New tax credits help schools go green
Federal funding available for schools to install solar, buy electric school buses and more
Schools play an essential role in every childs’ beginning – a place that should encourage a love of learning, foster personal and educational growth, while providing a safe and healthy environment to do so. Studies show that students even learn better in an environment free from air pollution, yet many schools still use diesel-burning buses and outdated energy systems. Luckily, with new federal funding available through the Inflation Reduction Act (IRA) and the Investment Infrastructure and Jobs Act (IIJA), there are now more funding opportunities than ever to update school transportation and energy systems, fostering the best learning environment possible for your students. Not only is this beneficial for the environment, but it will protect students from health risks while simultaneously saving your school district money.
Installing Solar Panels
The Inflation Reduction Act (IRA) provides substantial funding of solar energy projects that can lower utility bills for school districts. Valuable savings that can be redirected to other school priorities. With the largest investment into clean energy and electrification ever seen in the country, the IRA makes going solar easier than ever, and for the first time, tax-exempt entities can directly take advantage of these incentives.
Prior to the passage of the IRA, schools were unable to directly take advantage of federal tax credits to support installation of solar panels. Now, at least 30% of the cost of a solar project and installation can be covered by direct pay tax credits from the federal government through 2032.
How direct pay tax credits work
In lieu of a typical tax credit, schools can receive a ‘direct pay’ tax credit. How it works is that the Internal Revenue Service (IRS) will treat you as if you did pay this tax, and you will get refunded the owed amount for your solar project. To receive this credit, make an election on a tax filing in the year in which the project is placed in service. Eligibility begins in 2023 and the solar project must be completed and capable of connecting to the grid before filing this election. The IRS is still working out a lot of the details, but those interested should contact their tax advisors about specifics in their own state and market.
Installing Solar Energy: Things to Know
- Understanding available financing
Solar projects can be partially covered through the Investment Tax Credit (ITC). For projects that produce less than 1 megawatt of power, the baseline coverage of the system is set at 30%. There are also multiple bonuses that exist depending on if the project is in a low-income community, if the panels are manufactured in the United States, as well as others.
- Choose the right solar installer
Making the transition to solar power means first choosing the right solar installer. You want to prioritize having a certified, experienced installer with quality solar panels, but what does that look like exactly? To help advise your decision, review this guide from the Department of Energy, which includes a list of questions to ask, attributes to look for, and tactics to seek out reputable installers. You can also visit Solar Review’s Solar Calculator to get an estimate of the cost of the system and available local solar installers.
- Financing the rest of your solar project
Federal funding can cover some, but not all, of your solar energy installation. Luckily there are options to secure funding for the remaining costs. School districts can enter into a Power Purchase Agreement (PPA), which is a long-term contract with a third party owner. The outside party purchases and owns the panels and can also take advantage of the tax credits, while selling the generated electricity to the school. Some benefits: the price of electricity is locked and likely competitive to the utility’s rates, the schools do not handle operation and maintenance costs, and if the system does not work, the school does not pay. Another option is to obtain a bond, such as a solar payment and performance bond, which guarantees that the general contractor completes the project according to contractual requirements.
- Solar means savings
Over 8,000 K-12 schools across the country already use solar energy, either through the installation of solar panels or through their own utility. Munday Consolidated Independent School District (CISD) in north Texas is one example. In 2010, this rural school district received a $249,117 grant through the State Energy Conservation Office (SECO) to fund their solar project. Now, CISD saves over $40,000 per year on energy costs and annually generates 55.2 kilowatt hours per year. While these economic benefits motivated the district to choose solar, the environmental benefits and overall influence on the community was also important to CISD. The school district even turned this into a teaching moment – incorporating renewable energy into the science, technology, engineering, and mathematics curriculums in their schools.
Transitioning to Electric Buses
Through the Clean School Bus Program, the U.S. Environmental Protection Agency will distribute $5 billion over the next five years to fund school districts wanting to replace existing diesel school buses with electric or low-emission models. Funded by the Investment Infrastructure and Jobs Act, this program could drastically reduce greenhouse gas emissions and students’ exposure to diesel exhaust.
Simply sending a child to school should not increase their risk of adverse health effects, yet most schools across the country still rely on diesel-burning buses that emit greenhouse gasses and diesel exhaust. Even in comparison to cars in the same pick-up line, diesel exhaust levels in school buses are up to four times higher. The International Agency for Research on Cancer found sufficient evidence that diesel exhaust is associated with an increased risk of lung cancer. Numerous studies have also shown that inhaling diesel exhaust can cause respiratory diseases and worsen existing conditions like asthma – conditions that vulnerable populations, like children, are more susceptible to.
With over half of the nation’s K-12 students taking the bus to school every day, an enormous number of students would benefit from reduced exposure to diesel exhaust, whether that is during transport or from idling buses on school grounds. Some school districts have already taken the beginning steps in this transition. Everman Independent School District (EISD), near Dallas, was the first district in Texas to adopt electric school buses, deploying three buses in 2020. Additionally, Austin Independent School District (AISD) recently committed to transition to an all-electric fleet by 2035. AISD plans to phase out diesel buses by having 25%, 50%, and 100% of new purchases be electric vehicles by 2023, 2027, and 2030 respectively – achieving an entirely electric fleet of 500 by 2035. This commitment is a first of its kind in Texas, but across the country, school districts and fleet operators have committed to over 12,000 electric school buses. Hopefully representing the beginning of an electrification era.
The grantees of the 2022 Clean School Bus Rebates have already been selected for the year with over $50,000,000 awarded to 13 Texas school districts. This application closed in August 2022, so interested districts will have to wait for the future program application to reopen. In the meantime, click here to see if electric buses are coming to your area.
Energy Efficiency Upgrades
With Renew America’s Schools (RAS) Program, $500 million is dedicated to fund energy efficiency improvements in schools, specifically focusing on the highest-need districts.
Public K-12 districts spend roughly $8 billion a year on energy bills – the second largest expense after teacher salaries, partially because many schools still rely on outdated and inefficient energy appliances. According to a 2020 Government Accountability Office report, about half of the studied schools reported problems with their heating, ventilation, and air conditioning (HVAC) systems, including leakage incidents that damage buildings. Unaddressed HVAC problems like these can lead to indoor air quality and mold issues, sometimes even requiring schools to reschedule classes.
Taking advantage of available funding in RAS can improve the quality of your school’s energy systems, and thereby the students’ learning environment. This grant program allows districts to further minimize energy costs which can then be redirected to other school priorities, like paying teacher salaries or buying textbooks and school supplies.
To encourage an efficient and healthy learning environment where children can thrive,the RAS program grants $500 million to make energy upgrades while prioritizing the highest-need districts. Services eligible for funding include energy efficiency, ventilation, renewable energy, alternative vehicles, and alternative fuel vehicle infrastructure improvements.
Applications for the first round of the RAS program are now open with $80 million of the full $500 million available to school districts. Concept Papers must be submitted by January 26th, 2023 and the full application must be submitted by April 21st, 2023. Applicants who do not submit concept papers will not be considered. Informational slides about the program , application requirements, and where to submit can be found here. More information about the program can also be found on the U.S. Department of Energy’s program description site. You can also contact [email protected] with any questions.
Training Local Education Agencies
In tandem with the RAS program, the Energy Champions Leading the Advancement of Sustainable Schools Prize (CLASS) is a cash prize for local education agencies (LEA) to install energy upgrades that will reduce utility costs, improve air quality, and limit greenhouse gas emissions. In total, $4.5 million in cash prizes is available for the education and training of LEA staff to facilitate their own energy improvement projects. Funding from this prize will prioritize the neediest districts, giving them the capacity to train and manage energy and indoor air quality projects for their school and facilities. Energy CLASS is currently receiving applications from LEA who, if selected, will receive $100,000 to hire and educate staff as energy managers. This is the first phase of cash prizes with $4.5 million dedicated to this prize in total.
Applications are open until February 28, 2023. To apply, local education agencies need to submit their statement of need, letters of support, identify staff to participate in the program, as well as demonstrate their commitment to implementing energy improvements. Informational slides about the Energy Class prize, including an overview of the prize and how to apply can be found here.
Clean Energy Associate, Environment Texas Research & Policy Center
Grace works as a campaign associate for Environment Texas, focusing on clean energy projects. Grace is an Austin local and loves exploring hiking trails and trying new recipes in her free time.