Community-owned solar: Like drinking milk without caring for the cow19. November 2012 | Top News, Applications & Installations, Global PV markets, Industry & Suppliers, Investor news, Markets & Trends | By: Judith Hübner
Community-owned solar power is on the rise in the U.S. Kent James, chief strategy officer of Martifer Solar USA has implemented a series of projects with the Colorado-based Clean Energy Collective. In the following interview, he speaks to pv magazine about the benefits and barriers of the model, and discusses why the real traction for rapid solar garden development lies in its broad appeal for utilities.
Could you briefly describe the concept of community-owned solar?
We liken community-owned solar to community gardens: members buy their own "plot" of an array, and collect the power it produces in the form of a monthly bill credit. There are a few key factors that distinguish community-owned solar from other community solar models:
- Arrays are built and maintained by a third party contractor/developer at no upfront cost to program participants or their presiding utilities;
- Program participants actually purchase and own their panel(s), rather than leasing them or buying the power they produce; and
- Operations and maintenance funds are held in a third party managed fund, not by members or by the participating utility.
Essentially, members pay to park on the grid. In the same way that everybody wants to drink milk without caring for a cow, we have found that residents and businesses across America want to participate in the solar movement without the complexities of building and operating individual systems. Keep in mind that there are several successful variations of this model.
In August, Martifer Solar USA and the Clean Energy Collective announced over one MW of upcoming community-owned solar garden projects, and an anticipated pipeline of more than five MW in 2012. Can you expand?
We just completed a 1.1 MW array for the San Miguel Power Association in Colorado and a small pilot array for the Poudre Valley Rural Electric Association. We’ve started construction on more than 4 MW of projects in Telluride, Colorado Springs, and New Mexico, whose completion we look forward to announcing.
What are the advantages of community-owned solar for members?
Traditional solar excludes a huge amount of individuals and businesses; you must own your property, and it must be well sited. You need cash or good credit to finance the array. There is a startup cost in terms of both time and money. If you see this as a hedge against the rising cost of fossil fuels, then you need to commit to consuming the energy that particular array produces for several years. What if you relocate? The traditional model makes sense for a lot of corporations and some households, but what about those who can’t take advantage of the federal and local incentives that make solar such a smart investment right now?
If your energy needs are low to moderate, then solar gardens afford you economies of scale and better ROI. You get higher production values when someone else maintains the system in optimal condition, trimming bush and cleaning panels and replacing inverters. In 20 years, when the cost of fossil fuels has increased, you are far beyond the payback period and simply enjoying free energy.
What are the benefits for communities, utilities and investors?
There are distinct advantages to utilities, communities, and members. And certainly it’s an attractive prospect for contractors and developers, or we wouldn’t be in this space.
Communities: A locally situated array can create jobs, but a locally maintained array can sustain them. With O&M contracts and warranties lasting up to 50 years, that’s a long-term economic advantage. Quality of life improves when residents and business come together to act on the pressing issues of clean air and environmental justice. This shared sense of purpose and collective action make your community a more attractive place for individuals and businesses to live and work. Overall, it makes you more economically competitive.
Utilities: Depending on the utility, there are various benefits to community owned solar. The most obvious is that it allows you to move toward your RPS [Renewable Portfolio Standard] goals at a manageable pace. We work closely with the Clean Energy Collective, which has developed one of the only truly scalable models when it comes to community owned solar gardens.
Investors: Energy investors, from financiers to construction firms, all want the same thing: swift payment, high returns, and a secure long term investment. Solar gardens deliver on all of these. As a builder, we provide construction period financing. The money from member pre-sales provides a payment installation to the contactor and seeds a third party escrow account that holds O&M funds. The LLC that owns the system signs a PPA with the utility, which in turn credits its constituents for power over the lifetime of the array. Whether the array sells to capacity or not, the LLC is getting paid for the power. If a member falls behind on payment, you can easily repossess that member’s assets since the array is communally situated and third party operated. Basically, it simplifies the deal and drives down transactional costs for everybody.
What are the challenges and barriers to it?
Member financing is one barrier we overcame. On a previous array, member financing was not available until several months after completion. We learned our lesson and offered financing from day one on a more recent array, which consequently pre-sold at 100% capacity.
Legislative considerations are obvious; net metering laws must enable a scenario that makes solar gardens profitable for members and utilities, as in Colorado.
Utilities need to consider a host of issues: how they will handle the SRECs [Solar Renewable Energy Credits], monitor production, comply with SEC regulations, administrate the billing function, price the program, and handle maintenance. Again our partner, the Clean Energy Collective, has developed a model that is highly rated when it comes to navigating the legal and administrative complexities of a community owned energy source, which fortunately takes into account all of the above.
You said that community-owned solar has the potential to bring clean energy to five times more customers than traditional residential ownership. Do you think it will be one of the major pillars for residential energy supply in the near future and what are the next steps to promote this alternative energy supply?
Yes, there is growing demand for community-owned solar to be one of the major pillars of the country’s residential energy supply. Martifer Solar USA began as a residential installation firm in 2001, so we have seen the model evolve firsthand. We’ve refocused our residential efforts on community owned solar, because of the tremendous potential there, the benefits that it brings to all parties involved. In communities where we have built arrays, demand has exceeded capacity and necessitated additional project phases.
To build on the momentum that solar gardens have gained, we are working to educate residents, communities and utilities about the benefits and challenges associated with community owned solar. I encourage any community or utility interested in community solar to conduct a thorough feasibility assessment to be certain that this model is the solution to your specific needs.
It’s also important to push legislation at the state level that enables net metering, so that members can receive the full benefit of this model in the form of bill credits for the power their arrays produce. (Those credits, by the way, are not taxable – another advantage to members.)
Finally, I’d like to see cooperation between utilities and the solar industry. Any legislator or utility commission that has concerns about this model needs a forum to voice those concerns, and we as solar contractors and developers bear the responsibility of hearing them out. Without taking their needs into account, without 100% buy-in, how can we build a sustainable clean energy infrastructure? We see solar gardens as something we build in response to a broad set of interests, not despite them.
While the model makes PV energy available to everyone on the grid, real traction for rapid solar garden development lies in its broad appeal for utilities. Can you tell us why?
For the most part, utilities are a natural monopoly. They operate the grid, so for anyone to park a solar array on their territory there has to be a clear benefit to them. This is true for investor-owned utilities, municipal utilities, and member-owned cooperative utilities. It would be futile to champion the solar garden model unless it solved some of the endemic problems that these utilities face: renewable portfolio standards, reliability, environmental quality, and cost chief among them.
Solar gardens don’t require a major logistical shift; in fact they are easier to build and maintain than any other power source I can think of. It’s the philosophical and cultural shift toward a clean energy infrastructure that will take time to evolve, but I am confident that we are well on our way.
Martifer had high hopes on the new net metering legislation in California and its support for community-owned solar. How did the blockade of the bill in September affect the development of community-owned solar in the USA?
SB 843 would have extended net metering benefits to the nearly 75% of California businesses and residents who cannot host on-site solar arrays. It would have reduced the burden of new transmission on utilities that are scrambling to meet the state’s ever growing energy appetite. It died in committee, but I’m confident that we are going to see some form of solar garden legislation pass in the near future. The demand is too great and benefits too obvious for this to go away, and when we work with the utilities to find a mutually beneficial solution then you’ll see community solar gardens sprout up throughout the state.
4th PV Power Plants Conference – USA 2012
Kent James presents Community-Owned Solar Power at the 4th PV Power Plants Conference – USA 2012, which is scheduled to take place on November 28 and 29, 2012, in Phoenix, Arizona. The conference provides an overview about the current status of system costs, quality, procurement, changing materials, financing and legal aspects.
Edited by Becky Beetz.
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