Industry Market Trends

Shared Solar Programs Could Be Energy Wave of the Future

Dec 17, 2013

It appears to be an exciting time in the solar energy market, for both customers and companies in the business. Prices continue to drop, demand continues to increase, and innovation in creating sustainable delivery and service models seems to be flourishing.

Whether it's small startups trying to sell do-it-yourself solar installation kits to homeowners or large companies selling their solar energy capacity back to cities and states, clearly everyone is searching for ways to make solar energy profitable and affordable. One of the newest ideas both public and private utilities have hit upon is community shared solar power, referred to by some quarters as solar gardens or solar farms.

While the details vary from project to project, here's the basic idea: A utility company decides to sponsor a solar farm somewhere in the community. The utility then offers its customers the chance to purchase shares in the power generated at the solar farm. The utility contracts with a third-party solar system provider to lock in energy rates at, let's say, a 25-year clip, and the provider handles the operations of the solar installation.

The benefits for the utility are the ability to lock in solar costs as part of its business for a number of years into the future, ability to promise customers a solar energy option every month, and meeting applicable in-state renewable portfolio standard requirements. Solar system suppliers get business in new installations and operating agreements.

For ratepayers, the benefits also seem numerous. They get a fixed rate on part of their insurance costs well into the future and the knowledge that as solar energy gets cheaper, their rates will certainly go down. Utility-sponsored community shared solar projects make solar energy more accessible by allowing voluntary buyers to purchase the amounts they want month by month. (In several cities ratepayers receive credits on their electric bills for participating in shared solar projects).

One city that's building one of these solar gardens is Springfield, Mo. Steve Stodden, the associate general manager of electric supply for Springfield's private utility company, City Utilities, explained that it has contracted with Chapel Hill, N.C.-based Strata Solar to build a 5-megawatt system on 40 acres of land near Springfield. Strata Solar will operate the farm at a fixed cost for 25 years, producing an estimated 9.6 million kilowatt hours of power per year.

The project is scheduled to go online next May, but City Utilities still must get approval from the city.

"We get 80 percent of our energy from coal plants, and it's no secret they're starting to get some years on them," Stodden said. "With solar getting so much cheaper, it seemed like a good time to try this now."

While Springfield's solar farm is still in the embryonic stage, several other major cities have already gotten into community shared solar.

Orlando Utilities Commission in Florida began its shared solar program last March and had resounding interest from its customers; within six days all 400 kilowatts of solar power the company was offering were sold out and application requests totaled another 300 kilowatts.

In Colorado, Xcel Energy has been doing community shared solar for three years. It now has 12 solar gardens in operation across the state.

This model seems to be working for utilities, but is it something they can emulate for other forms of energy? And to that point, is this energy model going to someday compete with traditional ones that have been in place for decades already?

Gabriel Romero, a spokesman from Xcel Energy, said that he thinks this business model is the best way yet for energy companies to deal with solar.

"The companies are happy because they get to build more solar projects, and the customers are happy because they receive a credit on their bill," Romero said. "Solar hasn't been able to compete (with traditional energy) as of yet, but we're finding how to best use renewable energy now. This model works for everyone, and it's not costing (utilities) an arm and a leg."

Other energy companies are showing interest but still exploring the concept.

Kurt Stodgill, the interim solar program manager at Austin Energy, which serves the Austin, Texas, area, said he thinks community shared solar would augment the utility's current business model rather than compete with it.

"We've got very aggressive renewable goals, like 35 percent renewables by 2020," said Stodgill. "The majority of that will be through wind (energy) here in Texas, but we've also got a goal of having 200 megawatts of solar by 2020, with 100 of that being local.

"We look at community solar gardens as a way to give us and the customer cost certainty, in a way we haven't been able to do before," he said. Austin Energy serves approximately 400,000 customers.

As for transposing the community solar garden model to other forms of energy, Stodgill said Austin Energy already tried it with a wind program several years ago but got mixed results. That program allowed residential and commercial customers of Austin Energy to lock in wind energy rates for 10 years, but few customers were interested.

Al Rudeck, vice president of strategy and planning at Minnesota Power, another private utility, also thinks the shared solar model will work, though the company hasn't yet decided to invest in the concept.

"I think this complements the business model, because our customers are becoming more and more energy-aware and interested in their energy [usage]" Rudeck said. "A solar program like a solar garden is providing choice to customers; we can preserve reliability and still deliver good product at a great value.

"Whatever you can do to provide cost surety to your customers, and allowing your customers to 'clean up' their generation mix, is going to help both sides," Rudeck said. "To allow customers to buy blocks of power where they don't have to offset all their power needs is something very attractive."

Rudeck said the community shared  model could work for wind energy, as well. Minnesota Power invested in a community wind farm approximately 10 years ago, and customers were able to subscribe in the program in monthly 50-kilowatt-hour blocks. They paid for the actual wind power they used. Rudeck said that customers would buy 500 kilowatt hours per month, for example, and buy five to six blocks at a time.

"But wind energy was more expensive then, and we didn't have real good market penetration at the time," Rudeck admitted. "I think it could work if wind costs come down like solar costs have."

Rudeck added that one obstacle to using the shared concept with other energy forms is size and time. "You can build solar on whatever size and however quick a customer wants it; with coal or wind, there's a minimum entry size and a much higher cost of entry," he said.

City Utilities' Stodden said he expects more and more U.S. utilities to get into shared solar. "It's absolutely going to be something other companies do, because solar is getting so cheap that it makes business sense to do this," he said. "Certain businesses are being required to have a sustainable mix in their energy, so that's part of it.

"What we've also found interesting is that there's a wide variety of customers who are interested in this," Stodden noted. "The environmentalists and the anti-coal people are interested, but also the group of folks worried about carbon taxes and future energy costs."


Photo credit: Xcel Energy