State of Green Business
The first step to community solar for all
Communities are a critical actor in the global effort to combat climate change. More than 1,000 locally elected officials from around the world were present at the Paris Climate Conference talks. Their voices, representing distant communities, were widely recognized as drivers of the international agreement. In the United States, communities and governments continue to drive toward more sustainable, inclusive economies by leveraging local solar power — most recently, in the form of community-scale solar.
A unique benefit of community-scale solar projects is their very community orientation, which enables "community-supported development." This concept describes the range of activities that can be taken to reduce the cost of, and drive local interest in, community-scale solar. The communities taking action can include constituent- or community-based organizations, nonprofits, municipalities, counties, regional infrastructure boards, or other institutions.
Boardman Hill: Bringing inexpensive clean energy to members
Boardman Hill Solar Farm is a great example of a community coming together to provide its members with affordable clean energy through community-scale solar. The 150-kW project in West Rutland, Vermont (population 2,326), came about when two locals held a town meeting on community-scale solar, and 56 people showed up and signed on to be joint owners of a small community solar farm. The group formed a limited liability corporation, the nonprofit member-managed BHSF LLC, to represent its members in administrative and financial matters in connection with their purchase of solar panels.
When a site proved difficult to find, a local organic farmer, Greg Cox, offered his land for the solar farm under one condition — the group could not sell the renewable energy certificates (RECs), which is often one of the best ways to keep down the cost of a solar project. Yet even without this benefit, which could have brought in about $40,000, the group brought the cost down to $2.87 per watt (before tax incentives described below), about $1 per watt lower than the average community-scale solar farm at that time.
"We are truly green because we hold the RECs," said Roland Marx, one of the initiators of the project and owner of 10 panels in the solar farm. Electricity retailers can buy RECs to sell green electricity, meaning that the renewables are counted twice. "And even with giving up that money, we still have lower costs than any other community solar project."
Making solar affordable to all
To cut costs, BHSF negotiated the price and bought solar panels from a local installer. Further, BHSF manages the administrative and financial matters in connection with the panel ownership, eliminating customary markups and profit margins.
"We are member owned, managed and financed," said Marx. "We cut out the third-party financier and brought costs down enough to make purchasing panels in the system affordable."
Another way they brought the cost down was by paying the land lease through energy credits. The land lease was budgeted at a total of $70,000 over the 25-year term. Instead, BHSF LLC bought 5 percent of the panels, which corresponded to the same value, and the output of those panels gets credited to Cox’s electric bill. This cost the members only $25,000 upfront, a savings of $45,000, which more than made up for not selling the RECs.
"The landowner gets same amount annually from 5 percent of the project’s output," according to Marx, "but it costs participants far less to buy the panels up front rather than paying per year for 25 years."
In past projects, household investors in community-scale solar have not been eligible for the 30 percent residential tax credit. Yet one of Boardman Hill’s members applied for a Private Letter Ruling (PDF) to the IRS, which resulted in his being eligible for the tax credit. Although the PLR is legally applicable only to the one Boardman Hill member, it opens up possibilities for other community solar projects that may benefit from additional IRS guidance.
With the low cost of $2.87 per watt, and the addition of the tax credit, a 3 kW share in the larger system would cost about $6,000. Saving over $700 a year in electricity costs makes the solar panels an investment that earns 12 percent per year. "Customers who can’t come up with the money upfront can take advantage of some of the lower interest-rate green loans available from local banks and credit unions, pay nothing more than they would pay the utility, and eventually pay off the panels," according to Marx.
Community support for economies of scale
Portfolios of projects larger than 1 megawatt benefit from commercial experience and economies of scale that communities may not be able to access on their own, and they can deliver real savings at no upfront cost to community members.
Community-supported development can tap into these benefits by seeking inclusive access, where the intention to make community solar available to all customers at reduced cost can drive local authorities to support projects in their community as a means of social support.
RMI’s groundbreaking partners in New York are doing just that. In Rochester, ROCSPOT has partnered with the city of Rochester and Monroe County to identify underused urban sites, aggregate local customers and drive supportive local policy.
According to Susan Spencer, ROCSPOT founder and president, "Equitable access to solar power is one of the core missions of ROCSPOT. In our city, where over 50 percent of children live in poverty, shared solar offers a unique opportunity to customers of all socioeconomic backgrounds to participate in our renewable energy transition, in a way that stabilizes neighborhoods, engages communities in energy education and demonstrates that everyone can and should have reasonably priced access to renewables."
The Central New York Regional Planning and Development Board (CNY RPDB), a public agency that serves six counties, has aggregated sites across 20-odd municipalities with the support of the New York State Energy Research and Development Authority (NYSERDA).
"We started our SolarizeCNY project for municipalities with the goal of leveling the playing field between local governments and solar developers by providing independent analysis of their solar resources and achieving economies of scale," said Chris Carrick, energy program manager at CNY RPDB.
The CNY RPDB also will facilitate project development by working with state regulators to educate developers about the permitting process, provide a model of local solar zoning ordinance for use by local officials and help create public-private partnerships to reduce project financing costs.
In a critical step for projects of this scale and number, ROCSPOT and CNY RPDB plan to perform a competitive bid process to ensure their communities see the value of their support. Together, they expect to release an RFP for about 30 to 35 megawatts of solar across those sites this summer.
In demand: Community support funding
These organized community support activities — which come at a discount by leveraging local comparative advantages — nonetheless benefit from supportive funding. As an example, New York state has been a leader in giving communities the tools, financial and otherwise, to increase awareness of solar and support the process. NYSERDA’s NY-Sun provides small grants to communities to run Solarize campaigns, aggregating household demand.
Right across New York’s border, a Canadian energy retailer named Bullfrog Power is also helping community groups develop local projects. As one of Canada’s first B Corporations, Bullfrog channels a portion of the revenues from its 10,000 households and 1,500 commercial green power retail clients into $20,000–$40,000 project grants and community microloans. Across 65 projects, it has provided about $2.3 million in early-stage project funding to renewable energy cooperatives, First Nation communities, environmental nonprofits and others to assists them in building renewable energy education and demonstration projects.
In time, communities such as ROCSPOT, CNYRPDB and Boardman Hill will show that such startup capital can enable innovative community-supported solar development. As a result, communities materially can reduce cost and create incredible local benefits.
"We’re doing something good for the environment, taking action against climate change and doing it in a way that gives us a marvelous investment and great savings," said Marx. "Not many investments like that have such low risk and such great benefits."
Moreover, these communities can leverage comparative local advantages in the form of networked relationships, local geographic knowledge, financial resources and strong motivation at the possibility of broad, inclusive and long-lasting benefit. By tapping into these resources, communities can drive down the cost of developing, owning and operating community-scale solar and make the resulting benefits accessible to a broad swath of their community.
Moreover, they can proactively address the question, "What did you do to prevent climate change?" with 30 years of low-cost electricity from community-integrated solar arrays.