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    NREL is a national laboratory of the U.S. Department of Energy, Office of Energy

    Efficiency & Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

    Contract No. DE-AC36-08GO28308

    Solar Schools Assessment andImplementation Project:Financing Options for Solar

    Installations on K12 SchoolsJ. Coughlin and A. KandtNational Renewable Energy Laboratory

    Technical ReportNREL/TP-7A40-51815October 2011

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    NREL is a national laboratory of the U.S. Department of Energy, Office of Energy

    Efficiency & Renewable Energy, operated by the Alliance for Sustainable Energy, LLC

    National Renewable Energy Laboratory1617 Cole BoulevardGolden, Colorado 80401303-275-3000

    Contract No. DE-AC36-08GO28308

    Solar Schools Assessmentand Implementation Project:Financing Options for SolarInstallations on K12 Schools

    J. Coughlin and A. KandtNational Renewable Energy Laboratory

    Prepared under Task No. SM10.18J1

    Technical ReportNREL/TP-7A40-51815October 2011

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    This report was prepared as an account of work sponsored by an agency of the United States government.

    Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty,express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness ofany information, apparatus, product, or process disclosed, or represents that its use would not infringe privatelyowned rights. Reference herein to any specific commercial product, process, or service by trade name,trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation,or favoring by the United States government or any agency thereof. The views and opinions of authorsexpressed herein do not necessarily state or reflect those of the United States government or any agency thereof.

    Available electronically at

    Available for a processing fee to U.S. Department of Energyand its contractors, in paper, from:

    U.S. Department of EnergyOffice of Scientific and Technical InformationP.O. Box 62Oak Ridge, TN 37831-0062phone: 865.576.8401fax: 865.576.5728email:

    Available for sale to the public, in paper, from:

    U.S. Department of CommerceNational Technical Information Service5285 Port Royal Road

    Springfield, VA 22161phone: 800.553.6847fax: 703.605.6900email:orders@ntis.fedworld.govonline ordering:

    Cover Photos: (left to right) PIX 16416, PIX 17423, PIX 16560, PIX 17613, PIX 17436, PIX 17721

    Printed on paper containing at least 50% wastepaper, including 10% post consumer waste.
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    Contact Information

    Jason CoughlinNational Renewable Energy Laboratory1617 Cole Boulevard

    Golden, CO 80401(303)

    Alicen KandtNational Renewable Energy Laboratory1617 Cole BoulevardGolden, CO 80401(303)

    Tom KellyKyotoUSAHELiOS Project800 Hearst AvenueBerkeley, CA 94710(510)

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    This report was made possible through funding from the Solar America Showcase activity of theU.S. Department of Energys Solar Energy Technologies Program. To learn more, please
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    List of Acronyms and Abbreviations

    AC alternating currentARRA American Recovery and Reinvestment ActBAB Build America Bond

    CA-CHPS California Collaborative for HighPerformance Schools

    CDE community development entityCDoE California Department of EducationCDLAC California Debt Limit Allocation CommitteeCEC California Energy CommissionCHPS Collaborative for High Performance SchoolsCREB Clean Renewable Energy BondCSI California Solar InitiativeDC direct currentDOE U.S. Department of Energy

    DSA Division of the State ArchitectDSIRE Database of State Incentives forRenewables and Efficiency

    ECM energy conservation measureEE energy efficiencyEERE energy efficiency and renewable energyEPA U.S. Environmental Protection AgencyEPAct Energy Policy ActESCO energy service companyESPC energy services performance contractFEMP Federal Energy Management Program

    FERC Federal Energy Regulatory CommissionFMV fair market valueFY fiscal yearGHG greenhouse gasHIRE Act Hiring Incentives to Restore Employment Act

    of 2010HPI High Performance IncentiveHPS High Performance SectionHVAC heating, ventilating, and air-conditioningIOU investor-owned utilityIRS U.S. Internal Revenue Service

    ITC Investment Tax CreditkW kilowattkWh kilowatt-hoursMACRS modified accelerated cost recovery systemMUSD Milpitas Unified School DistrictNAESCO National Association of Energy Service CompaniesNMTC New Market Tax CreditNREL National Renewable Energy Laboratory

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    O&M operations and maintenanceOPSC Office of Public School ConstructionPG&E Pacific Gas and Electric CompanyPOU publicly owned utilityPPA power purchase agreement

    PV photovoltaicQECB Qualified Energy Conservation BondQSCB Qualified School Construction BondQTCB Qualified Tax Credit BondQZAB Qualified Zone Academy BondREC Renewable Energy CertificateSAB State Allocation BoardSDG&E San Diego Gas and ElectricSFP school facility programSJUSD San Jos Unified School DistrictSMP Solar Master Plan

    TREC Tradable Renewable Energy CreditW wattWp watt-peak

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    Executive Summary

    The Sequoia Foundation is supporting three California public school districtsOakland,Berkeley, and West Contra Costa Unified School Districtsin the development of Solar MasterPlans (SMPs), documents that are intended to be incorporated into the districts facilities master

    plans. The National Renewable Energy Laboratory (NREL) is providing technical assistance tothese school districts and the Sequoia Foundation as part of the U.S. Department of Energy(DOE) Solar America Showcase program (see One element of thisassistance is the development of a resource guide for financing the installation of photovoltaic(PV) systems on Californias public schools. This guide contains an overview of financialoptions. A variety of templates, signed project documents, and other reference materials thatschool districts can review as they pursue their solar electricity generation projects wereprovided in a separate appendices document to the three school districts. Some of the documentsare publicly available online, and, where this is the case, links to the websites are provided.

    This document focuses on financial options developed specifically for renewable energy andenergy efficiency projects, including the traditional methods of financing capital investments atschools. Section 1 provides an introduction to financing PV on schools, including considerationof energy efficiency, roof viability, and classroom impact. Section 2 discusses the direct-ownership option. After selecting a solar developer through a request for proposal (RFP) process,the school district finances the projects purchase price with 100% debt financing which couldinclude traditional tax-exempt municipal bonds, leasing, or taxable bonds that provide a form offederal subsidy. Section 3 focuses on the third-party finance model, including power purchaseagreements and energy services performance contracts, with a brief description of New MarketsTax Credits. Examples and case studies are incorporated when relevant and available. Theseparate appendices to this report include a number of pertinent documents related to financingsolar installations on public schools and other public facilities.

    It is important to remember that all aspects of financing renewable energy systemsregardlessof whether they are in school districts or in other settingsare very fluid and dynamic. Laws arechanging, incentives are being offered or exhausted, federally subsidized bonds come and go,and interest rates rise and fall. Establishing the cost of projectswhether owned by a district orby an investoralso changes based on local economic conditions, tax law, installation costs,utility tariffs, and how m