US universities are currently in a position to make substantial solar project investments on their campuses and associated properties. With the near nationwide adoption of the Prudent Management of Institutional Funds Act, endowment managers are now guided by the first prudent investor rule enacted in statutory law. The law allows endowments to invest in any kind of asset, to pool endowment funds for investment purposes, and to delegate investment management to other persons (e.g., professional investment advisors), as long as the governing board of the charitable institution exercised ordinary business care and prudence in making these decisions.
This act makes it possible for endowment managers to invest directly in solar systems as an investment or program related asset. As of June 30, 2013, the 835 educational institutions that participated in the 2013 NACUBO-Commonfund Study of Endowments maintained $448.6 billion dollars in endowment assets. The participating institutions’ trailing 5-year returns averaged 4.0 percent and 10-year returns averaged 7.1 percent, making investment in solar photovoltaic projects competitive with current investment returns.
Beyond the comparable investment returns, PV installations provide colleges and universities with the potential to stimulate further contributions to their endowments and dedicate the derived benefits of the investment to support program-related activities such as a renewable energy degree program, demonstration projects, or campus sustainability coordination.
A number of US universities are already advancing interdisciplinary centers and degree programs aimed at meeting the challenge to deploy clean energy and modernize the electrical grid. This is occurring as a nationwide fossil-fuel divestment movement is staging student-led campaigns to force university boards to discontinue their investments in fossil-fuel related stock holdings. These efforts, though not related, are creating opportunity for solutions-based, student led efforts to showcase the investment potential of on-site solar energy projects, generate favorable board policies to govern investments in solar assets, secure investment from endowed funds, develop a case for giving to solicit continued contributions to support such efforts, and provide a road map for universities across the country to deploy solar energy on their campus.
To be successful, this effort will need to apply innovations in shared solar, crowdfunding, and data-driven outreach to leverage the individual tax benefits of charitable contributions to increase project profitability, effectively attribute the utility bill savings and other values of the project, and to efficiently reach and motivate audiences to support the project.
Our initial efforts with university endowments will allow us to build and replicate solutions that help a wide ranges of non-profit organizations overcome the challenge of accessing incentives available to for profit solar developers without creating complicated contractual relationship with poorly understood risks. By leveraging charitable contributions from donors, organizations can advance solar projects that provide long-term support for their efforts and produce clean, local electrons every time the sun shines.
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