Due to its modular nature, solar power can be deployed in multiple ways to capture solar value in a wide range of sizes, expanding installations over time, in different locations or under different ownership models. Different approaches entail different strategies for rural electric cooperatives (co-ops).
Central station plants can be structured through either cooperative ownership or some form of shared or community solar. Distributed solar involves the physical location of the solar arrays and is not dependent on the ownership model. For example, one cooperative can install solar they own at multiple locations on their system to capture the benefits of distributed solar.
Solar energy can be implemented in many ways, by members as well as by cooperatives. We will only realize the true value of solar by developing it in all its forms. The following options can be pursued individually or together as part of a comprehensive strategy.
Utility solar involves the traditional model of cooperative ownership of generating assets or buying power from a solar developer. Under the ownership model, the same as used for coal or natural gas plants, costs are recovered through rates charged to members on their bills. This approach allows co-ops to avoid fundraising, marketing and other transactional costs of voluntary or purchased power solar plans.
The co-op might also enter into a long-term contract to purchase power from a solar developer via a power purchase agreement (PPA). Under the PPA approach, the developer carries out the system design, permitting, equipment, and installation. The advantage for the developer is guaranteed income from the co-op as well as any tax credits and other incentives. Developers engaged in multiple projects can often realize economies of scale in system purchases and installation.
The ownership strategy selected by a co-op will affect project finances. For example, a tax-exempt non-profit co-op cannot directly use federal tax incentives such as the investment or production tax credits or accelerated depreciation. However, under a PPA the co-op can indirectly benefit from these tax incentives through a third-party owner although the full value of the tax incentives may not be passed through to the co-op.
For an in-depth discussion of these options, see the TechSurveillance report from the National Rural Electric Cooperative Association (NRECA), titled Renewable Energy for Cooperatives: Ownership vs. Power Purchase Agreements.
Member-owned solar involves co-op members providing the investment capital to build the system on their own premises, near to where the power is consumed. Member-owned solar reflects a guiding principle of cooperatives; the member’ economic participation. Members provide the investment for the power generation to meet most of their needs. This approach can be seen as analogous to a PPA, except that member customers own the generating facilities and provide the power output.
Some co-ops and utilities have expressed concern that member solar can displace power purchases and reduce revenues. As some co-ops grapple with distributed generation (DG) and how it fits in their business model, other forward looking co-ops have embraced the value of solar and view their members as potential energy producers instead of solely energy consumers. This very basic shift in attitude will open a new door for member participation to help their co-op become more sustainable.
Much as co-ops were originally formed with participation from pioneering members, member solar can help to provide power for all members on the system.
Co-ops have different methods for compensating energy producing members. One of the most common is is net energy metering (or “net metering”), which allows members to use self-generated on-site power to earn credits on their electric bill for power returned to the grid. Essentially, the member-produced kWhs are ‘stored’ on the grid and then pulled down when the member needs it.
Another compensation method used by some co-ops is a feed-in-tariff, which involves the co-op purchasing or crediting all of the member’s production at a set price. The price varies from co-op to co-op; some co-ops pay the avoided cost rate, retail rate, or value of solar rate.
A number of cooperatives have embraced member-owned and sited solar as inevitable due to the continuing fall in system costs. Rather than oppose this development, they embrace it by providing financing services with some even starting up their own solar installation service.
Community solar (sometimes referred to as “shared solar” or “solar gardens”) allows members to jointly participate in an off-site solar facility by purchasing subscriptions or “shares” in the solar system and receiving credits on their bills. The facilities may be owned and operated by the cooperative or by a third party. Community solar can fill an unmet need for co-op members who want to use the sun as an energy source, but are unable to build a solar array on their property due to shading or roof condition.
Community solar projects require cooperatives to design the program and set the terms of the project. This requires planning for system contracts, pricing, and marketing. According to NRECA, 100 cooperatives in 30 states offer community solar programs.