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Pennsylvania Offers Grants to Promote Solar Energy Use
Practical Law Legal Update w-011-8911 (Approx. 7 pages)
Pennsylvania Offers Grants to Promote Solar Energy Use
by Practical Law Real Estate
| Published on 05 Dec 2017 • Pennsylvania |
Pennsylvania has expanded its Solar Energy Program to provide grants for solar energy generation, distribution, and research projects and solar equipment manufacturing.
Pennsylvania relaunched its Solar Energy Program (SEP) in 2016 as part of its efforts to bolster solar energy use in the state. Until recently, SEP assistance was available only through low-interest loans. Now, businesses, certain nonprofit organizations, and municipalities may apply for grants in the form of direct payments or guaranties.
Background
The SEP is administered by the Pennsylvania Department of Community and Economic Development (DCED) and Department of Environmental Protection (DEP) under the direction of the DCED's Commonwealth Financing Authority (CFA).
The SEP provides funding for:
- Solar energy generation, distribution, or storage projects with a useful life of at least 22 years.
- Manufacturing or assembling solar photovoltaic (solar PV) or other solar equipment.
- Developing or constructing solar energy research and development facilities.
The following parties may apply for SEP assistance:
- Businesses, including venture capital firms and not-for-profit entities.
- Economic development organizations (nonprofit corporations or associations formed to enhance economic conditions in a community).
- Political subdivisions, such as municipalities, counties, and school districts.
Proposed projects are evaluated under a number of criteria, including:
- Technical and financial feasibility.
- Energy savings generated or solar energy produced.
- Capital efficiency.
- Project readiness.
- Environmental benefits.
Successful applicants may use SEP funds to:
- Acquire land, buildings, rights-of-way, and easements.
- Construct or renovate buildings and purchase and install equipment for solar manufacturing or solar energy research and development.
- Design, purchase, install, and construct solar energy generation facilities.
- Pay solar energy storage costs.
- Pay permit fees and administrative costs.
Applicants must limit design and engineering costs to ten percent of the award and may not use SEP funds to pay loan interest or refinance existing debt.
Grant Program
Eligible applicants may seek grants in the following amounts:
- Up to $5,000 for every solar equipment manufacturing job projected to be created within three years after grant approval. The CFA may require repayment of the full grant amount if the manufacturer fails to meet its projections.
- A maximum of $1 million or $1.50 per watt, whichever is less, for a solar energy generation or distribution project. The CFA may approve a higher amount if the project significantly impacts solar energy generation in Pennsylvania.
- Up to $1 million for a solar energy research and development facility.
Grants are subject to the following conditions:
- The applicant must make a minimum matching investment of $1 for every $1 of grant funding.
- Solar PV projects must transfer all solar renewable (alternative) energy credits (solar RECs or solar AECs) to the CFA. Revenue from the sale of solar AECs is reinvested in the SEP.
The SEP may also award grants of up to $5 million for guaranties in the form of standby letters of credit for applicants who invest a minimum of ten percent of the project equity.
Loans remain available in the following maximum amounts:
- $40,000 per new job for solar equipment manufacturers.
- The lesser of $5 million or $3 per watt for solar energy generation or distribution projects.
For more information, see the revised SEP Guidelines.
Practical Effects
The SEP expansion follows the enactment of legislation limiting electric utilities and suppliers to Pennsylvania sources of solar PV energy (see Legal Update, Pennsylvania Limits Electric Utilities and Suppliers to In-State Solar Energy Sources). Both efforts are likely a response to recent findings regarding the increasing insufficiency of solar installed capacity in Pennsylvania.
In addition to encouraging investment in Pennsylvania's solar energy industry, the new grant program also explicitly targets job creation by providing hiring incentives to solar equipment manufacturers. The revised SEP guidelines state that loans remain the preferred assistance vehicle for generation and distribution projects.
The new grant program provides strong motivation for developers to incorporate solar energy generation in their projects, especially when constructing green buildings. Property owners may consider solar energy when upgrading buildings to meet Leadership in Energy and Environmental Design (LEED) standards.
Counsel should remind their clients of factors to consider in renewable energy development, such as:
- Property acquisition, including the roles of easements and ground leases in commercial projects.
- Environmental concerns and the necessity of conducting thorough due diligence.
- Permitting issues at the local, state, and federal levels.
For more information on solar energy projects, see Practice Notes:
For guidance on green buildings and sustainable development, see Practice Notes, Green Buildings: Laws and Practices and Owning and Leasing Green Real Estate.
For a general discussion of renewable energy, see Practice Note, Renewable Energy: Overview (US).