The document discusses the challenges and opportunities associated with community solar projects, focusing on program design, project development hurdles, and financial incentives. Key topics include the importance of site access, federal tax incentives like the investment tax credit and accelerated depreciation, and the regulatory complexities around securities. It emphasizes that navigating these challenges is essential for successfully financing and implementing community solar gardens.

1. Community Solar
Challenges and Opportunities
Presented by:
Sarah Johnson Phillips
October 24, 2013 ● Fresh Energy Solar Opportunities Series
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2. To order any of these books please contact
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3. Project Development Challenges
• Community Solar Garden Program Design:
– Minn. Stat. §216B.1641
– Xcel Energy Filing – PUC Docket No. E-002/M-13-867
– Value of Solar
• Community Solar Garden Project Design:
– Partners: Developer/organizer, host site, utility, subscribers,
equipment supplier, financing partners, contractor, other experts
(engineering, legal, tax, accounting, design).
– Siting
– Tax Incentives
– Securities Regulation
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4. Project Development Challenges
• Siting
– Need affordable, long-term site access, solar access,
and grid access.
– Rooftops, otherwise low-value land.
– Site leases tend to more challenging to negotiate
when the host is not the off-taker.
– Local ordinances vary widely (setbacks, street-facing
roofs, height restrictions, screening).
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5. Federal Tax Incentives
• Federal Tax Benefits:
– High value for solar projects.
– High transaction costs/complexity to fully utilize.
• Investment Tax Credit (ITC) –
– Available for solar if placed in service before 2017.
– Credit = 30% of qualified costs of facility (in the year placed in
service).
• Accelerated Depreciation (tax losses) –
– Creates tax losses that may be claimed by owners
– 5-year depreciation for solar
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6. Federal Tax Incentives
• General rule: must be an “owner” to be entitled to tax benefits
– Tax benefits cannot be “sold” under U.S. tax law – only available to
owners.
– An owner must have tax appetite to make use of tax benefits.
– Creative tax structures allow “investors” to claim these tax benefits.
• Who is an owner?
– Partner are owners (partnership flips)
– Owners are owners (sale/leasebacks)
– Lessees can be treated as owners (inverted lease; tax credits, not tax
losses)
• Tax-driven project structures can be complex, but likely critical for
financing larger community solar gardens.
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7. Securities Regulation
• What are “securities”?
• How are securities regulated?
– State and federal registration and disclosure (anti-fraud) requirements.
– Compliance can be costly and time-consuming.
– Non-compliance can result in civil or even criminal liability.
• Why are securities regulated?
– Protection against fraud.
• Policy Considerations:
– Being subject to securities regulation increases transaction costs.
– But securities regulations also protect investors from unscrupulous
actors.
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8. Securities Regulation
• Potential Strategies for Community Solar Gardens”
– Structure subscriptions not to be “securities”.
• Various possible strategies, lots of uncertainty.
– Qualify for exemptions from securities registration requirements.
• E.g., Regulation D, public entities
• But: Exemptions from registration requirements are not exemptions from
disclosure requirements (full and accurate disclosure of all material
information about a securities offering).
• But: qualifying for exemptions may come with limitations, including the type
and number of investors and the amount raised.
– Register securities.
• Transaction costs are significant.
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9. Sarah Johnson Phillips
Attorney
Minneapolis, MN
(612) 373-8843
sjphillips@stoel.com
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10. QUESTIONS?
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October 2, 2013
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