New Financing Tools Help Push for Clean Energy
Although large scale efficiency retrofits and renewable energy projects are among the few investments on campus that ultimately pay for themselves and generate positive cash flows for campuses, they can carry a daunting price tag and compete with other campus needs for capital. NACUBO shows, however, that where there is a will, there is a way. Using more than a dozen campus examples, the guide details a suite of 18 financial tools, ranging from clean renewable energy bonds to tax-exempt lease purchases, and provides insights into how they are being employed to reduce the upfront capital required for large-scale sustainability projects in various parts of the U.S.
This diversity in technique is necessary: there appears to be no single funding source that works for every project. In the examples Barlow cites, business officers employ anywhere from two to five different financial instruments to fund one large-scale project or a set of smaller ones. For example, even when Mount Wachusetts College in Massachusetts received a large grant from the federal government to move an all-electric campus towards cleaner fuel sources, it needed to be supplemented with rebates, leases and other tools to meet the project total.
Forming partnerships is the other fundamental step most campuses need to take to meet the budget for large-scale clean energy projects. Business officers often partner with entities ranging from utilities to tribal communities to other campuses, and these partnerships can help lower or stabilize clean energy prices, ultimately making clean, renewable energy resources more widely available.
Because various types of tax breaks represent such a large component of the available financial incentive for clean energy projects in the U.S., Barlow spends a lot of time detailing how business officers work to make it possible for colleges to take advantage of them. For example, tax-exempt college and universities can form partnerships with commercial entities who can apply a portion of their savings from tax-exempt lease purchases, investment or production tax credits and accelerated appreciation programs to reduce project costs.
Often, these arrangements involve power purchasing agreements whereby campuses lease renewable energy generation sites on their own land and purchase the power. Some of the largest installations, such as the 1.2 MW solar array at the East L.A. campus of the Los Angeles Community College District (LACCD), Barlow notes, are neither owned nor operated by the campus.
Clean renewable energy bonds (CREBs), which can also help finance campus clean energy projects by providing tax incentives to private investors, are also useful, and reviewed in detail in the guide. Barlow illustrates how University of Minnesota-Morris plans to draw on CREBs to help achieve its goal of becoming energy self-sufficient by 2010, to reduce global warming pollution by 80% and provide student internships and research opportunities in the process.
Although this is noted only obliquely, perhaps the most important partnerships of all are with students and faculty. Barlow spotlights the role they have played in helping to establish, manage and finance revolving loan funds and the purchase of renewable energy certificates with student fees and class or alumni gifts.
In fact, given the breadth of sustainability needs on campuses, business officers will probably need to draw more heavily on support from students and faculty than has been the case in the past. Students could, for example, help business officers identify and prioritize conservation, efficiency and renewable energy opportunities across buildings and operations on campus. They could also survey the range of local, state and federal grants and other incentives available, help interview energy service companies (ESCOs) and other contractors, assist in monitoring performance of clean energy and efficiency installations and help educate their peers. With members of the faculty serving as project advisors and working closely with facilities and finance departments, students could be afforded a powerful educational opportunity to learn from project implementation and financing, while contributing meaningfully to the goals of the campus. Barlow notes, in fact, that student and community support for campus sustainability initiatives is a factor in some lending decisions.
Barlow takes an even-handed approach to the often-contentious discussion of renewable energy certificates (RECs) and carbon offsets. He recognizes that these tools have been criticized by some for not harnessing the resource and cost savings potential of on-campus projects, yet acknowledges that some campuses are opting for these measures as a way to cover the gap between current and planned emissions reducing strategies, as a way to invest in the broader local, regional or national development of clean, renewable energy resources, and sometimes, as a way to generate funds for investment in additional clean energy projects. The guide fails to mention, however, that Architecture 2030 and the American Institute of Architects recommend that RECs or carbon offsets not be used to offset more than 20% of an institution’s total emissions.
Embracing diverse strategies and objectives, this guide will be particularly useful for campuses ready to move beyond the traditional portfolio of smaller-scale, incremental energy efficiency projects to larger scale conservation, efficiency and renewable energy conversions. NACUBO has provided a great service here that will help many campus and other organizational leaders better understand the powerful tools that are available that, if artfully and knowledgeably brought together, can help move beyond the impasses many are encountering in the aim to move beyond business as usual to realize a post-carbon economy.
To read the whole report, visit the NACUBO site.