Community Solar Case Studies

Grand Valley Electric Power, a Colorado rural electric cooperative, has developed two community solar projects with an on-bill financing option. The first, built  in 2011, was self-developed by the co-op. The second, built in 2014, was done in partnership with the non-profit Grid Alternatives. Grand Valley Power constructed these solar farms as a way to better provide service to its members and anticipate to changing business models, with a key objective to provide solar access to low-income households.

Self-developed Solar Farm

Grand Valley Power’s first community solar development was a modest 17 kW (88 panel) system, built using only their own capital and human resources. The total project cost was $77,500. Grand Valley Power marketed the project through radio advertisements, on their website, and in the monthly newsletter. Despite the push, the co-op only managed to lease 20 percent of the array to its members in the first year.

Grand Valley Power surveyed its members for ways to make the project more appealing. The survey showed that many members were unwilling to pay the $800 upfront subscription fee, but would be interested in a “pay over time” model in which payments would be included as part of the participant’s monthly utility bill. The co-op moved ahead with this “on-bill financing” option, offering leases for $15 a month for five years. To determine eligibility for the on-bill financing option, the co-op used utility bill payment history in lieu of credit checks. Co-op members needed to be in good standing with the utility, with no holds on their accounts. Solar subscriptions quickly doubled with the on-bill option, and eventually sold out.

Whether using the upfront or pay-over-time option, solar subscribers receive a bill credit of $4 per month for the system’s output.. This adds up to $960 over 20 years. The end-life for the community solar project is set for 2036. At that date, the co-op will reevaluate the need for a solar farm.

There are no fees or penalties if the participating co-op member chooses to stop making on-bill payments and leave the program. If a participant moves out of the co-op serving territory, the solar panel is bought back by the co-op. No cancellations or buy-backs have occurred to date.

Grand Valley Power evaluated lengthening the payment schedule for the on-bill payment option from five to 20 years. This would have made the monthly payment equal to the solar bill credit, creating a bill-neutral program.. The co-op decided not to do so mainly because longer-term loans would create more uncertainty and higher risk for the co-op.

Partnering with Grid Alternatives on a Low-Income Solar Project

For its next project, Grand Valley Power partnered with the non-profit Grid Alternatives to develop a community solar farm exclusively for low-income families. Energized in June 2015, the 24 kW (122 panel) system provides low-cost solar energy to select co-op members that need it the most.

Grid Alternatives specializes in increasing solar access to low-income households. The organization provided the capital for the solar array via a grant with the Colorado State Energy Office, as well as volunteers for outreach and construction. Grand Valley Power committed technical and electrical expertise in developing a solar array. The co-op also ran a transmission line to connect the array to the power grid and managed all changes to participants’ bills.

Co-op members with an income below 80 percent of Area Medium Income ($48,000 for a family of four in Mesa County in 2015) could apply for a share of the solar system at no upfront cost. Participating members only needed to 1) agree to let the co-op and Grid Alternatives to keep a portion (2 cents/kWh) of the system’s revenue for administrative costs and 2) provide 15 hours of “sweat equity” by helping at the solar site or home-based efficiency improvement work. This is done to provide participants with a sense of ownership in the solar array. In return, the seven participating families each received an equal share in the system for an initial four years. One share is the output of 16 solar panels (3.5 kW) saving each household about $600 in electricity costs per year, with approximately $110 going back to the co-op and Grid Alternatives to cover program management costs.

After four years, participants are phased out in order for the panels to be transferred to a new qualifying. . The low-income solar program is meant to be temporary, not permanent. The program’s objective is to help low-income families move upwards by saving on electricity costs.

With both solar farms sold out, Grand Valley Power is looking to expand. The original 17 kW array may grow by another 50-60 kW. The co-ops is also in talks with Grid Alternatives for the second and third phases of the low-income solar project.

Cedar Falls Utilities is a municipally-owned utility in Iowa that provides electric, gas, water and telecom services to the city’s 40,000 residents. In 2016, the utility connected a 1.5 MW community solar farm to the grid and began leasing shares to its customers. Built on eight acres of land donated by the City of Cedar Falls, the system was initially designed to be a third of its current size, but overwhelming customer interest during the planning phase led to the larger system. Called the “Simple Solar” program, the community solar system is expected to produce roughly 2,600 megawatt-hours of energy per year, about 0.5 percent of the city’s total electricity use in 2015, or roughly enough to power 275 homes.

Cedar Falls Utilities launched a community solar program in part to make renewable energy available and affordable to everyone. Customers could purchase a 20-year lease on a 170 watt unit – 60% of a solar panel – for $270. Customers could choose to pay upfront or through 12 no-interest installments added to the customer’s monthly utility bill. The latter is a form of “on-bill financing,” with which the utility had used successfully in an energy efficiency on-bill pilot program in 2008-09. Three out of four solar subscribers chose the on-bill payment plan option.

Simple Solar subscribers receive a monthly $1.30 solar bill credit per unit for the electricity generated at the solar garden. The subscription leases provide the monthly bill credits for 20 years, and it is estimated that the $270 investment will be paid back within 15 years. Subscriptions can be sold back to Cedar Falls Utilities or transferred to someone else, provided they are a Cedar Falls Utilities customer.

The Simple Solar program sold out quickly and currently has a waiting list. Cedar Falls Utilities made 8,882 units (6,516 panels) available to the public. The rest went to retail and wholesale customers. Cedar Falls-based University of Northern Iowa purchased approximately 20% of the total project. More than 1,250 residents and businesses have subscribed to the solar farm. Due to the great demand, the utility began selling several hundred additional units that it had initially reserved for institutional reasons.

Cedar Falls Utilities uses a specific software in its Oracle Customer Care & Billing (CC&B) system to track both the solar credits and on-bill subscription payments. The software is able to provide reports that track results for participating customers.

To market the Simple Solar program, Cedar Falls Utilities engaged customers early on in the community solar planning process as part of a multi-phase outreach push to attract subscribers to the solar project. Before construction took place, the utility launched a pre-enrollment multimedia campaign.  In the pre-enrollment phase, Cedar Falls Utilities unveiled artist designs of the solar farm, created a web page for customers to reserve a solar panel, and even ran a show on the local-access TV station in conjunction with the City of Cedar Falls.

During the enrollment phase, marketing included promotional videos and TV ads run through the Cedar Falls Utilities cable/internet utility,  online materials, open houses, and direct mail. Extensive community outreach included events at farmers markets and presentations at the University of Northern Iowa. Cedar Falls Utilities staff actively participated in all of these events to talk about the project and its benefits, and to answer any questions.

Energy generated by the community solar farm is bought by Cedar Falls Utilities through a 25-year power purchasing agreement (PPA) with RER Energy Group, the private developer that built the array. With this financing format, the developer captures the 30% federal Investment Tax Credit (ITC) available for solar projects. Cedar Falls Utilities, as a tax-free entity, is ineligible for the ITC. Cedar Falls Utilities retains the rights to purchase the solar array from the developer once the tax benefits are exhausted.

In 2013, Lake Region Electric Cooperative developed a 25 kW community solar array for its members. Built at its headquarters in Pelican Rapids, Minnesota, the 60-panel solar farm is entirely owned and maintained by the co-op. For the co-op, the decision to build the array was simple. After following the development of a community solar project by a co-op in Colorado (Grand Valley Power Co-op), and with the great interest by other co-ops in Minnesota, Lake Region decided to include solar as part of its energy system.

Minnesota requires select utilities to generate 1.5 percent of their total energy through solar. Co-ops are exempt, but Lake Region knows that might change in the future. It wanted to get into the solar business and stay ahead of any mandates. The co-op determined that it had sufficient internal human resources, technical expertise, and electrical experience to develop a community solar project on its own. By being the developer, the co-op keeps the value local, creates jobs, and benefits its members.

To invest in the program, Lake Region members must make a one-time lease payment of $1,400 for a full panel (410 watt capacity) or $700 for a half panel. Knowing that the upfront cost would be a barrier to many of its members, Lake Region introduced an innovative ‘pay over time’ option with no added fees or interest. Through this option, co-op members could lease a full panel for $40 a month over 35 months. Alternatively, co-op members could select to lease a half panel for half the price. The payments are made via a line item on the member’s monthly utility bill – a process known as on-bill repayment or on-bill financing. For all options, the lease is for 20 years.

To qualify for the on-bill financing option, co-op members needed to have good bill payment history and have no holds on their account. No credit score checks were needed. This alternative underwriting method helped the co-op expand access to more members.

Administering the on-bill option for the community solar project proved to be simple. The software and the tools to include the solar line item on the participant’s utility bill were available in-house. There were small incremental costs and few hours of learning at the beginning, and then it became part of the normal accounting routine.

Program participants, whether making on-bill payments or a one-time payment, receive a $5.75 per month bill credit ($69 annually) for a full panel’s electric production. Program investments have a 20-year payback period. This does not include any value for Renewable Energy Credits (RECs), which the participant owns along with the panel.

To right-size the solar array and to manage future risk, Lake Region surveyed its members about their interest in solar energy at the outset of the project. This initial outreach led to an early list of members interested in the solar project, which became a key marketing tool. The marketing push continued during construction with fact sheets and bill inserts that featured renderings of the array. The co-op also offered a free LED bulb for each solar panel sold. Thanks to a strong marketing strategy, Lake Region sold half of the community solar array in the first month, and sold out the program within six months.

Most of the co-op members that bought into the solar array through a one-time payment are retirees that have their second, seasonal home in the area. For these members, who likely live in the Minneapolis-St. Paul metro area, leasing a solar panel is as much a vote for renewable energy as it is an investment. To cater to these members, Lake Region allows for the winter solar credits to be carried forward to the spring or summer when the member uses their seasonal home.

With the success of the community solar project, Lake Region is planning to build two larger 100 kW solar arrays. The co-op will use its own resources to build and manage the solar farms.  Lake Region may also expand its community solar offerings to retail and corporate members, such as large agricultural farms. And as it looks to expand beyond the traditional electricity business, Lake Region is evaluating becoming an installer of solar systems for its residential and commercial members.