There are a lot of stories on residential rooftop solar but few if any on what cities are doing to make themselves energy self-reliant by using their own buildings and lands to generate power.

In Public Rooftop Revolution, ILSR estimates that mid-sized cities could install as much as 5,000 megawatts of solar—as much as one-quarter of all solar installed in the U.S. to date—on municipal property, with little to no upfront cash. It would allow cities to redirect millions in saved energy costs to other public purposes.

This report is being released in serial format, beginning Monday, June 1 through Thursday, June 4. CHECK BACK TOMORROW FOR UPDATES.

Read the Executive Summary

Read Part 1 of the report

Read Part 2 of the report

Listen to our podcast conversations with a few of our Featured Five municipal solar cities:

Lancaster, CA city manager Jason Caudle, listen to the podcast, read the interview summary.

Raleigh, NC renewable energy coordinator Robert Hinson, listen to the podcast, read the interview summary.

Kansas City, MO project manager Charles Harris, listen to the podcast, read the interview summary.

Public Solar Economics

Although the cost of installing solar has been falling rapidly (by nearly 75% over the past 5 years), cities have a substantial disadvantage to private property owners when installing solar. The primary incentive for solar is the 30% federal tax credit, a deal that doesn’t apply to local governments. The federal government also provides accelerated depreciation for solar projects, resulting in a tax write-off worth nearly another 30% of a project’s value.

To access incentives and avoid upfront costs, cities have sought legal arrangements to lease or purchase solar energy via third parties. After all, even half an incentive (typically what’s left for the city after one of these arrangements) is better than no discount, and many cities are reluctant to use their borrowing power for solar in competition with other potential capital expenses.

The chart below from ILSR illustrates the challenges for tax-exempt entities like cities in financing solar. A city’s best option is to purchase electricity from a third party (a power purchase agreement, or PPA), but that’s only legal in about half of U.S. states. A lease is second best, but usually allows only capture of the tax credit or depreciation. Direct purchase by the city means no federal incentives can be used. thus more costly energy. Private entities that can use federal tax incentives get the lowest solar prices of all. Using cash grants instead of tax credits—as was done during the aftermath of the financial crisis—would put cities on par with private entities in access to incentives.

The following chart illustrates the lifetime benefit (also known as net present value) for three primary ways a city can finance a solar array: municipal bonds, a power purchase agreement (with a fixed rate), or a lease. We use the same cost assumptions for all three scenarios, although they differ most in that a city-financed solar array gets no incentiv...