Resources > Solar for municipalities

Solar for municipalities

• Factsheet

June 5, 2024

Solar for municipalities

Solar energy benefits us all. It saves money. It creates local jobs. It strengthens our energy system. Municipalities are well-positioned to benefit from going solar.

Why go solar?

Powering schools, libraries, municipal office buildings, and maintenance centers requires a lot of energy. Going solar can benefit municipalities in many ways. Below are some highlights:

• Cost savings: Solar is now cheaper than buying power from the grid in most places across the country. Solar costs have fallen more than 60%. Electricity costs are on the rise. Municipalities can invest solar savings elsewhere in the budget
• Job creation: The solar industry is diverse and growing nationwide. Solar jobs range from installation to manufacturing to sales. Municipalities fuel job creation by installing solar.
• Local economic development: Going solar can help municipalities jump-start the local clean energy economy. You can use the installation to educate constituents about renewable energy. This grows the local customer base for solar. Municipalities can also boost local clean energy employment. Choose local contractors for installation. Lastly, solar keeps money local. You pay less to out-of-state utility holding companies.
• Sustainability commitments: Installing solar can help your municipality meet its sustainability goals. You do so by lowering your fossil fuel consumption.
• Resiliency: As battery technology drops in price, many municipalities are considering using solar plus storage during power outages. These projects are often designed to protect the most vulnerable citizens in times of crisis. See the Clean Energy States Alliance for more on this topic.

Getting started

Municipalities can go solar in several ways. You can install panels on a single site. You can install them on a fleet of buildings. 

Our Solar FAQ will help you understand solar basics. It provides information about:

• solar technology
• installation procedures
• costs
• incentives

When installing solar, municipalities can choose from two models of ownership:

1. Direct ownership

Under direct ownership, the municipality pays for and owns all solar photovoltaic (PV) equipment. You take the full financial value of the electricity produced by the panels.

2. Third-party ownership

With third-party ownership, a separate entity owns the solar panels. The municipality pays that company for the electricity produced by the panels. Municipalities pay two separate electric bills under third-party ownership. You are billed by the utility company and the third-party solar owner.

Power Purchase Agreements (PPA) are the most common third-party arrangement. Check out the Clean Energy States Alliance website. It provides extensive resources on clean energy for municipalities.

What to look for when going solar

Tax-exempt status

The Inflation Reduction Act of 2022 allows municipalities to utilize federal solar tax credits. The credit is set at 30%. It will remain at 30% until 2032. It declines to 22.5% in 2033 and 15% in 2034. It sunsets in 2035. Municipalities don’t pay taxes. The law allows them to earn the credit through a direct pay option. The IRA also introduced additional credits that will be available to municipalities. 

Some projects may qualify for a tax credit more than the base amount above:

• 10% for projects located in energy communities — check out the eligibility mapping tool from the U.S. Department of Energy.
  • Communities that contain brownfields
  • Economically disadvantaged communities, particularly if they previously relied on fossil fuel jobs
• 10% for projects using defined minimums of domestic content for equipment

Note: Credits above only apply to systems that are smaller than 1 megawatt (MW). Larger projects can also access the 30% base ITC, as well as these adders. But, they must meet certain labor requirements. For projects over 1 MW that do not meet those requirements, the base and adder values are reduced.

• By application and approval, there are also other adders available for certain projects under 5 MW:
  • 10% for selected projects located in low-income communities or on, tribal lands (map tool)
  • OR 20% for selected “Qualified Low-Income Residential Building Projects” (eligible housing) OR “Qualified Low-Income Economic Benefit Projects” (See “Program Resources” section on DOE site for more info)

Other key things to consider:

• Project time frame: Installing solar for a municipality will take longer than it would for an individual home. Municipalities have many stakeholders. They will all need to take part in the process. The project lead should communicate with fellow municipal offices and staff about the installation in its early phases. This will help you avoid hold-ups down the line.
• Long-term project timeframes: With numerous departments, stakeholders, and staff teams involved in a municipality’s solar installation process, the installation timeframe will be longer than for an individual home. It is important for the municipal project lead to communicate with fellow municipal offices and staff about the installation in its early phases, to avoid delays down the line. Bringing together environmental, facilities, permitting, communications, and education departments at the outset of the solar planning process will help streamline the work process and maximize engagement across all municipal offices.
• Opportunity for constituent participation: Municipal governments are uniquely situated to leverage their PV installation(s) to their constituents’ interest in going solar. Through their listservs, email blasts, and community programming, municipalities can help their residents see solar in action and learn how it can benefit their businesses and households.

Alternative solar project models for municipalities:

You don’t have to install solar on your buildings to increase solar in your community. You can help your residents go solar on their homes. Partner with Solar United Neighbors. Solar United Neighbors’ National Solar Help Desk can offer free support to households and businesses interested in going solar.

Or, through our Ready, Set, Solar! Program, we provide step-by-step guidance. We educate homeowners about solar. They learn about solar economics, technology, and the process to go solar. We’ve helped thousands of families across the country go solar. 

Aggregate demand through Community Choice Aggregation 

Community Choice Aggregation (CCA) is another way to encourage more solar. Under CCA, municipalities aggregate their residents’ electrical demand. Municipalities buy electricity through direct contracts with energy producers. Residents can then choose to continue buying their electricity from the utility or municipality.

CCA is a way to help communities use more renewable energy than what may be available from the utility. Presently, only a few states have legislation that allows for CCA. Only one state, California, has operational CCA programs.

For an overview of the California program, read about the UCLA study: The Promises and Challenges of Community Choice Aggregation in California.