JULY 14, 2011 ISSUE
AIRE Aids Community-Owned Renewable Energy with New Program
“
The potential for growth is exponential.
” —Rio Tazewell, director of education and outreach for AIRE
First Congregational United Church of Christ in Asheville served as the pilot project for the Boone-based Appalachian Institute for Renewable Energy’s innovative social finance program, which helps nonprofits take advantage of state and federal tax incentives to fund community-owned renewable energy projects. The church’s 9.4-kilowatt solar power system installed April 1 is the largest on any church in the state.The Appalachian Institute for Renewable Energy (AIRE) has developed a financial model to promote community ownership of renewable energy systems by optimizing the full gamut of state and federal tax credits and incentives available to such projects.
After spending years planning and crunching numbers, AIRE launched its “innovative social finance” model in May thanks to a $400,000 grant from the Kendeda Fund and is helping organize renewable energy projects across North Carolina. AIRE will target churches, nonprofits, neighborhoods, schools and local governments.
“We’re interested in working all across the state,” said Rio Tazewell, director of education and outreach for AIRE. “For the time being, we’re focusing on solar.”
AIRE’s model operates through structured tax equity financing. Tax credits and incentives, Tazewell explained, are designed to benefit for-profit businesses—nonprofits do not have tax liability.
Under the innovative social finance model, groups create businesses—limited liability companies, or LLCs—comprised of community members willing to make an investment with a safe return. These LLCs are able to take advantage of tax credits not available to nonprofits.
The LLCs purchase renewable energy systems and are able to make their money back within five to six years through investment tax credits for renewable energy; accelerated depreciation, a set of IRS rules that allows businesses to deduct from their taxable income the declining value of business-related investments faster than the value of those assets actually declines; and sales of renewable energy credits and electricity.
Once they make their money back, the investors are then able to donate the system to the nonprofit as a charitable donation—another tax deduction.
Throughout this process, AIRE will facilitate in a consulting role. With investors able to make back as much as 140 percent of their investment in the ideal tax situation, some will be motivated by the financial returns. But others want to be part of something bigger, Tazewell said.
“They’re really in it to help build the clean energy movement,” he said. And these projects will help diversify ownership of energy sources in a market dominated by large energy monopolies, fostering self-sufficiency and economic opportunities, he noted, remarking, “The potential for growth is exponential.”
Currently, AIRE has already launched an innovative social finance project at First Congregational United Church of Christ in Asheville, and other projects are being planned in Elon, Boone and Asheville.
AIRE views community-owned energy projects as one step in its mission to create sustainable, equitable communities. Many barriers exist that prevent people from investing locally, Tazewell added.
“Our church has no money for a project like this, so it was the only way,” said Stan Corwin, project organizer at First Congregational United in Asheville. “We were a pilot program for [AIRE], and they were our helping hand. Without AIRE’s help we would still be trying to put the whole thing together.” Corwin said he’s been told the 9.4-kilowatt system installed April 1 is the largest solar system on a church in the state.
Helping AIRE to mine the tax code in developing this model was Dave Harman, a retired accountant and former chief financial officer and founder of High Country Bank. Bob Olson, a Minnesota attorney, also contributed to the project, along with a few other accountant advisors.
Funding from the Kendeda grant will cover staff expenses, travel budgets, materials and other expenses for two years, at which point AIRE hopes to have developed the program into a self-sustaining, for-profit arm of AIRE, a nonprofit. AIRE sees the development of a for-profit consulting division as a way to support the nonprofit’s mission without being beholden to grant funding.
Tazewell acknowledged that the existence of this program in the future is contingent on lawmakers voting to renew the applicable tax credits, which expire after so many years. This is anything but certain.
“It’s impossible to see what would happen,” he said. However, short of any “radical legislation” that would end the credits before they’re set to expire, AIRE is confident that all tax components of the model will be effective until the end of 2016—meaning any projects that have broken ground through 2016 will benefit from the tax credits as they are currently structured.
For more information about AIRE’s innovative social finance model, click to www.aire-nc.org, email rio@aire-nc.org or call 828-406-8995.
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