In 2015 a farmer walked into the office of a customer-owned electric cooperative in Wisconsin. He pulled out his checkbook and proceeded to write a check to the cooperative for $60,000. That day two other cooperative members followed suit, and the three of them bought up 10% of the brand-new community solar garden on the first day of subscription sales. CEO Joe McDonald admitted that he was “absolutely floored.” Two and half weeks later, the entire community solar program had sold out—all 1,000 panels had been claimed by 113 cooperative members. Joe said the cooperative threw their community solar marketing plan in the trash. The program sold itself.
Over 130 rural electric cooperatives in over 30 states are now offering community solar programs at an estimated capacity of 63MW. Municipal and public power utilities have built an additional 29MW of community solar in 22 programs per the Smart Electric Power Alliance. This means that many of the community solar subscribers across the nation are not city dwellers in high-rise apartments—they are people and businesses in the most rural parts of the country. This trend is likely to continue as community solar programs are much more effective in areas with cheap, available land and creditworthy subscribers who don’t move often. Simply put: rural America beats out Manhattan for community solar.
Why have we seen this large, voluntary, non-mandated growth of community solar in co-ops and public power utilities? There are several factors that go into this, but here are two crucial factors to understand.
- An increasing number of customers are demanding access to renewable energy and expecting an answer. These customers are ones that utilities do not want to lose to areas with more renewable access or even to grid defection. Many co-ops and utilities are tired of shrugging their shoulders when solar comes up—they want to provide it, and they want to be the expert on it. Community solar programs allow co-ops and utilities to give their customers the option to actively choose where their energy comes from by buying into a utility-built solar array. For a customer, it’s a win-win. They get solar access, don’t have to take the time to build solar themselves, and can capture the cost-savings from joining a large-scale solar array. For a smaller-scale utility, this is also a win-win, it means they can keep grid defection low while pleasing their customers, and creating good PR.
- Solar is increasingly becoming the cheapest form of new electricity generation for these rural and municipal utilities. What is repeatedly happening is that a utility will build a 1‒10MW utility-scale solar array and then turn it into a community solar program—post-construction. Utilities are finding that many of their customers are willing to pay a premium price for a kWh of solar energy vs. a kWh generated by fossil-fuel. Thus, a community solar program allows a utility to capture the full value of their solar investment. Compound these elements with the fact that a community solar garden also keeps energy production local, can reduce peak demand costs in some areas, attracts new businesses, provides local jobs, and benefits the environment. For smaller utilities looking to expand or replace aging generation, a utility-scale solar array with a simple community solar program is becoming the most logical choice. That’s why we are seeing 150+ programs come online—with many more in the works.
Based on these two factors and several others not noted in this article, community solar programs can be effective at providing customers with clean energy; while increasing returns for utilities and providing additional community benefits. Each program does, however, need to be crafted in a way that is both easy for customers to understand and works economically. Many different community solar programs have arisen—some good, some bad. This has led to confusion for utilities that want to build a community solar garden. At Sol Systems, we have analyzed the various programs around the country and compiled them into three base models that have proven most successful.
- The Premium-Rate Model
In this model, customers sign up for community solar and then pay a small amount extra per month based on how much of their usage they want to offset. That’s it—simple and straightforward. Most programs offer a fixed cent increase per kWh charged and others allow customers to purchase a kWh “block” to offset their usage. Additionally, these programs can provide “fixed” solar costs, that offer a hedge against rising electricity costs. Simply put: if you could offset your fossil-fuel electricity usage with clean solar energy by paying a few dollars extra a month—would you? Many residential customers and businesses are telling their local utility a resounding yes.
Examples of this structure: Cobb EMC Community Solar Garden in Georgia, City of Tallahassee Utility in Florida, MGE’s Green Power Tomorrow Program in Wisconsin, Bandera Cooperative Community Solar Program in Texas.
- The Pay-Up-Front Model (Block Model)
This model allows customers to pay a certain amount up front for a portion of the community solar garden. Let’s say a community solar garden has 10,000 panels. A local business could “purchase” 100 panels for $50,000. All the energy that those panels produce over 20‒30 years will be subtracted from their energy bill. With the drop in the cost of solar, these programs can offer customers a hedge against rising utility costs. Customers like this model because they can buy into a large-scale solar array instead of building a smaller one themselves, meaning they can capture the economic benefits of scale. Imagine if you and all your neighbors could build a large solar array and all use the energy from it—and save money over time. That’s how this model works.
Many municipal utilities and electric co-ops use this model, some specific examples are: Western Iowa Power Cooperative Community Solar Program, Valley Electric Association Inc. Program in Nevada, Vernon Electric Cooperative in Wisconsin.
- The Bill-Credit Model
This model we generally see in larger scale investor-owned utilities, but it is worth mentioning. In this program, a third-party solar developer builds a solar garden (at no cost to the utility) and finds subscribers who sign up for free. These subscribers then receive a bill credit from the utility for the portion of their electric usage they offset from the community solar garden. They then pay a portion of that credit to the third-party developer. Many of these programs are set up in a way that ends up saving customers money on their electricity bill from Year 1 (around 3% to 10%). At no upfront cost—these programs are highly popular, but often they are the result of state regulations requiring utilities to put more solar on the grid. This is ideal for a utility that wants to please their customers, but the utility won’t see much of an economic gain.
Sol Systems is working with co-ops and utilities to craft its own unique community solar programs, that are simple and effective. Our company can provide help with building, structuring, financing, marketing, and all aspects of development of a community solar program. If you are a public power company, rural electric cooperative, or municipal utility looking to capture the benefits of community solar, please reach out to William Graves at firstname.lastname@example.org or call 202-588-6237.
ABOUT SOL SYSTEMS
Sol Systems, a national solar finance and development firm, delivers sophisticated, customized services for institutional, corporate, and municipal customers. Sol is employee-owned, and has been profitable since inception in 2008. Sol is backed by Sempra Energy, a $25+ billion energy company.
Over the last eight years, Sol Systems has delivered more than 600MW of solar projects for Fortune 100 companies, municipalities, universities, churches, and small businesses. Sol now manages over $650 million in solar energy assets for utilities, banks, and Fortune 500 companies.
Inc. 5000 recognized Sol Systems in its annual list of the nation’s fastest-growing private companies for four consecutive years. For more information, please visit www.solsystems.com.