In 2015, a farmer walked into the office of a customer-owned electric cooperative in Wisconsin. He pulled out his checkbook and wrote a check to the cooperative for $60,000.
That day, two other cooperative members followed suit, and the three of them bought up 10 percent 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. McDonald said the cooperative threw its 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 63 megawatts. Municipal and public power utilities have built an additional 29 megawatts of community solar in 22 programs, according to 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. The trend is likely to continue since community solar programs are much more effective in areas with cheap, readily 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.
1. 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. For customers, 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 can keep grid defection low while pleasing customers and generating positive PR.
2. Solar is increasingly becoming the cheapest form of new electricity generation for these rural and municipal utilities. Commonly, a utility will build a 1- to 10-megawatt 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 kilowatt-hour of solar energy vs. a kilowatt-hour generated by fossil fuel. Thus, a community solar program allows a utility to capture the full value of their solar investment.
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 have seen 150+ programs come on-line -- with many more in the works.
Based on these factors, 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 able to work 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've 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 kilowatt-hour charged, and others allow customers to purchase a kilowatt-hour “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 responding to their local utility with 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-upfront model (aka the block model)
This model allows customers to pay a certain amount upfront 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 to 30 years will be subtracted from the owner's 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
We generally see this model at larger 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 one (around 3 percent to 10 percent).
With 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 its customers, but the utility won’t see much of an economic gain.
Thomas Gulley is a project acquisition intern at Sol Systems, a national solar finance and development firm. This piece was originally published at Sol Systems and was reprinted with permission.