Small utility creates cutting-edge solar projects

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This article first appeared at Clean Energy Finance Forum.

In an Iowa community with a large Amish and Mennonite population, Farmers Electric Cooperative has become a nationally recognized solar energy leader. FEC, one of the smallest utilities in the nation, is the subject of a case study (PDF) by Solar Electric Power Association published in October.

“Farmers Electric Cooperative: A Small Rural Cooperative Becomes a Solar Leader” explores the reasons for the utility’s success in introducing solar power. Twenty percent of its members are solar power owners. This accomplishment is no accident. FEC’s leadership consciously has taken a simple and pragmatic approach to renewable energy. This approach could be a model for other small utilities.

“The genius of it all is in the fact that there has been no upfront investment by the cooperative itself, so no debt incurred and no capital investment on our part,” Warren McKenna, CEO of FEC, said to SEPA.

McKenna said he sees solar power as key to member retention. He said FEC has become a national model by keeping things small, gradual and local — and by framing solar programs as a matter of smart, sensible economics, with payoffs in both cost savings and customer retention.

The utility has created Iowa’s largest commercial solar project, financed by a power purchase agreement. It also has introduced a feed-in tariff, built a community solar garden and encouraged local schools to install solar panels.

These options appeal to local residents and businesses — including Amish and Mennonite farmers, who do not have electricity or running water in their homes. However, they do use solar-powered phone booths for business purposes.

The utility has introduced a feed-in tariff to support locally generated solar power. According to SEPA, this feed-in tariff was one of the first in the United States. Participating customers are billed at a rate of 12.5 cents per kWh for all of the power they use. This is offset by a credit based on a sliding scale.

According to SEPA, once members begin producing more power than they consume, they are paid at a rate of 6 cents per kWh. The credits rarely are over $10-$20. After the 10-year contracts for the feed-in tariffs expire, the incentives probably will be between 8 and 10 cents per kWh.

Solar power

FEC's latest foray into renewable energy is an 800-kW solar farm in Iowa.

“A feed-in tariff doesn’t have to be higher than the current retail credit,” McKenna said. “It’s designed to pay back the installation.”

FEC is banking the renewable energy credits from the installations, because Iowa does not have a market demand for solar RECs.

Community solar also has become popular at FEC. According to SEPA, the local solar garden has grown from 13.8 kW to 40 kW and has a waiting list. The utility plans to expand it by 10 kW per year.

An 800-kW solar farm is FEC’s latest foray into renewable energy, SEPA said. This is the largest solar farm in Iowa. It has been financed via a power purchase agreement. FEC will own the farm after 10 years.

To offset costs of the solar programs, SEPA said, the cooperative has created an opt-in Green Power Program that costs members $3 per month. These funds are used to buy biodiesel for backup generators and lower the costs of the solar programs.

The utility uses low-cost, in-house options for installing and buying solar.

“Don’t gold-plate it,” McKenna advised other cooperatives in an interview with SEPA. “When you can, do it yourself with your own labor force.”

This small-scale, in-house approach has reduced buy-in costs for the solar garden. Participants pay $375 for their first panel and $475 for additional ones (up to 10), SEPA said. Low-income members can participate with zero upfront buy-in costs.

The utility  has a cumulative solar capacity of over 1,800 watts for each of its 650 members, SEPA said. But its membership in the Resale Power Group of Iowa still requires it to buy 50 percent of its power from fossil fuel sources.

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