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One of the sweetspots for community owned renewable energy currently is small scale solar:

  • under 100KW
  • behind the meter
  • under the load

This scale of installation is still eligible for small scale certificates (STCs) which are paid up front and ensures a retail-like price for all electricity produced.

This toolkit is available for free from The Difference Incubator (TDI) a Melbourne based social enterprise incubator. However, community groups are required to sign a simple Memorandum of Understanding with TDI before accessing the documents.

To access the toolkit, please email toolkit@tdi.org.au

Function

With small installations, the set-up costs (legal, accounting, fundraising, etc) can be significant in the overall scale of the project. This toolkit was developed in order to reduce these up-front costs and hence make small scale community solar more viable for investors.

The toolkit consists of generic legal documents that can be used by a community group with minimal editing required.

The toolkit has been produced for two possible scenarios. Both involve a community group, most likely an incorporated association, setting up a special purpose vehicle (SPV, a propriety limited company) to own the solar installation.

The two scenarios involve investors loaning capital to the SPV or investing equity in the SPV respectively. Which of these approaches is best will depend on the financial modelling of each individual case. Typically a debt based model is simpler but any tax paid by the SPV may not be recoverable for investors unless franked dividends can be paid (as under an equity model). The structure enabled by the toolkit is illustrated in the diagram below.

Resources

The documents in the toolkit include:

  • a factsheet and guide to registering the SPV through Cleardocs
  • a power purchase agreement (PPA) – this is recommended only if your group has a retail license or retail exemption
  • rental agreement – this is the alternative to the PPA
  • management agreement between the community association and the SPV
  • a loan agreement between investors and the SPV – for use in the debt case
  • a letter of comfort between investors and the association recognising the investment purpose as loan investors – in the debt case – do not have management rights over the created SPV company
  • a shareholders agreement between investors and the SPV – for use in the equity case

All the documents can be used completely at the group's discretion in implementing a project.

Each document will require tailoring to make them specific to a groups needs. A number of key selection clauses have been highlighted to make some of these areas easily identifiable, but users will still need to go through all of them carefully to ensure they are fit precisely for a groups purpose.

Finally, this toolkit is designed as a general legal base from which to work and hopefully save a lot of time and resources. However, groups will still need to engage a lawyer to make sure it is perfectly tailored to their needs. While this will still incur some costs, it is anticipated to be significantly less than the approximately $15,000 to create these documents from scratch.

TDI also recommend the usual process of engaging with accountants and other advisors to walk through the impact of tax, depreciation etc on the financial modelling. There is a possibility that there could be a small, final year, tax liability incurred under the debt-based model but that will vary project-to-project.

More information

The first project to use the toolkit is RePower Shoalhaven for their Repower One project.

Developing a solar project