With over a decade of helping nonprofits fund solar projects at a discount, CollectiveSun is one of the premier companies in the solar for nonprofit space.
Nicole Withrow is Account Manager for CollectiveSun and is an experienced sales manager, contract administrator and fulfillment coordinator with the company. She sat down with Kerim Baran of SolarAcademy to discuss the host of benefits that come when a nonprofit and their installer go solar in partnership with CollectiveSun. The videos below includes details about the CollectiveSun installation discount, financing assistance, installer partnerships and more.
You can also learn more about the company at their SolarAcademy company page and company website.
Entire video conversation
The video in 6 parts
Hone in on any of the sections below to gain an understanding of specific topics such as details on the 12% system discount, what it’s like for installers to partner with CollectiveSun, and the lowdown on financing options.
Why should every solar installer be aware of CollectiveSun’s 12% Nonprofit discount? (2:20)
How does the 12% nonprofit solar discount really work and who funds the remaining 88% of the cost? (2:39)
Does this work for any solar system size and anywhere in the US, and how big is CollectiveSun? (:58)
What are the obligations for the installer who introduces the CollectiveSun 12% discount benefit? (1:54)
How does the 6th year ownership flip (for no additional cost) work? (4:06)
Does the EPC have to guarantee a certain amount of solar production as per CollectiveSun’s Solar Power Agreement? (1:19)
Video Transcripts
Video 1: Why should every solar installer be aware of CollectiveSun’s 12% Nonprofit discount?
Kerim Baran of SolarAcademy: Hi everyone. This is Kerim Baran of SolarAcademy and today I have with me, Nicole Withrow from CollectiveSun. Nicole, we’ve known each other for at least a year and – probably a couple of years that you’ve been at CollectiveSun and I’ve been familiar with CollectiveSun for a number of years. And I know you guys as the leader of solar in the world of nonprofit, and you’ve been there as a sales leader for a good while.
And today I want to talk to you about solar and nonprofits and how you guys are helping nonprofits to go solar. So with that, I guess my first question is, tell us why every solar installer in the U S should be aware of CollectiveSun’s 12% solar discount for non-profits?
Nicole Withrow of CollectiveSun: I think that one of the main reasons would be there are 1.6 million non-profits out there nationwide. That’s a lot of business. That’s a vertical installers should be aware of. And it’s a category that’s really well aligned, mission-wise to going solar. So you have people that are thinking about caring for the planet and to them that equals solar. So it’s kind of a no brainer. Don’t leave nonprofits off the table. Definitely think of them as an important category for solar.
And you want to include CollectiveSun in that mix because your nonprofits cannot monetize tax benefits. So they need a way to do that. And we can solve that problem by adding a 12% or more discount to their solar project, but better than a PPA because they’re going to own the energy from day one as soon as that system’s powered. They’re going to benefit from the utility avoided costs right away.
And they are going to keep any incentives or rebates that exist outside of those federal tax benefits. So in some of the markets where you guys are working there are renewable energy credits. There are net metering benefits. There are incentives coming at the state or local level. They get to keep all of those. And on top of that, they get to benefit from that 12% or more discount from CollectiveSun. So it really becomes a great selling tool for an installer.
Video 2: How does the 12% nonprofit solar discount really work and who funds the remaining 88% of the cost?
Kerim: So how does this 12% non-profits solar discount really work for the nonprofit? Can you tell us a little bit of what happens behind the scenes that you said because nonprofits cannot monetize the federal investment tax credit? Usually 26% goes for the homeowners and commercial businesses that are going solar. So you guys have a way of creating that benefit for the nonprofit.
Nicole: Yes, we don’t have a magical unicorn that allows non-profits, you know, to suddenly be able to access the ITC directly. What we have is a prepaid service agreement that provides an indirect benefit to the nonprofit. So in our Solar Power Agreement or SPA, that’s the prepaid service agreement that CollectiveSun uses, there is a discount in there. So we take their total project cost, determine the appropriate discount based on that cost, and we apply it in there. So they receive a CollectiveSun SPA discount right off the top. So if they had a hundred thousand dollar solar project, we would take $12,000 off.
And then the nonprofit would fund that remaining 88% using whatever funding mechanism makes sense for them. Anything from cash reserves, donations, grant funds, their existing banking relationship. Denominational lending programs are really, really popular. They give the most beneficial terms to the nonprofits. So the lowest interest rates, the best terms, those loans are coming right from their own house of worship, their denomination. So they are looking out for their fellow nonprofit and providing really great terms for them. So whatever that mechanism is. PACE funding is an amazing fit for a Solar Power Agreement.
Kerim: And you guys have the breadth of relationships to bring in these various options to the table when they engage.
Nicole: Yes. If there’s a lender that you’re already working – the nonprofit is familiar with us, let us chat with them. They might want to just get a better understanding of what our role is and the transaction to understand if this is an ownership model that there’s comfortable lending for. So we’re happy to solve that problem, chat with them and just make sure that they have a complete understanding and are willing to loan to a nonprofit that wants to engage in the.
Kerim: Got it.
Video 3: Does this work for any solar system size and anywhere in the US, and how big is CollectiveSun?
Kerim: And does this solution, your solution work for any size solar system and anywhere in the us? What is your experience of doing this? Like how wide and deep are you in the market?
Nicole: Right. Great. So I will say since 2017, we have done 190 Solar Power Agreements across 23, 24 states so far. So we can work on any size system provided it’s 50 kilowatts or larger and any area where the state or utility approves third-party ownership in the form of a lease or a prepaid service agreement. Typically, if they will allow a PPA than something like a lease or a prepaid service agreement is also going to be fine there. So if third-party ownership’s allowed, CollectiveSun can operate there. We’ll call and confirm if that’s not been verified yet, but those are the general parameters.
Video 4: What are the obligations for the installer who introduces the CollectiveSun 12% discount benefit?
Kerim: What are the obligations of the installers when they engage you, when they bring in CollectivesSun into their sales process, because that makes the sales process one notch more complicated, but it comes with that benefit of 12% discount making their bid more competitive. I understand that too, but then what happens after and do they keep choosing to work with your time after time again?
Nicole: Right. And you know, we have lots of installers that are trusted partners that have been through this process multiple times where they seem to be aligned on the types of customers that they work with regularly. So we ended up being great, great team members.
The thing about the Solar Power Agreement is there are some very specific steps and specific pricing requirements. So I think the solution is to reach out through a call on my calendar. Let’s walk through the pricing requirements, make sure you fully understand them. But you can ask questions. Once you understand what the pricing requirements are we give you a link to at your convenience to generate a Solar Power Agreement for your customer. That agreement will automatically populate with the appropriate discount.
And then there’s an agreement guide that we can walk you through. Myself and the rest of the sales team are here to walk you through that first one, make sure you fully understand it. And if you would prefer to have our support on a sales call those first couple of times through, you got it. You want us to hop on a zoom meeting we’re there. That way we can teach you and train you at the same time that we are explaining it to the customer. If that doesn’t work for you and you want to just go through it, we can do that as well. Always happy to.
Kerim: Right. Well, thank you. Thank you very much for this clarification.
Video 5: How does the 6th year ownership flip (for no additional cost) work?
Nicole: It’s a $0 net purchase. So they’re able to take ownership for the price they’ve already paid. They already prepaid the 88%. So at the end of the fifth year, we’ll start bringing them up to speed. If there are new staff members, make sure they understand what the termination right. looks like, the early termination right. And we will make sure all their questions get answered, hare the template that they will use to exercise the termination right, and then when that timeframe hits they can exercise the termination right, take ownership of the solar system. At that point, we transfer the asset to them.
They’re now the owner of the solar system and we pass through all of the remaining useful life that still exists on the workmanship warranty from the installer, on the robust warranties, on the equipment for the panels and the inverters. That gets passed through to them. There’s still a lot of useful life there, but that terminates a Solar Power Agreement and CollectiveSun’s relationship with the nonprofit. They’re now the owner of the solar system. So that dissolves the SPA.
Kerim: When you design this 12% discount, there’s a 26% federal tax credit that that is generally available to for-profit entities. And I understand you bring in a tax equity investor to basically capture that benefit by owning the system for the first six years. And then what happens? So being at the beginning, year zero to year six, and then what happens after year six?
Nicole: So the contract is between CollectiveSun and the nonprofit, the Solar Power Agreement. Once the system is built, we will assign that to the tax investor. So you’ll see that SPA get assigned to your particular tax investor, but CollectiveSun will remain the party that still carries out all of these obligations in the Solar Power Agreement between the nonprofit and CollectiveSun.
So we’ll still be that third party that reaches out to coordinate a time for the installer to come do an inspection or make a repair or investigate if there’s a scenario where something’s not looking right on the monitoring of the system. But assuming everything is going smoothly and there aren’t any issues. Solar systems are usually low maintenance . But if something comes up, we’ll take care of it promptly. You know, there’s not a lot of maintenance to worry about with solar systems, but at the end of the sixth year the early termination right becomes available in the SPA. The benefits are fully consumed for the nonprofit, and at that point, the nonprofit can take ownership of the solar system.
If they would like to remain IRS compliant, we have to give them an option to stay in the Solar Power Agreement for the length of the SPA, which is 20 years. Or they can elect this early termination right which allows them to take ownership of a solar system for that amount they already prepaid. So it’s a $0 net purchase. No additional cost to take ownership.
We’ll reach out and explain the early termination right to any new staff members that may be employed at the nonprofit filling roles that they maybe weren’t in at the time this agreement was executed. We make sure they’re up to speed. But essentially once they execute that early termination right, we just transfer the solar system to the nonprofit and pass through all of the wonderful warranties that exist from the installers. The 10-year workmanship warranty is still has got a lot of useful life on it. And those robust warranties on the panels and inverters, they’ve got a 25 year warranty on the panels and 20 on the inverters. So we’re going to pass that through so they can benefit from that. But that terminates the relationship between CollectiveSun in the nonprofit.
Kerim: They become the owner of the system at that point.
Video 6: Does the EPC have to guarantee a certain amount of solar production as per CollectiveSun’s Solar Power Agreement?
Kerim: Does the question of guaranteeing a certain amount of production come into play at any time in the process?
Nicole: It does. It does. So we actually have a production guarantee that is set at 85% of the lowest value PV watts. So we have one true-up, it’s based on the accumulated production of the system and those first six years.
So at the end of the sixth year, there’s a true-up. If the performance is over 85% of that lowest value PV Watts then there are no damages due. But if that system does not produce at 85% of lowest value PV watts, then the installer would be paying damages for that under production. And we can walk through that. But we do use PV watts to set that production guarantee.
Kerim: And I think 85% is a pretty fair number.
Nicole: Extremely reasonable, correct. Not not trying to be punitive towards installers, just trying to set a bar that’s consistent.
Kerim: Great. Well, thank you very much for this level of information, Nicole. I hope to dig in deeper as you guys grow and add new services and products to your offerings.
Nicole: Looking forward to that. Thank you, Kerim.