Overview of funding options for solar on schools (Jun 15, 2015)

Suspicious of the term ‘FREE solar for schools’?
After all there is no such thing as a free lunch.

We are not entirely happy with referring to what we do as “free solar panels for schools”. Whilst it is true that normally the school will incur no costs, either upfront or otherwise for installation of solar panels on the school roof, does this really mean the solar panels are free?

Free in the end

At the end of the agreement period, the panel’s ownership will revert to the school. At that point I think it is fair to say that they are free, but until then, the people who invested in buying, installing and maintaining them own the panels. So more accurate descriptions would be:

  • “fully funded solar panels”
  • “third party funded solar panels”
  • “investor funded solar panels”
  • “rent a roof in exchange for cheap electricity scheme”

Unfortunately none of the above descriptions are widely used by either companies offering funded solar panels or people looking for them, so we are rather stuck with ‘Free solar panels’.

Is there a catch to ‘free’ solar panels for schools?

No, but some argue that councils or schools should borrow money and own the solar panels directly, as they cut out investors who are expecting to make a return on their money. In theory, owning the panels themselves should provide a greater overall saving to the school, but in practice this is only true if the following apply:

  • The school is allowed to take on debt to pay for the system.

This is not usually the case in council run schools, FOE is campaigning to change this and we fully support them, but given government deficit, I would not hold your breath. I don’t think the environment can hold its breath much longer either.

  • The school has a lower cost of capital than investors prepared to fund solar.

This is probably true in the case of government-backed schools, but less likely in private or academy backed schools.

  • The school can buy and install reliable solar at lower cost than specialists.

Funded solar providers typically buy in bulk and as they install on many schools each year, benefit from economies of scale and thus should be able to do so at a lower cost than a school. Finally as their returns depend on the system working well for 20+ years, they will choose equipment carefully based on experience rather than just price. Not easy for a school to beat this.

  • The school will monitor and maintain the system over its lifetime.

Solar panels have no moving parts and are very reliable, delivering years of silent energy generation, but equally when they fail it is not at all obvious unless they are being monitored. Most schools do not have the time or skills to monitor, maintain and deal with repairs as needed.
Of course the school or council could hire a solar consultant to help them with the entire process from roof surveys and electrical connection to potential saving calculations. Then get quotes for installation and maintenance, arrange additional insurance and loans and oversee it all. The consultant’s costs will easily be greater than the first few years net surplus after financing and maintenance costs. In fact the consultants costs may never be recovered from the solar panels if the system is small or does not go ahead at all.

Our view is that every school in the world should have solar panels installed, regardless of if funded by governments or third party investors, and the sooner the better. Whilst we offer a fully funded option (free solar), we are also happy to work with schools that wish to fund it themselves. I.e. we can provide design/construction and maintenance services.

Any other potential issues with free solar panels for schools?

Yes, all funded solar programs require the building owner and school to enter into a long-term agreement in order to provide the investor with the confidence to invest. These agreements vary between suppliers of 'free' solar panels, but typically consist of either a roof lease agreement and separate Power Purchase Agreement (PPA) or single agreement covering the (PPA) and license to use the roof. Regardless of the type of agreements used, they require the following conditions:

  • Use of the roof for 15-25 years
  • Purchase of any electricity from the solar panels during the agreement period at an agreed rate

Depending on the limitations and guarantees attached to the above conditions, some schools may not be able to enter into the agreements. Typically the lower the price of electricity offered in the PPA, the stricter and less flexible the conditions become as investor returns will be lower and thus the investment needs to be made safer for them.

Ultimately a school and its landlord will need to choose between level of expected savings and contract flexibility.

SolarforSchools uses a combined PPA and license agreement (Solar agreement). Unlike a lease agreement it does not require an entry in the Land Registry and thus is easier to implement and more flexible. We pride ourselves in having the most school friendly agreement in the market, focused on minimizing risk and distractions to the school whilst providing reasonable overall savings from larger systems, rather than simply offering the lowest cost PPAs on small solar PV systems.

Alternatives to ‘FREE’ solar panels for schools

Assuming the school does not have lots of spare cash it can’t invest in children’s education, there are a few other options a school can use to fund the panels. They are:

1. Fundraise donations from parents to pay for the solar panels

If your school’s roof is relatively small, parents and the local community are very engaged, then working with a charity such as 1010, who run solarschools.org.uk and help schools runs solar fundraising campaigns may be an option for your school. Probably the most satisfying option as the school keeps the solar subsidy and the savings, but it is a lot of work.

2. Lease the solar panels

A number of installers and equipment vendors offer leasing options. Assuming your school is allowed to lease equipment this may be worth considering as the school normally gets to keep the Feed in Tariff (FIT) subsidy that is paid for every unit of electricity generated and then simply pays a monthly lease rate. The school needs to consider who will be responsible for equipment maintenance and what happens if the system is not generating enough savings to cover the monthly lease costs. (Winter months and during repairs).

Overview of funding options for solar on schools

We have put together a downloadable cheat sheet table comparing the different funding options for solar panels on schools here.