Solarize Philly – Philadelphia C-PACE

January 11, 2024

Non-IRA incentives and sources of financing for solar

Written by Brian Lavinio, PEA intern and Williams College (2024)

Solarize Philly is your one-stop shop to go solar for your property.

This is the second addition in a two-part blog series focused on solar, storage, and other technologies highlighted in the Inflation Reduction Act (IRA). Part 1 is here. The IRA is a powerful tool with many incentives and sources of financing for solar projects; however, there are non-IRA solar financing measures that can provide additional benefits. Many of these can be combined with IRA benefits to reduce already lowered costs of solar projects.

THE BOTTOM LINE

There are dramatic cost savings available for installing solar!

IRA Investment Tax Credit reduces system costs by at least 30%: “Adders” for domestically-produced content, low income and energy communities can reduce costs even further

PECO incentive of $0.10 per kWh of energy generated in first year of operation, which PEA estimates will reduce total system cost by approximately 5%.

Expect a reduction in the cost of solar by at least 35% and potentially much more!

What incentives are available?

In June of 2023, PECO launched a new solar energy incentive for commercial property owners. The incentive is for production of “behind-the-meter” solar energy and provides $0.10 per kWh of energy generated based on the property’s first year of annual solar production, minus any excess kWh that is not directly consumed by the account and sent to the grid. Simply put, PECO will provide an incentive on the kWh that commercial properties produce and consume.

We estimate that this incentive will reimburse property owners between approximately 5% of a typical total solar system’s cost. This incentive, when combined with the IRA’s expanded Investment Tax Credit (or Elective Pay for non-tax paying entities) of at least 30%, brings the total cost of commercial solar projects down by 35% or more. See this blog post for more information.

What financing measures are available?

If commercial property owners are unable to generate the required capital for solar projects, there are financing measures available to reduce the gap in access to renewable energy projects.

Commercial Property Assessed Clean Energy (C-PACE)

C-PACE financing is available for commercial property owners to pay for energy efficiency, water conservation, clean energy, indoor air quality (IAQ), and resiliency projects. PEA administers the Philadelphia program. C-PACE terms can be as high as 30 years and interest rates in the second half of 2023 were between 7% and 8%.

C-PACE financing can be a great solution to pay for the full upfront cost of installing solar. When incentive payments are received (12-18 months after installation) they can go towards C-PACE payments or can be used for other capital investments.

What properties are eligible?

Commercial properties including office, multifamily, retail, warehouse, medical, hospitality, agricultural, industrial, and vacant land, among others.
Non-governmental, tax-exempt organizations that operate facilities such as community centers, medical facilities, theaters, schools, religious facilities, among others.

For more information about Philadelphia C-PACE and to determine if your property and project qualifies, check out the Philly C-PACE website or contact Lisa Shulock at lshulock@philaenergy.org.

Catalyst Term Loan, Philadelphia Green Capital Corp.

Financed through Philadelphia Green Capital Corp. (PGCC), an affiliate of PEA and the Philadelphia region’s green bank, this loan offers lightly secure financing for low-to-moderate income multifamily properties and non-profits. The Catalyst Term Loan primarily targets energy and resilience improvements through decarbonizing buildings, improving occupant health and safety, and complying with local building energy-efficiency requirements. Renovations and new construction are both eligible.

What properties are eligible?

Affordable and market-rate residential properties with five or more units.
Co-ops, condominiums, rental properties, and affordable housing (including mixed-use).
Buildings owned by non-profits or municipalities, including community centers and houses of worship.

What are some eligible improvements?

Most energy performance improvements are eligible, as well as improvements to a building’s health, safety, or resiliency. Some examples include:

Solar PV and other renewable energy systems
Repairs needed for building electrification or solar, including roof replacement or electrical rewiring
Energy storage solutions
Work deemed necessary for achieving high-performance building standard certifications such as LEED

What are the loan terms and rates?

Loans can range from $50,000 to $2,000,000, with rates starting at 8.75% and terms ranging from 7-20 years. Higher loan amounts may be considered on a case-by-case basis by PGCC. Rates vary based on housing affordability status and/or owner’s nonprofit status.

For more information, check out the PGCC webpage. Questions can be directed to Rishika Ghosh, greenloans@phillygreencapital.org.

Sustainable Development Fund

The Sustainable Development Fund is part of the Reinvestment Fund of Philadelphia in conjunction with the Pennsylvania Public Utility Commission. This fund financially supports projects that promote energy conservation and efficiency, and clean energy technologies.

Who is eligible?

For-profit companies
Non-profit organizations
Local government entities

Renovations and new construction are both eligible. All projects must be located in the Commonwealth of Pennsylvania.

What are some eligible improvements?

The Sustainable Development Fund provides financial support for projects promoting energy conservation and efficiency, renewable energy implementation, storage solutions, and construction of electricity-generating projects from clean energy sources. Examples include:

Construction of solar, wind, hydro, or other renewable energy sources.
Energy conservation and energy efficiency improvements in buildings, including gut rehab and energy retrofits.
Energy-efficient production equipment.
Electric storage solutions.

For more information, check out the Sustainable Development Fund webpage, or contact Bridget Wiedeman at the Reinvestment Fund, Bridget.Wiedeman@reinvestment.com.

YOUR ROADMAP TO GOING SOLAR

Obtain quotes from Solarize Philly solar installers
Secure Financing or capital for 100% of system cost
Approximately 12-18 months after interconnection with PECO, receive payments from IRS and PECO for 30-35% or more of system cost

Financing options can include:

Reach out to Solarize Philly, your one-stop shop to go solar for your property.

January 10, 2024

Incentives for Solar/ Storage/ CHP and Other Renewables for Commercial Properties

Written by Brian Lavinio, PEA intern and Williams College (2024)

This is the first in a two-part blog series focused on financing solutions for solar, storage, and other renewables technologies for commercial properties. The primary driver is the Inflation Reduction Act (IRA). Signed into law by President Biden in August, 2022, the historic piece of legislation contains $369 billion of federal climate-related funding. Since the IRA was signed into law, federal agencies have released updates on implementation details, regulations, and guidance. This series will educate commercial property owners on these updates and how they can monetize them. This blog series is an update to an earlier version published in February 2023.

The greatest benefits from the IRA for commercial property owners is expansion of Alternative Energy Credits, Section 48 of the Investment Tax Credit (ITC). Alternative energy technologies that are eligible for incentives include solar, energy storage, ground source heat pumps, geothermal, combined heat and power (CHP), electrochromic (dynamic) glass, and more.

Section 48 provides a minimum tax credit of 30% of the total cost of eligible systems (aka “Facilities”) including materials, labor, interconnection costs, etc. The total credits can soar as high as 70% in specific instances.

Important note: The Philadelphia Energy Authority is not providing tax advice in this blog or any other communication. And while solar installers and other alternative energy contractors are also not qualified to provide tax advice, they are most familiar with what tax incentives a particular project is likely to be eligible for.

What properties are eligible?

Nearly all commercial properties are able to take advantage of this incentive:

Owners with tax capacity (meaning they owe at least as much in federal taxes as the value of the credit) will receive a credit on taxes owed for the tax year the system is placed in service.
Nonprofits and most government-owned properties are eligible for Elective (aka Direct) Pay. After an application process, they will receive a check from the IRS for the credit amount.
Owners that do not pay taxes (and are not nonprofits or government entities) such as Real Estate Investment Trusts (REITs) are able to sell or transfer the credits to entities that can monetize the tax credits.

Are all projects able to receive a minimum of 30% credit?

Projects smaller than 1MW receive a 30% credit as a base amount. For projects larger than 1MW, there are prevailing wage and apprenticeship requirements that aren’t addressed here. In addition, there are significant “adders” that can increase the tax credit up to 70% (though not common) of total system cost depending on which qualifications a project meets.

What are these “adders”?

These are bonuses that increase the value of the 30% base tax credit from the ITC. They are the Domestic Content Bonus, Energy Community Siting Bonus, and Low-Income Community Bonus. Each adder is applied differently, but they can be stacked to increase the value of a project’s tax credit. The Domestic Content Bonus and Energy Community Siting Bonus are 10% credits, while the Low-Income Community Bonus is 10% or 20%.

What is the Domestic Content Bonus?

The purpose of this adder is to encourage the manufacturing and sourcing of American-made materials in their renewable energy projects. The IRS and Department of the Treasury issued guidance in Notice 2023-38 on eligibility and requirements to access the domestic content bonus. The U.S. solar industry has stated that the guidance makes it very difficult to meet the requirements in the next several years. They are encouraging the Treasury Department to modify the requirements in the final regulations, not expected to be released until sometime in 2024.

Solar installers are best able to inform customers as to whether their systems meet the content requirement.

What is the Energy Community Siting Bonus?

This bonus is designed to boost development in communities with economies historically dependent on the fossil fuel industry for employment and tax revenues. The IRS and Department of the Treasury released updated guidance in Notice 2023-47.

In order to access this benefit, projects must be located in energy communities. The Department of Energy has released a comprehensive map to help developers determine their eligibility.

Philadelphia does not qualify though there are locations close to Philadelphia that do. In addition, projects located on Brownfield sites are also eligible for this bonus.

What is the Low-Income Community Bonus?

This bonus targets low income communities and projects on Indian Lands. Unlike the other bonus credits or “adders”, there is a cap on the tax credits that will be distributed in the low income community bonus. It is expected that the Low-Income Community Bonus applications will exceed the available funding. Some describe it as a “lottery” for low-income credit adders.

This bonus is divided into categories with differing credits. Most relevant to the Philadelphia area are:

Facilities located in low-income communities (10% credit): Check out this map that visualizes eligible communities under this category. For the Philadelphia region, the building must be in a Census tract that is identified in the map as located in a New Market Tax Credit Low Income Community.
Facilities are part of a qualified low-income residential building project (20% credit): Eligible housing programs can be found here.
Facilities are part of a qualified low-income economic benefit project (20% credit): These facilities must provide at least 50% of the financial benefits of the electricity produced from the project to one of the following:
1. households with income less than 200% of the poverty line
2. households with income less than 80% of the area’s median gross income

Facilities may only qualify for one of the categories in the Low-Income Community Bonus.

Unlike the other bonuses, this requires an application through the Department of Energy. The application for the 2023 program year was opened October 19 and closed on November 18, 2023. Applications submitted after the initial 30 days will be considered on a rolling basis. To be eligible, projects must be under contract, but not placed in service. More guidance is expected to be released in 2024.

Stacking the investment tax credits for projects under 1MW

Philadelphia Energy Authority is not providing tax advice but rather educating readers about the potential tax benefits of the Inflation Reduction Act. The second of this two-part blog series is about financial incentives and financing options to go solar for commercial property owners in addition to the IRA incentives.

Credit category	% credit of total system cost *assume project cost of $200,000	Value of Bonus	Net cost of system after bonus (with base credit)	Net cost of system after bonuses (stacked)
Base credit	30%	$60,000	$140,000	$140,000 (base credit)
Domestic Content	10%	$20,000	$120,000	$120,000 (base + domestic)
Energy Community	10%	$20,000	$120,000	$100,000 (base + domestic + energy community)
TOTAL	50%	$100,000	$100,000 (base + domestic + energy community)

LOW INCOME COMMUNITY ADDERS (MORE DEMAND THAN SUPPLY – ASSUME “LOTTERY” TO RECEIVE THEM)

Low income community 10%	10%	$20,000	$120,000	$80,000 (base + domestic + low-income community)
Low income 20%	20%	$40,000	$100,000	$60,000 (base + domestic + low-income community)

Philadelphia Energy Authority is not providing tax advice but rather educating readers about the potential tax benefits of the Inflation Reduction Act. The second of this two-part blog series will be published later in January and will cover financial incentives and financing options to go solar for commercial property owners in addition to the IRA incentives.

August 18, 2020

First Solar Project to Use C-PACE in Pennsylvania Closes in Philadelphia

FOR IMMEDIATE RELEASE:
Tuesday, August 18, 2020

CONTACT:
Maryrose Myrtetus, Philadelphia Energy Authority
215-431-5641 (cell)
mmyrtetus@philaenergy.org

Philadelphia, PA – The Philadelphia Energy Authority, Greenworks Lending, and the Capers Company LLC announced today the financial close of the first project in Pennsylvania to use Commercial Property-Assessed Clean Energy (C-PACE) financing for a renewable energy project as part of a series of announcements being released during Philadelphia Solar Week. Capers Company LLC is borrowing $519,020 in C-PACE financing from Greenworks Lending to install a 212-kilowatt solar system on a building in the Germantown neighborhood of Philadelphia. K.E.S. LLC is the solar developer. The solar array is projected to generate 266,673 kWh in its first year of operation, meeting nearly 100% of the electricity needs of the building’s tenants. By using solar energy, the building will reduce its carbon footprint by 6,900 metric tons of CO2e emissions over the life of the project.

Under the leadership of Councilmember Derek S. Green (At Large), Philadelphia City Council passed legislation enabling C-PACE financing in Philadelphia in June 2019. “We saw C-PACE as a tool to open up new markets for clean energy investments in our City,” said Green. “This solar project proves that C-PACE does just that.”

William Capers, Principal of the Capers Company, says, “We feel it is most suitable and fitting that this project benefits a building that caters to the care of children, supporting them now and with the goal of leaving a better earth for them. I am happy to be a part of a project that will help decrease a necessary cost associated with operating a childcare center.”

Jessica Bailey, Greenworks CEO and Co-Founder, stated that “Solar can immediately help decrease a building’s operating expenses while lowering its carbon footprint and has been a key piece of the Greenworks story since we started. C-PACE finance offers a powerful solution to build these projects where they might not otherwise have made fiscal sense. We are proud to expand our offering into Pennsylvania and provide financing for the first C-PACE-financed solar project in the Commonwealth.”

“This is the second C-PACE financing to close in Philadelphia this summer, showing the breadth of projects that C-PACE enables,” noted Maryrose Myrtetus, the Philadelphia Energy Authority’s Program Manager overseeing the Philadelphia C-PACE program. “The first financing covered energy and water efficiency improvements in a new mixed-use gut-rehab project in Kensington. It is notable as well that this solar project pencils out without grants, simply utilizing the energy savings, C-PACE financing structure, tax benefits and anticipated Solar Renewable Energy Credits (SRECs) revenue.”

The line-up of virtual events for Philadelphia’s second annual Solar Week includes a webinar on Thursday, August 20th titled Good for Business: Trailblazing Commercial Solar Projects, which will include information on C-PACE and another commercial solar project announcement. Find details about all Solar Week events at solarizephilly.org.

About the Philadelphia Energy Authority

The Philadelphia Energy Authority (PEA) is an independent municipal authority created in 2010 to advance energy affordability and sustainability for the City. PEA has facilitated over $136 million in clean energy projects in Philadelphia since launching the Philadelphia Energy Campaign in 2016, creating more than 1,300 jobs. As Program Administrator, PEA reviews and approves applications, manages the billing and lien processes, engages in market education and supports the growth of the Philadelphia C-PACE program.

About Philadelphia C-PACE

Commercial Property-Assessed Clean Energy (C-PACE) financing allows commercial property owners to borrow money for energy efficiency, renewable energy, and water conservation projects. Repayments are made via a special assessment similar to a property tax assessment. Key features include: 100% of project costs can be financed; repayment terms are up to 30 years; the special assessment stays with the property in the event of a sale.

For more information, visit www.philadelphiacpace.org.

About Greenworks Lending

Greenworks Lending is the largest provider of Commercial Property Assessed Clean Energy (C-PACE) financing in the country. Led by several of the industry’s founding policy developers and standard-setters, Greenworks Lending is a private capital provider uniquely dedicated to funding commercial real estate through C-PACE. Greenworks has provided financing to hundreds of commercial properties in more than a dozen states. Greenworks Lending’s C-PACE financing makes clean energy a smart financial decision for commercial property owners.

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April 6, 2020

Philadelphia Opens Applications for New Solar Rebate to Encourage Property Owners to Install Solar

The City of Philadelphia’s Office of Sustainability and the Philadelphia Energy Authority have opened applications for the Philadelphia Solar Rebate, an incentive program to encourage property owners to install solar photovoltaic systems in Philadelphia by providing $0.10 per watt to commercial projects and $0.20 per watt to residential projects ($1,000 for an average row home installation). Visit https://www.phila.gov/solar-rebate to learn more and apply.

This one-time incentive payment will be issued by the City after the solar project has been installed and has received Permission to Operate from PECO. To be eligible to apply for the Solar Rebate, applicants must:

Have installed solar on their property located in the city of Philadelphia.
Have received Permission to Operate from PECO on or after July 1, 2019.
Be current with or in a payment agreement for all taxes and other indebtedness to the City.
Not have any unresolved building code or other property-related code violations.

Government or government-related projects will be subject to approval based solely on the discretion of the Sustainability Director.

Applications will be reviewed in the order in which they are received. Payments will be processed within 4–6 weeks, pending availability of funds. The Solar Rebate is not to exceed a total payment of $100,000 per project. If not enough funds are available in a given fiscal year, your application will be considered to have been filed on the first day of the next fiscal year.

The Solar Rebate is one of several measures supported by Mayor Kenney and passed by Philadelphia City Council in 2019 that support solar adoption. Other initiatives included a reduction in solar permit fees, a measure to enable solar canopies, and Commercial Property Assessed Clean Energy (C-PACE).

The Philadelphia Energy Authority (PEA) is administering the Solar Rebate on behalf of the Office of Sustainability. PEA runs other solar market development programs, including Solarize Philly, the nation’s largest group buying program to support rooftop solar, and Bright Solar Futures, a solar training program for Philadelphia’s young people.

Visit https://www.phila.gov/solar-rebate to learn more and apply. Contact us at SolarRebate@philaenergy.org with any questions.