How Cities Can Scale On-Site Solar with New Federal Incentives

The City of San Antonio has approved a deal with Big Sun Solar to install approximately 13 MW of solar capacity across 42 city-owned facilities and parking lots. This project is notable for being among the first to use the 'direct pay' (Elective Pay) mechanism established by the Inflation Reduction Act (IRA) of August 2022, which allows tax-exempt entities to receive tax credits to reduce upfront costs. The project is expected to offset about 11 percent of electricity consumption for City operations and generate net savings of $7–$11 million over 25 years. The guide outlines four lessons for other cities: aggregating small projects for economies of scale, leveraging tax credit bonuses for low-income or energy communities, planning for the time lag in receiving direct pay refunds, and maintaining flexibility in procurement to compare different financial structures using net present value.

• The City of San Antonio's agreement with Big Sun Solar involves installing an estimated 13 MW of solar on 42 city-owned facilities and parking lots, which is expected to offset approximately 11 percent of the electricity used for City operations and save between $7 million and $11 million over 25 years.
• The Inflation Reduction Act (IRA) introduced a 'direct pay' mechanism, also known as Elective Pay, which enables tax-exempt entities like cities to access tax credits to lower upfront project costs, allowing them to own solar projects instead of relying on third-party contracts.
• IRA tax credits are projected to cover 30–40 percent of upfront costs, with additional bonuses available for projects located in low-income or qualifying energy communities.
• Cities using direct pay should treat it as a reimbursable grant because the refund may not arrive for over a year after the project is operational, requiring the city to secure initial financing for all capital costs.
• To maximize value, the guide recommends aggregating multiple small projects (individually under 1 MW) to avoid domestic content requirements and using flexible procurement processes to evaluate the net present value of various financial models.

APA

RMI (2024). How Cities Can Scale On-Site Solar with New Federal Incentives. https://rmi.org/resources/how-cities-can-scale-on-site-solar-with-new-federal-incentives/

Chicago

RMI. How Cities Can Scale On-Site Solar with New Federal Incentives. 2024. https://rmi.org/resources/how-cities-can-scale-on-site-solar-with-new-federal-incentives/.

Wikipedia

{{cite report |author=RMI |title=How Cities Can Scale On-Site Solar with New Federal Incentives |date=11 January 2024 |url=https://rmi.org/resources/how-cities-can-scale-on-site-solar-with-new-federal-incentives/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024how, author = {{RMI}}, title = {{How Cities Can Scale On-Site Solar with New Federal Incentives}}, institution = {RMI}, year = {2024}, month = jan, url = {https://rmi.org/resources/how-cities-can-scale-on-site-solar-with-new-federal-incentives/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }