involves leasing roof space for solar panels, a small new income stream is generated for the congregation during the period before the system is donated or sold to the faith community.

Success Stories:

First Congregational United Church of Christ, Asheville is the first congregation in North Carolina to use this model. They dedicated their 10KW solar system at a Solarbration on April 3, 2011. It was featured in a news story in the Asheville Citizen-Times, Asheville Church Puts in Faith in Solar Power. The project was developed by the Earth Team with the full support of Pastor Joe Hoffman, who had been promoting the idea for several years.

Members of the Earth Team, members of the church, and some interested outside parties formed a Limited Liability Corporation, First Solar LLC, to finance the project. First Solar LLC leased rood space from the church, and all of the electricity is being sold to Progress Energy. First Solar also is selling their Renewable Energy Tax Credits to North Carolina Green Power. At the end of 6 years, First Solar plans to donate the system to the church. Although the Church does not benefit financially directly from the solar array, other than the lease payment, during this time period, after the solar panels are donated, they will have full financial benefit for the life of system from that time forward.

A reflection from Pastor Joe Hoffman on the project:

Our approach was to invite investors to purchase a share – which was valued at $5000, and thus each investor became a partner in the LLC. We ended up with 9 investors, some who bought more than 1 share, and a couple who split a share with another person.

The rest of the congregation was then invited to donate to a solar fund so that we might have money to purchase the panels from the LLC in 5-6 years – according to what the financial model indicated. Those persons would write a check to the church, it could be any amount, and would receive a notice from the church of this tax free contribution. In this way, everyone still gets to be a contributor, and the original investors do not face a possible small loss of their investment when it is time to sell the panels to the church. (The church does not want our original investors to lose money – they could have earned money on that investment in some other kind of investment on the market – but they chose to invest socially, and we want to honor that.)

So far, the church has had no costs associated with the solar panels. And yet, we have gotten free great publicity in the press, we have used the results of our panels for educational purposes to inform people of why this is important, etc. It has been a win/win. We are considering doing the same kind of LLC for a different kind of green energy project in our church because this process has worked so well with the solar panels.

Elon Community Church followed the LLC model of financing our solar panels.  This is the model developed by the Appalachian Institute for Renewable Energy (AIRE) in Boone and utilized by the Asheville UCC.  What follows are learnings and suggestions gleaned from our experience of putting this model into action. Written by David Andes, Chair, Elon Community Church Green Church Committee.

Perspective: This is a creative and complex model that allows a non-profit (for example, a church) to take advantage of tax credits in order to maximize capital investment in solar panels.  Its structure and process allow “benevolent investors” (in an LLC) to recoup most or all of their investments over the course of about six years. This means that a church will most likely be able to put up a larger array of solar panels than would normally be possible, because investors would get their money back, whereas contributors would only get a charitable contribution credit on their taxes.

Findings:

1)    The process, from information gathering to educating the congregation to site assessment to fund raising to trustee approval to panel installation to final connection and activation, took over two years.  All along the way there were many details to learn and obstacles to overcome.  Patience, perseverance, and faith are needed.

2)    It seems important to involve not only a core group of solar panel promoters, but also as many people in the congregation as possible. This project needs dedicated people with skills in technology, church politics and functioning, construction, fund raising/investing, marketing. That bears much fruit when it comes time for approving the project and raising the funds.

3)    Think big.  Put up as large an array of panels as possible, even if you have to wait a little longer to accumulate the necessary capital. The costs of solar panels is steadily decreasing. The LLC paperwork involved in financing a large system is not much more than that for financing a small one. AIRE is now focusing on assisting the non-profits who organize to finance at least 20 kW systems (80 panels), and they actually much prefer larger systems.  The only down side to a large system is that NC Green Power will not buy Renewable Energy Credits from systems larger than 5kW.  Thus that source of revenue for investors will not be available.

4)    In forming the LLC, consider expanding the possible pool of investors beyond just church members. While it is important for the church to have a strong sense of ownership for the project, there may be people in the community who would also like to invest in a renewable energy project.  This can strengthen community ties and be a good advertisement for a congregation that does earth stewardship.

5)    We contracted with AIRE to teach us the LLC financing model and to guide us through its implementation.  We could not have done this project without them.

6)    You will need the help of a lawyer and a tax accountant who are familiar enough with the LLC financing model to ably facilitate it.  AIRE can recommend such professionals if you do not already have them available.

7)    Due to the fact that our church was erecting a new Community Life Center, we had some complications.  First of all, our members were already financially pledged to the new building. This made for unfortunate timing for fund-raising for solar panels. Investor-financing was helpful here, but still limited in potential.

8)    Secondly, the new building was determined to be the best site for the solar panels, but it has insulated roof panels.  This was good for energy efficiency, but problematic for attaching frames for solar panels.  Our trustees raised this issue with much concern. We had to pay the architect to engineer the attachment process.

9)    You have to have liability insurance for your solar panels.  Although the church’s own insurance did provide that coverage, the insurance company itself would not name our LLC as an insured party.  Thus Duke Energy required that the LLC buy separate liability insurance before they would contract with us.

10)   We sell our generated electricity to Duke Energy.  In order to do that, we had to sign contracts and have them run through their inspection and connection procedures. That all took several weeks.  Now we are producing and selling, but be forewarned that Duke’s purchase price for renewable energy is significantly below what they charge customers for electricity.  Progress Energy pays more than Duke does, but now they are merging with Duke and that could change.

Was it worth the effort and aggravation?  Yes, definitely.  We are subtracting some carbon that would normally be put into our atmosphere.  We are educating our congregation about climate change, we will be saving the church money on utility bills. We are witnessing to our community about earth stewardship.  We hope, in the future, to add to our solar panel array and to produce more renewable, clean energy.

Third Party Payer Model

Using this model, members of a faith community usually have no or little upfront costs in getting a renewable energy system. The congregation contracts directly with an outside business (Third Party Payer) which installs a system, arranges financing, and negotiates the rate for energy usage directly with the congregation. The third party payer usually owns the system for anywhere from 11 and 15 years before the congregation is offered an option to buy the system at fair market value.

Because of Electric Utility Regulations in North Carolina, to our knowledge no solar electricity systems have been installed as of February 2013 using this model. This model has, however been used by faith organizations that have a large need for hot water, as hot water usage is not regulated by the Utilities Commission.

Success Story:

Montreat Conference Center received the 2011 Green Leaf Seal from the Presbyterian Church (U.S.A.)’s Environmental Ministries and the Presbyterian Church Camp and Conference Association for the installation of an innovative solar hot water system on the roof of the Conference Center’s Assembly Inn.

The Conference Center incorporated a 1500 gallon solar thermal system into their energy portfolio using a Solar Energy Purchase Agreement (SEPA).  No capital was required of Montreat. The Third Party Payer owns the solar hot water system and will sell Montreat the energy needed to heat the water for the next 10 years, at rates lower than energy rates dependent upon burning fossil fuels. The hot water solar collectors will generate over 1 million BTU’s of energy and save Montreat about $3000/year in heating oil costs.

“Montreat Conference Center is deeply committed to the responsible care and preservation of this mountain cove,” said conference center president Pete Peery.  “We have an on-going program of environmental stewardship that includes a 2,500 acre conservation easement, environmental programming, a recycling plan, an electric vehicle for on-site transportation of guests, and more.”

Using or Selling your Energy

If your congregation does the direct-donation model, you will need to decide what to do with your power immediately. If your congregation chooses the LLC route, your congregation will make this decision upon the transfer of the array.

There are currently two entities that purchase/compensate for solar energy: NC GreenPower (which purchase Renewable Energy Credits) and Duke/Progress. Either way, if you connect your array to the grid, Duke/Progress will pay you 5 cents/KwH for your solar energy month. If your congregation chooses to form a (typically annually written) contract with NC GreenPower, your congregation will earn a subsidy (ranging typically from 8 to 15 cents/ KwH). Currently (2013), NC Green Power contracts are only available to congregational arrays at or below 5K.

Alternatively, your congregation can use the electricity directly by congregation’s electric system behind the meter or by net-metering,thus reducing their electricity expense. Net metering is a system that involves that allows the facility’s electric meter to run either forward or backward. When the solar array produces more electricity than the congregation is using, the meter runs backward. When the facility uses more electricity than is being generated, the meter runs forward. The congregation is billed on the “net” usage per month.

This guide was primarily created by members of Temple Emanuel Greensboro and based on their successful solar panel project, completed in 2011. Contributions are also from members of Myers Park Baptist, Charlotte and the Pastor of 1^st Congregational United Church of Christ, Asheville. You may wish to download a printer-friendly version of this guide.

Please note that this document is to serve as a guide, rather than a literal step-by-step process. How individual congregations pursue this process must reflect their own particular decision making procedures and policies.

Note: Tasks relating to “donors” only apply to congregations using the direct-donation model.

1. Gather initial group of interested congregants and clergy.  This project could be taken on by an existing “Green Team” (or whatever your Environmentally-minded committee is called), a subcommittee of the Green Team, or a new group of people.

• Identify other congregants and invite them to the team.
  • If possible, include people with experience or expertise in construction, green energy, tax benefits, fundraising, communications and public relations.
  • Try to engage the youth, having 2 or so youth representatives on the team.
  • Woven throughout the group should be people passionate about this project seeing it through, especially because most successful solar projects at congregations take 2-3 years.
• Note regarding clergy involvement: How and when your clergy become involved should reflect how your congregation typically operates. Keeping communications open and inviting clergy early in the process is ideal – then clergy can determine when it is appropriate for them to become more actively involved.

2. Determine the solar suitability of a building. If none of your buildings (or possibly parking lot spaces) have a good, shade-free south-facing roofs/potential, consider partnering with another congregation that has a more suitable building. Most installation companies will do a quick, free suitability assessment – often using GoogleEarth.   Note: NCIPL does not endorse any specific companies, per our standard operating procedures.

• Determine approximate cost of the project based on size of the projected installation (size may be limited by NC GreenPower) and other factors.
• Research options for energy use such as “Buy all sell all” through power companies or NC GreenPower, or using the power you generate on site.
• Determine what financing model your congregation(s) will use. Each model has different parameters, including the ideal number of funders the project needs to succeed.
• Create an overall plan and projected timeline.

3. Gain Approval for Project

• Create a presentation explaining the basic plan, including how it will be funded, environmental benefits, educational benefits, financial benefits to congregation, and why the project reflects our religious obligation to protect the earth. Be prepared to address:
  • Concerns around funding, how much it will cost the congregation, how you will ensure that donors do not lessen their congregational contributions, and how the project will financially benefit the congregation. Consider contacting other congregational solar champions around the state (info@ncipl.org can put you in touch) so that you can share their stories of how they financed their panels without spending any direct congregational funds, or in their words, how it cost their congregation “zero dollars.”
  • Concerns that are specific to your congregation or site, such as whether or not you will have to cut any trees to reduce shade.
• Deliver presentation to congregational committees whose support would be helpful (i.e. Buildings and Grounds, Social Action, Religious Education).
• Meet with the groups necessary to gain approval. This may include clergy, lay leaders, entire congregation, buildings and ground committees, and/or your congregation’s Board of Directors.

4. Divide into sub-committees (each with its own chair)

• Communications/Fundraising – responsible for creating literature, planning kickoff event, contacting donors, explaining tax benefits, honoring donors, planning dedication of completed project.
• Procurement/Installation – responsible for determining best type of system to install, contacting vendors, soliciting bids, selecting a contractor, working with the contractor and the congregational staff throughout the installation.

5. Announce to Congregation and Build Enthusiasm

• Use emails, brochures, bulletins, displays, announcements during services, social networking, etc. to increase project support.
• Hold kickoff event (possibly luncheon) to present the project and answer questions.  Local politicians and environmental leaders could be invited.  Could include a speaker with expertise in Green Energy, a leader of a successful congregational solar project elsewhere in the state, or someone from NCIPL.

6. Development Campaign

If using Direct-Donation model:

• Create brochure briefly explaining how solar panels are expressions of faith, and the benefits of project to the environment, the congregation and the donors. Include a pledge form and distribute to congregation.
• Be prepared for concerns around funding (see above)
• Detail tax benefits, explaining that credits for renewable energy projects for non-profit organizations are passed through to individual donors (they could deduct up to 60% of their donation).  If possible, have a CPA that have experience in similar topics, or an outside consultant, available for potential donors to contact with specific questions.
• Identify potential donors and divide up between fundraising committee members to make contacts.  Follow up with those who say they are considering making a donation.

Donations are sent to congregational office and deposited in a special account for the project.  Office records name and contact information for each donor in a file which are made available to the fundraising committee.

If using Limited Liability Corporation (LLC) model:

• Determine the ideal number of investors and size of shares.
• Recruit investors.
• If you have more investors than you can handle, record their information and after the project is completed, consider doing a 2nd solar project on a community building and letting this be an investment in the community and another educational opportunity.
• Commission a legal contract between the LLC and congregation
• If the congregation is scheduled to buy the panels back from the LLC at a discounted rate, invite remaining congregation members to donate to a solar fund for that purpose

7. Solar Panels Installation

• Work with congregational administrators and Buildings and Grounds Committee to identify possible issues with construction, and best location for installation.  Address these issues when making presentations.
• Identify local contractors who are capable of completing the project, and solicit bids from them.
• Committee reviews bids, and selects the best fit for your needs.
• Work closely with contractor throughout installation process.
• Possibly include installation of a monitor which is visible inside the building and displays ongoing energy generation.
• If using “Buy all sell all” register to sell energy to power company and NC GreenPower.

8. Follow –Up

• If using direct-donation model:
  • Congregation staff sends tax letters to donors
  • Hold reception for donors (optional)
  • Possibly honor donors above a certain level with a plaque.
• If using an LLC:
  • At the time specified in the contract, purchase or receive (depending on the terms of the contract) the solar panels
  • Decide how to use or sell the energy once the panels are transferred to the congregation.
• Hold a public dedication ceremony.
• Draw attention to monitor (if installed).
• Work with Religious Education leaders to incorporate the panels/monitor into the curriculum.
• Share your story with NCIPL, so we can use it to inspire others!

• Community UCC Solar Project - Community UCC is a relatively small (about 120 active members) congregation located in Raleigh, NC, that has long had an active interest in environmental stewardship. We created our Justice in a Changing Climate initiative (JCC) in 2007, recognizing that climate change will affect those with the fewest resources more adversely and sooner than the rest of us.
• Elon Community Church - Elon Community Church followed the LLC model of financing our solar panels.  This is the model developed by the Appalachian Institute for Renewable Energy (AIRE) in Boone and utilized by the Asheville UCC.  What follows are learnings and suggestions gleaned from our experience of putting this model into action.  Refer to Joe Hoffman’s article to […]
• Eno River Unitarian Universalist Fellowship - As part of our Green Sanctuary Certification effort we got solar panels placed on the roof of our CARE building. Visit Eno River Unitarian Universalist Fellowship online at: https://eruuf.org
• Epworth United Methodist Church - As members of Epworth United Methodist Church (EUMC), we hold a core belief that “All creation is the Lord’s, and we are responsible for the ways in which we use and abuse it” (from the UMC Social Principle). However, powering our church with electricity generated from fossil fuels contradicted this belief, as it causes pollution, […]
• First Congregational United Church of Christ, Asheville - First Congregational United Church of Christ, Asheville 20 Oak St.,  Asheville, NC 28801 Contact: Pastor Joe Hoffman, revjoehof@uccasheville.org First Congregational United Church of Christ, Asheville is the first congregation in North Carolina to use this model. They dedicated their 10KW solar system at a Solarbration on April 3, 2011. It was featured in a news story […]
• Hendersonville First United Methodist Church Solar Installation - The Hendersonville FUMC Board of Trustees received a suggestion in 2021 from one of the trustees, Mr. Jim Kane, that the church should investigate the possibility of rooftop solar as a means of lowering energy costs and reducing emissions.  The church buildings constitute about 66,000 sq. ft. and were consuming on average about $34,000 in […]
• Hillside Church, A Baptist Fellowship - Hillside Church is an 18,905 square foot building built in the year 2000 in Chapel Hill. Hillside Church had an Energy Assessment Report done by John Roberts, a church member and energy auditor with NCIPL in 2020. The report recommended changing out lights for LED lamps and installing solar panels. Hillside’s pastor, Rob Tennant, and […]
• Myers Park Baptist Church, Charlotte - Myers Park Baptist Church 1900 Queens Rd  Charlotte, NC 28207 Contact: Kate Green, greenkat1@bellsouth.net Myers Park Baptist Church, Charlotte dedicated their 5 kW system on October 2, 2011 in a ceremony after worship services. A church Energy Committee, created at the request of their Earthkeepers Group learned about a matching grant using federal stimulus funds that was […]
• Peace United Church of Christ - As of Wednesday, March 13th, 2024 Peace UCC became a church largely powered by the sun. Yes, our 95 solar panels have been installed and are up and running. “Green energy” is now a part of our ministry! There are, of course, two major reasons to adopt solar energy: financial stewardship and environmental stewardship. The […]
• Pilgrim United Church of Christ - We are not a large congregation but do consume a lot of energy due to the fact that we have a day care facility on our campus. Before we installed our solar panels, the annual cost of our electricity was between $10-$11K per year. We did some other cost saving measures such as bringing our […]