Co-ops big and small are sponsoring innovative community photovoltaic projects to meet member demand for renewables
By Reed Karaim | RE Magazine
Farmers Electric Cooperative in Kalona, Iowa, is among the oldest electric co-ops in the United States. It was founded in 1916, and the original members were clearly a determined lot. According to historical press reports, they built 6 miles of line before they even knew where they were going to obtain power.
Today, Farmers Electric is one of the smallest co-ops in the nation, with about 650 members. But its founding determination to serve its members’ needs remains undiminished. And among its most visible community-focused efforts is a growing array of photovoltaic (PV) panels assembled on a parcel of prairie land next to the co-op’s offices.
The solar panels are Farmers Electric’s “community solar garden,” an innovative approach co-ops are taking to give members access to solar power while helping them avoid the steep costs and other difficulties associated with solar installation.
Through solar gardens, or “solar farms,” as they’re also known, members can acquire power from one or more PV panels, or in some cases, just a portion of a panel. “We take care of the construction and the maintenance. It’s pretty much hands-off for the consumer,” says Warren McKenna, Farmers Electric general manager. “To sign up, all they have to do is call us. We invoice them for the solar module, and it shows up on their bill. It’s just very easy to do.”
Co-op solar gardens are blooming everywhere from the bright desert sands of New Mexico to the lake regions of Minnesota. The approach is still relatively new, with most of the projects coming on-line since 2010. Yet 4 percent of electric co-ops now have solar gardens, according to a recent survey by NRECA Market Research Services.
It’s part of an overall boom in solar power, spurred by the rapidly falling cost of PVs, down nearly 70 percent since 2010. State renewable energy portfolio requirements also have driven some of the activity.
With lots of private solar companies out there touting their wares to consumers, many co-ops have decided it’s time to move more aggressively into the market. “We didn’t want third parties coming into our territory and getting between us and our members. We are the energy provider,” says Dan Husted, vice president of energy services for Lake Region Electric Cooperative in Pelican Rapids, Minn., which has a community array. “We wanted to do it ourselves and keep that value here, locally.”
In essence, solar gardens represent electric co-ops doing what they have always done: responding to their consumer-members. “Surveys are showing that more and more members are interested in seeing clean energy options,” says Peter Muhoro, a project advisor at NRECA’s Cooperative Research Network (CRN). “Based on recent trends, a lot of co-ops are realizing we should get ahead of the game and do something for the community.”
With funding from the U.S. Department of Energy, CRN is working alongside several industry organizations and electric cooperatives to implement the deployment of more than 20 MW of utility-scale (250 kW and higher), utility-owned solar PV. The National Rural Utilities Cooperative Finance Corporation (CFC), Federated Rural Electric Insurance Exchange (Federated), technology firm PowerSecure, and 15 co-ops joined CRN on the Solar Utility Network Deployment Acceleration (SUNDA) project, which aims to reduce the barriers faced in implementing utility-scale solar PV systems. “We hope that with the cost reduction, all co-ops can find savings to implement even smaller systems,” says Muhoro.
Farmers Electric, like most of the co-ops that have built solar gardens, started small. It solicited member interest in a single array with a limited number of PV modules. But it soon found that even with its limited membership, demand quickly outstripped supply. “We started out with about 40 modules. We add about 40 modules a year, and the next 40 are already spoken for in 2014,” McKenna says. “The offerings typically sell out in the first week.”
Such responses are common among co-op membership. At Wright-Hennepin Cooperative Electric Association, based in Rockford, Minn., a single member meeting in July 2012 and one article in the co-op’s newsletter sold out 171 panels of the co-op’s community array, which also includes a battery-storage component that allows some of the power to be used during peak periods late in the day. “It was pretty surprising,” says Rod Nikula, co-op vice president of power supply. “That first meeting showed us that the membership was really interested.”
Lake Region Electric surveyed its membership on interest in solar power and found similar results. The co-op operates in a popular vacation area with many seasonal homes and has members from all 50 states. “A lot of those members have a very green attitude about energy, and they told us they’d be interested in having more renewables as part of our portfolio,” Husted says. “We listened to that.”
An NRECA Market Research survey of 1,200 co-op members around the United States found 43 percent consider themselves “actively green” or “conveniently green.” Members in that second category, which support renewable energy but also place a high priority on frugal choices and want an “invest-once-and-done” choice in energy efficiency, appear to be a natural fit for solar gardens.
McKenna says a survey of Farmers Electric’s members revealed that the ease of signing up was the number-one reason members listed for joining the project. Number two was concern about the environment. Third was the importance of keeping money in the local community.
Wright-Hennepin’s Nikula notes that many members attracted to solar gardens don’t want to, or can’t, take on the expense of a full-fledged rooftop system. The garden allows them to buy into solar one panel at a time. “This way, they can just get a few panels and see if they like it,” he says, “and then add more if they do.”
For other members, home installation is impractical. “When you really think about the number of homes that can actually do solar on their home with the proper southern exposure, it may only be 15 to 25 percent,” says Jerry Marizza, new energy program coordinator for United Power in Brighton, Colo. “This solar farm was an opportunity for the other 75 percent.”
Grow as you go
Marizza says United Power began the first solar farm in Colorado in 2009. “At the time, we had a state mandate for a certain percentage of renewables,” he says. Members were also interested in a solar rebate program. United Power did set up a rebate program but wanted an approach that could spread benefits to more members. “We were thinking of another way to do this,” he recalls. “We came up with this idea of a community solar farm.”
United Power’s service territory includes 70,000 meters in the Denver suburbs. Yet, in the beginning, the co-op followed the same route as tiny Farmers Electric: Start modestly and solicit member commitment before proceeding. “Because this was new in 2009, we wanted a ‘grow-as-you-go’ model,” he says. It’s an approach that several co-ops have used to finance their community solar gardens.
One of the appeals of solar power is its apparent simplicity. The sunlight falls and PV cells turn it into electricity. The financing of solar projects, however, is a more complicated matter. Electric co-ops have structured the ownership of their solar gardens in different ways. In some cases, the members own the panels. In others, the co-op does, or a third party, and members sign a contract that guarantees them power for 20 to 25 years.
United Power’s approach is one of the most straightforward. The Governor’s Energy Office at the State of Colorado provided seed money to help the co-op develop its solar farm. But from there, it has expanded on a self-financing basis. United Power started with a “little 10-kilowatt ground-mount system,” Marizza says. When it had leased all 48 panels on that array at $1,050 a panel, “my thought was . . . that we’d have about $50,000 and build another.”
United Power recently sold out its second unit, a 20-kW array, and is gauging member interest in a third. United Power’s members lease the panels long-term from the co-op; at Farmers Electric, the members own the panels, but the net financial result for members and the co-op is largely the same.
Other co-ops have sought to take advantage of the federal government’s Investment Tax Credit, a credit for 30 percent of the cost to build a solar facility. Because of their not-for-profit status, electric co-ops generally cannot take direct advantage of the credit. However, some co-ops have turned to solar partners who can use the tax credits and, essentially, pass the savings on to the co-op and its members.
Wright-Hennepin Cooperative chose to work with Clean Energy Collective, a community solar developer, on its first community solar array. “They were the owners. Wright-Hennepin Electric was the facilitator,” Nikula says. “They had the ability to capture the 30 percent tax credit. Under the net metering laws of Minnesota, we did a power purchase agreement with them saying we would forward kilowatt-hour credits to the participating members.”
The co-op felt that taking advantage of the credit was necessary to bring the price of the solar garden down for members. However, Nikula notes that the falling cost of solar components has led the co-op to take a different approach as it expands its solar garden. “In the second solar project, Wright-Hennepin Cooperative is the project manager. It’s going to be crowd-funded. The members will own the array.”
Under this approach, the co-op is financing the construction upfront and then collecting money from members as they purchase panels. “By the time it goes commercial, basically, Wright-Hennepin Cooperative won’t have any money in it,” Nikula explains. The co-op used bigger panels for the second array and asked for $2,000 for each of the 72 panels. The project is fully subscribed, Nikula says, and there’s already a waiting list for a third array.
Minnesota’s Lake Region Electric took another approach known as a “tax equity flip.” Under a program developed by the National Renewables Cooperative Organization (NRCO), Federated, and CFC, the co-op created a “taxable special purpose entity” through which a co-op and a partner (Federated) can build and operate solar facilities, including community solar farms.
In a tax equity flip, majority ownership of the facility resides with the partner until the tax benefits are exhausted and then transfers to the co-op. Tax equity flips are complicated financial transactions, but they can provide another route to bringing down costs by taking advantage of tax benefits. “If a co-op thinks they might be interested, they should get in touch with NRCO, and we can help them pursue it,” says Todd Bartling, NRCO vice president of renewables development.
Many approaches, one result
Co-ops may have a variety of options for developing a community solar garden, but from the consumer-member’s perspective, the various approaches appear largely the same. The member pays a one-time cost up front to acquire power from part of the array. The cost is usually per-panel and varies depending on the co-op’s cost. The member gets a credit on their bill equal to the power generated by their part of the array. A key ingredient in the popularity of solar gardens is that after writing the initial check, “the member doesn’t have to worry about anything for the next 25 years,” Marizza says, since the co-ops take care of maintenance and upkeep.
A member who moves out of the service territory or who decides they no longer want to receive power from a panel can sell or transfer their share of the array. “All the member has to say is, ‘I’m changing my ownership over, and I want my credits to go to this address,’ and that’s it,” Marizza explains.
At least one co-op has sought to lower the bar to joining a solar garden to almost nothing. Delta Montrose Electric Association, based in Montrose, Colo., allows members to pay as little as $10 to receive the power from a small share of a panel, for which they receive a small credit on their bills. Although the savings are negligible, members are still able to express their support for solar. (See “Electricity . . . and Beyond” in the March 2014 issue of RE Magazine.)
That opportunity―whether it’s through a small symbolic amount or by purchasing enough solar power to pay for most of their electric bill―is clearly resonating with members. The survey conducted by Farmers Electric in Iowa found that more than 90 percent of its participants were satisfied with the program.
Co-op energy managers also have plenty of anecdotes to illustrate the public response, even among non-members. At United Power, a customer from a neighboring utility contacted Marizza to tell him he loved the idea of the co-op’s solar garden so much he wanted to know if he could buy a panel. “I said, ‘Anybody can buy a panel, but where do you want me to apply your credits? It has to be in our service territory.’ This person considered buying a panel and donating it to a boys and girls club in Brighton in our service territory,” says Marizza. “That was cool.”