Is it possible to develop large solar power projects with households as backers, and do it again and again? That’s the idea behind solar gardens or community shared solar, a trend catching fast in the US.
‘It is something positive for people to focus on that might help with the healing process,’ said Hughes, who worked at Apple Computer and several Silicon Valley start-ups before founding the Colorado-based Solar Garden Institute.
A solar garden, also called community-shared solar, is a photovoltaic array that takes from the ideas of community vegetable plots, crowd source funding and energy aggregations. The garden is built near or within a community, where it is visible to its members. Local households and businesses come together to fund the projects through subscriptions, ownership of shares, or some other form of investment, sometimes using utility on-bill financing. Models vary, but the harvest usually comes in the form of electric bill credits, guaranteed utility rates, or some other type of financial compensation for the gardeners.
Helping a community through trauma is not a solar garden’s usual purpose, but then Hughes points out that the model opens up all kinds of possibilities not often associated with a power plant. ‘This is a way people can take individual ownership, individual responsibility for their power supply,’ she said. ‘lt becomes a symbol for sustainability for every community.’
Beyond the symbolism, the solar garden offers a sophisticated financial model that can leverage virtual net metering, bulk purchasing, solar power purchase agreements (PPAs) and tax equity credits to reduce solar costs and ensure all parties benefit from the deal. Moreover, solar gardens offer a way to attract investment from property owners who are otherwise disenfranchised from the solar boom.
Often solar gardens are built on public land, depleted agricultural plots, airports, school rooftops and other inexpensive pieces of property that are highly visible to the community. But it’s not just neighborhoods that can benefit; the concept also can serve retail operations with multiple stores, as well as municipalities that pay electricity bills for schools, fire houses, water treatment plants and other facilities.
The results, say its backers, could soon be gigawatts of new photovoltaic installations.
Spreading Like Weeds
While solar gardens first emerged in the usual green-oriented states: the Pacific Northwest, California and Colorado, they are now spreading elsewhere, and the community model accounts for 60 MW, according to the Solar Electric Power Association (SEPA). Eight states have policies that specifically encourage community solar: Colorado, Massachusetts, California, Delaware, Vermont, Washington, Rhode Island and Maine. The concept is especially alive in Colorado where former governor Bill Ritter signed a bill in 2010 that allowed up to 6 MW per year of solar gardens. Changes in government policies, however, are not always necessary – solar garden models exist that can work in most states.
So far individual solar gardens have tended to be in the 1 MW range, but that appears to be changing, as existing gardens expand and new ones are proposed.
‘This is the way that we can bring solar to scale,’ Hughes said. ‘There have been two solar sectors up to now: one being the residential/commercial and the other being the utility scale. Now we are creating a third sector at a mid-scale size.’ Moreover, if pending legislation in California becomes law, solar gardening may take on gigawatt proportions.
California’s SB 843, the Community-Based Renewable Energy Self-Generation Program, would create incentive for up to 2 GW of solar garden installations, which could each be as large as 20 MW. The state Assembly Utilities and Commerce Committee voted 9-2 in favour of the bill in June, and the full legislature is expected to consider it by the end of August 2012.
‘This, I think is a potential game changer. If that bill passes, it will unleash innovation around these business models and the policies to support them. Keep an eye on California,’ said Hannah Masterjohn, policy advocate at Vote Solar, a US non-profit solar advocacy organization.
Net Metering Goes Viral
Solar gardens overcome one of the biggest obstructions to mass PV installation. While 90% of the US population says it wants to take advantage of solar energy, only 25% actually can, according to Masterjohn. The remaining 75% are precluded because of various obstacles: trees share their roofs, they don’t own the building, or they lack the capital or financing.
Using a community-shared model, households and businesses can participate in solar, and do so by taking advantage of the economies of scale offered through bulk purchase and aggregation. This reduces the already falling cost of PV installation.
‘What the customer sees is the cost savings; it is a modest cost savings at this point, but it could easily become a much greater savings over time as the installation costs of panels goes down,’ Hughes said.
Many solar garden programmes bring savings to customers through virtual or aggregate net metering, a concept modelled after conventional net metering, but able to spread the financial benefit of distributed generation beyond the building that hosts the solar panels. Virtual net metering provides bill credits for buildings not actually connected to the solar panels.
In a July 2012 webinar on community solar, Masterjohn cited the example of a college campus where a dorm building has solar panels on its roof. In the summer, when the students are away, the dorm consumes far less electricity than the solar panels produce. But administrative buildings remain occupied – and continue consuming electricity – over the summer. So they receive bill credits for the dorm’s solar production.
Similarly, in a neighbourhood with solar gardens, the facility feeds the power into the electric grid and local households or businesses reap the virtual net metering benefits, even though they have no physical connection to the panels. However, not all states allow virtual net metering. That is why the Clean Energy Collective has created a solar garden model that works without virtual net metering. Founded in 2009, the company has eight solar garden projects either built or in development in Colorado, Minnesota and New Mexico, and is talking to utilities nationwide about additional projects. The company expects to develop 5 MW – 10 MW this year and six to seven times that amount in 2013.
The company’s model involves aggregating customers, striking a PPA with the local utility to buy the power, and offering a billing application and metering system that frees the utility from calculating the net metering credits.
Spencer, an engineer and serial entrepreneur, developed his company’s solar garden model after he built his own off-the-grid home near Aspen, Colorado in 2004. He wanted to create an opportunity for others to install solar in an affordable way.
While Spencer supports the idea of virtual net metering, he believes it may take too long to develop solar gardens if they rely on that mechanism – not all states allow virtual net metering and enacting new laws and regulations takes time. Spencer instead offers an approach that foregoes virtual net metering, but allows customers to own solar panels and earn a payback.
The company develops the solar facility and offers ownership stakes to community members at about $500-$800 per panel. CEC arranges a solar power purchase agreement with the utility, since this approach attracts third-party investors seeking tax benefits. Escrow money is set aside to maintain the garden, which has a 40-50 year lifespan. When members move, or just no longer want to participate, they can sell their panels. However, speculators cannot buy the panels as a pure investment play; shares cannot exceed a member’s electricity consumption.
Spencer says CEC’s model removes a major stumbling block to solar gardens: tracking and crediting solar energy production and customer energy use. The company offers a proprietary remote meter system that handles the tracking and credits members’ utility bills. CEC also partners with utilities to establish fair solar power pricing for both the utility and its customers. The idea is to offer enough financial incentive to encourage all parties to participate.
CEC’s approach is somewhat like crowd funding, the crowd being the gardeners who choose to invest. So far CEC has built solar gardens totaling $15 to $20 million, and the utilities involved have paid nothing, Spencer said. Instead, the capital came from CEC, which recouped the money from customer memberships. This design looks especially appealing, he said, when you consider the size of the California community solar bill, and what it will cost to develop that much solar – an estimated $8 to $9 billion, a lot of money for a few utilities, but not so much when spread out over many California households and businesses who are investing voluntarily and receiving electric bill savings in return.
Different Kinds of Gardens
Solar garden design – and the utility role – can vary widely, with some programmes more true to the original idea of neighbourhood ownership, and others diverging into other community share models.
In some cases, where there is no virtual net metering, a utility might build the installation and sell the power to the customers at a fixed tariff for a set period. The tariff allows the customer to hedge against future rate increase. In other cases, customers or a third party own the system. Sometimes the utility assumes the risk by guaranteeing the kilowatt-hour performance; other times the utility customer takes the risk by being compensated based on actual system performance, according to SEPA.
Whatever permutation they take, solar gardens not only encourage solar development, but also appear to provide a solution to one of the power industry’s daunting problems: In an age of smart grid, how do you capture the attention of consumers and get them to manage their own power use?