Luther College
IN-27: Innovation D

Luther College's Professor Jim Martin-Schramm has spent much of his career answering this question: “How can higher education most effectively collaborate with business, government and civil society to create a sustainable economy?” Over the last decade, Luther College has partnered with local investors to develop three significant solar energy projects on campus. The first involved Luther leasing 280 kW of solar photovoltaic (PV) equipment; the second involved Luther contracting to purchase all of the power from a 776 kW PV system installed in three places on campus; and the third will involve the installation of another 950 kW of PV paired with a 500 kW energy storage system. Luther College has become a valuable resource for other campuses looking for innovative ways to finance renewable energy systems. Luther College has created resources on how colleges can find potential investors in their communities. Luther has been a resource to peer institutions about how the federal Investment Tax Credit (ITC) and accelerated depreciation (MACRS) on eligible equipment are attractive to investors. Luther College is an example of how to use "open book" processes to develop projects that offered a reasonable rate of return to the investor as well as short and long-term cost-savings to the college. We have established and shared guidelines for which parties on a college campus (Financial Services, Facilities, Legal) and off campus (Contractors, Accountants, Legal) can play a role in developing the projects. This excerpt from an article by Second Nature summarizes the achievements of the innovative financial partnerships developed by Luther College. "Universities face a few significant challenges when it comes to developing solar photovoltaic (PV) systems on their campuses and associated properties. One of the foremost challenges is leveraging the tax incentives available to tax paying entities, including the Investment Tax Credit (ITC) and the accelerated depreciation of PV assets. These incentives alone can represent more than a 30% reduction in total project cost under optimal circumstances. Yet developing the private partnership necessary to take advantage of these incentives is complicated and can represent significant legal and contractual costs, which reduce the financial benefits. Additionally, understanding the financial performance and risks associated with third party financing can require considerable analysis and stakeholder engagement. Luther College, by beginning with small, low risk PV projects, developed the internal capacity needed to effectively scale their solar efforts. The measured approach to project development, dedication to campus stakeholder engagement, and partnership with a trusted supporter of the college has resulted in a successful, replicable pathway to advance solar energy projects that meet the college’s financial and sustainability goals. They now boast more than 1.1 Megawatts (MW) of solar energy, beginning with a 3.78 Kilowatt (kW) system in 2011 and continuing with their most recent installation, an 821 kW system representing a $1.6 million dollar investment in on-campus solar." This outline of our innovative financial partnerships was included in a 2016 white paper by the Intentional Endowments Initiative: • Power Purchase Agreement (PPA): The Preus Library and Regents Center PV arrays were financed via a third party PPA at a fixed price for ten years. Luther College is buying both the solar power produced and the RECs, and the project is predicted to save $1 million in electricity purchases over 25 years. • Purchasing “Unbundled” Renewable Energy Credits (RECs): Luther College purchases all of the Renewable Energy Certificates (RECs) from a single turbine community wind project owned by WindVision, LLC. • Direct Ownership / Asset Acquisition: The Luther College wind turbine was installed on September 19, 2011 and, on average, generates 3.6 million kilowatt hours (kWh) of electricity per year, which is about 27 percent of all power consumed on campus. In order to complete this $3.2 million project Luther College established a for-profit corporate entity, Luther College Wind Energy Project, LLC. Formed in 2005, LCWEP receives Iowa’s 476C tax credit for renewable energy, which adds about $50,000 per year to the project’s bottom line. • Green Revolving Fund (GRF): In 2015, the College established the roughly $1 million Climate Action Fund to provide necessary financial resources for Luther to achieve the goals in its Climate Action Plan, especially Luther’s emission reduction targets. • Asset Leasing: The Baker Village 280 kilowatt (kW) solar photovoltaic (PV) array was constructed in the summer of 2012. Leased for seven years from Decorah Solar Field, LLC, Luther’s lease payments are funded by avoided electricity purchases, donations to Luther earmarked for renewable energy, and the sale of solar renewable energy certificates (SRECs). After the lease period ends and Luther acquires ownership of the facility, Luther will pay less for electricity over the 25-year-rated life of the panels than it would to purchase electricity from the grid to power Baker Village.

The EPA uses Luther's model as an example in this Guide for Purchasing Green Power: https://www.epa.gov/sites/production/files/2018-08/documents/guide-purchasing-green-power-appb.pdf Luther College Professor Jim Martin-Schramm hosted a NREL webinar about this innovative work. https://www.nrel.gov/state-local-tribal/assets/pdfs/nonppa-universities-webinar-2016-oct4.pdf Luther College Vice President for Finance and Administration, Eric Runestad, presented the following poster about Luther's initiatives at the NACUBO conference in 2016: https://www.nacubo.org/-/media/Nacubo/Documents/BusinessPolicyAreas/Sustainability-Campus-Posters/2016/Luther-College-Poster.ashx?la=en&hash=5C0C735E1260C72E781037B694AB9F282A96A589