On Friday, July 11, the Iowa Supreme Court handed down a historic decision that means victory for distributed solar in Iowa. The court’s four-to-two decision clarifies that a solar financing mechanism common in major solar markets—known as third-party ownership—is allowed in Iowa. With the third-party ownership model, a solar company owns and maintains a customer’s solar system and “sells” the electricity to the customer at a set rate.
The ruling overturned an Iowa Utilities Board decision that a solar system located on a Dubuque city building—which provides power to that building but is owned and maintained by the solar installer—violated the local utility’s monopoly on electricity sales. The court held that rather than being a utility-like sale of electricity, the third-party ownership model Dubuque used is more properly characterized as a “method of financing a solar rooftop operation.”
The third-party ownership model is important because it can greatly expand solar access for two central reasons. First, it removes the up-front cost for solar customers by structuring payments over the first 20 years of the system’s life. This “no-money-down” model makes rooftop solar available to a much larger group of customers for whom solar makes economic sense but don’t have access to a big down payment up front. Second, the third-party financing model allows nonprofit entities that don’t pay taxes—such as churches, schools, and cities—to take advantage of solar energy’s tax benefits, because the third-party owner builds the tax benefits into customers’ financing and overall system price.
Over the last several years, Fresh Energy has been working to remove barriers to third-party ownership in Minnesota. We’re exploring how this landmark Iowa decision can provide positive momentum to the state’s policy process and help expand solar access to more Minnesotans.