As sure as the sun shines, solar power is coming.
The costs of photovoltaic (PV) technologies are tumbling. Government mandates for renewable energy are expanding. Options for adopting consumer-level solar are increasing. And member demand is exploding.
“I’ve never, never seen this kind of enthusiasm and excitement” from consumers, says Wright-Hennepin Cooperative President and CEO Mark Vogt, a 35-year co-op veteran.
Add to that a 30 percent federal tax incentive for solar projects that will be reduced to 10 percent at the end of 2016, and you have a rush toward a technology that’s already seen triple-digit growth over the past five years.
“We can safely say that for co-ops that haven’t seen solar on their systems yet, it’s not a matter of ‘if,’ but ‘when,’” says Andrew Cotter, a project manager in NRECA’s business and technology strategies division.
Electric co-ops nationwide have about 105 MW of solar energy in their generation mix, but a recent survey shows they’re planning to add nearly 300 MW over the next two years, and more co-ops are announcing plans nearly every day.
But for cooperatives venturing into solar for the first time, deciding which options are best for the co-op and the membership can be daunting.
“There are multiple options for each phase of a solar project,” Cotter notes. “First, you have to find out if your membership wants solar and if meeting the demand is worth the investment. Then, there’s financing, planning and design, installation and interconnection, and operation and maintenance. Making the right call on all these facets and getting them to fit properly can really be like solving a puzzle.”
The landscape becomes even more complex when co-ops are faced with individuals or third parties installing rooftop solar and with net-metering laws that compel utilities to compensate residents at retail rates instead of wholesale for solar power they feed back into the grid.
“When a member puts solar on a house on his own or through a third party, the traditional rate model is broken,” Cotter says. “Utilities recover most of their fixed costs through kilowatt-hour sales. Without major changes in the way we charge for power, the effect of rooftop solar and net metering is to transfer these fixed costs to members who can’t afford or don’t want solar or whose homes aren’t suitable for it.”
Regardless of the complexity, most industry veterans agree that taking a pass on solar is simply not an option.
“It would be a fatal mistake if the electric cooperative industry looks at solar as anything other than opportunity,” Vogt says. “There are new competitors coming, and they’re coming with solar panels.”
Vogt and his team at Rockford, Minn.-based Wright-Hennepin studied those competitors for a couple of years before deciding on a business model to bring solar to the co-op’s power mix. That model was community solar, a highly successful option being deployed by dozens of co-ops across the country, where the utility builds a large solar power installation and sells or leases individual panels or their output to members.
The co-op built Minnesota’s first community solar power project in 2013 at its headquarters. Soon after, it created a for-profit subsidiary, WH Solar, to install and maintain its solar projects. The company is now on its third community solar installation and looking to develop and sell solar energy outside the co-op’s territory by the end of 2015.
“Our industry likes to build great big power plants. But now the customer is saying, ‘The appeal for me is to produce some or all of my own power,’” Vogt says. “As an industry, we better be prepared to seize that opportunity. And the beauty of community solar is they can buy one panel and kick the tires a little bit to see how it works for them without making a huge investment all at once.”
WH Solar customers lock into a 20-year solar electricity rate that covers the cost of the panel with no money down. They pay a higher retail rate than non-solar customers during the first few years but can potentially net thousands of dollars in savings as the term matures, Vogt says. Customers also have the option of paying $2,695 per panel upfront and $0 per kilowatt-hour where the production essentially offsets their usage at the retail rate.
With electricity prices from traditional sources forecast to increase about 3 percent a year, and likely to be compounded by new federal power-plant-emissions rules, Vogt says solar will become even more attractive to consumers and utilities.
Listening to Members
Vogt says for Wright-Hennepin, the driving force into solar energy has been the “tremendous interest” among its 46,000 consumer-members, based on recent surveys the co-op has conducted. Minnesota’s 25-by-25 standard—25 percent renewables by 2025—is also a contributing factor.
“There is a romance with solar, an intangible there that doesn’t exist with central-station power,” he says. “If we can tap into that, I think co-ops can be in the driver seat for an awful long time. That is something we, as an industry, better not miss.”
Owen Electric Cooperative, located in Northern Kentucky just a few hours’ drive from the coal country in the Eastern part of the state, got a wake-up call in 2010 when 184 out of 604 voting members chose an “actively green” candidate to join the co-op board.
“Our incumbent director retained their seat, but we were surprised that a green candidate could garner 30 percent of the vote,” says Mark Stallons, the co-op’s president and CEO.
Then, a 2012 survey found that 38 percent of Owen Electric members were interested in green issues. At the time, the co-op had no solar power integration and no plans to implement it.
That’s when Owen Electric teamed up with the SUNDA Project, a U.S. Department of Energy-sponsored collaboration between NRECA, the National Rural Utilities Cooperative Finance Corporation, and several co-ops to establish technical and financial guidelines and best practices for utility-scale solar installations.
“What [SUNDA and NRECA] brought was a team of experts from a financial standpoint as well as from a technical standpoint,” Stallons says. “If we did it ourselves, we would have to go to a local provider of solar energy, and we would be subject to whatever they wanted to provide us with.”
The Owenton, Ky., cooperative has begun work on its first solar energy project: a community solar array on a three-acre site owned by the co-op. The project, slated to be operational by the end of 2016, will be sized according to member demand.
Stallons says the imperative of solar energy is to find a balance that both meets member needs and makes financial sense for the cooperative. Failure to get the solar formula right, he says, could negatively impact the relationship with members and the co-op’s bottom line and invite competition from outside sources.
“Our goal is to provide all of our members with the power supply they desire, whether it is from traditional or renewable sources, and at an equitable price point that is not subsidized by other members,” he says.
Vogt agrees, saying co-ops have a “natural advantage” over outside competitors that must be leveraged: “We are the trusted power supplier in our communities.”
Keeping it in the Family
Where co-ops like Wright-Hennepin elect to outsource the building and management of their community solar facilities, Lake Region Electric Cooperative (LREC) looked at the expertise it already had on staff and decided to go it alone.
“Think about our history: We build substations. A solar array is simple, low-voltage, on-the-ground panels, rails, and racking,” says Tim Thompson, CEO of the 26,000-member co-op. “Why would we want to pay someone else to come into our territory and build a small power plant? Doing it ourselves saves money.”
LREC, based in Pelican Rapids, Minn., built its first community solar array of 96 panels, 410 kilowatts, in 2013, and it sold out quickly. All told, the co-op devoted 368 hours of labor to building the project.
“We are proud that a variety of employees contributed significantly to the construction, including our linemen, electrical technician, facilities supervisor, staking supervisor, CAD technician, meter tech, and warehouseman,” Thompson says. “We leveraged our skills and the equipment we already have and applied them to solar, and it turned out to be a success.”
The co-op sees the project as a way to maintain the long-standing bond it has with its membership. “If we don’t get in on the ground floor and build this, someone else will,” Thompson says. “Community solar has now become a part of our business.”
Panels cost $1,500 each, and members can use a payment plan to spread the costs over 36 months. LREC recovers all its costs—panels, labor, and lost kilowatt-hour sales revenue—in the price, plus a small margin.
“The new revenue coming in pays for the project,” he says. “If a third party came in and started building solar, they would really extract value.”
Thompson says there’s another intangible in offering solar that you can’t put a dollar value on: member trust.
“Our members really do look to us; they trust us,” Thompson says. “As long as there is member demand, we’ll keep doing it.”
Small Co-op, Big Idea
Not too long ago, Steele-Waseca Cooperative Electric, a small electricity provider south of Minneapolis, began hearing a common refrain from its members through phone calls, e-mails, and at annual meetings: They wanted to own solar energy, and they wanted it sooner rather than later.
But the staff had a dilemma: How can a co-op with fewer than 10,000 members build and manage a solar program at a cost the rural community could afford?
Kristi Robinson, Steele-Waseca’s engineer, was pondering that question while checking e-mails one day when she came across a bundling ad by a telecom company. Then the proverbial light bulb came on.
“Why can’t a cooperative bundle services the same way?” Robinson thought. “The idea was so simple, we doubted ourselves. So we crunched the numbers. Every time we did that, the numbers came out better than we thought.”
In January, Steele-Waseca Cooperative began offering solar power ownership packaged with its long-successful demand-response program that uses grid-enabled water heaters.
Before the first shovelful of dirt was turned at the co-op’s Owatonna headquarters, more than 20 percent of the pro-posed array’s 250 panels were sold.
Dubbed the Sunna Project, participating members receive a free 105-gallon electric water heater that the co-op controls to shave peak demand, plus the opportunity to purchase one 410-watt solar panel for $170. That’s nearly 90 percent less than the average price of a panel.
The result? Steele-Waseca gave away more electric water heaters in the first four months of 2015 than it gave away in all of 2014.
“Before community solar, one-third of our membership was with the water heater program. Community solar is convincing the other two-thirds to also join,” Robinson says. “I guess solar is sexier than water heaters.”
The solar array, built on the co-op’s five-acre property, began feeding into the grid in May and each panel is expected to generate an average of 510 kWh of electricity per panel per year. The entire community solar garden will produce approximately 127,500 kWh per year.
Steele-Waseca Cooperative CEO Syd Briggs says the co-op receives a great deal of renewable energy from Great River Energy, its Maple Grove, Minn.-based generation and transmission co-op (G&T), but there’s something more attractive about having a local project that members can see and own.
“Our members wanted their co-op to do it, so they could own solar,” Briggs says.
An added advantage is that the co-op gains about 4,500 kWh per year in additional electricity sales from every Sunna participant’s water heater—welcome growth in the co-op’s residential class, which has been flat since 2011, Robinson says.
Seminole Electric Cooperative is taking community solar to a new level.
The Tampa, Fla.-based G&T found that among its nine member co-ops, there was high interest in developing solar power, and the member co-ops wanted to find the most cost-effective option to meet the demand. With this in mind, the G&T has embarked on a project that co-op officials are calling “cooperative solar.”
Under the plan, Seminole Electric would build and operate a utility-scale solar project and allow member co-ops to sell the array’s output to consumers.
“What we’re trying to do is provide our member cooperatives access to that solar facility at a rate structure that allows each to design a program to meet their needs,” says Lisa Johnson, the G&T’s CEO and general manager. “This approach gives them an opportunity to access an affordable solution without having to put their own capital out on the front end.”
Development of the project is in the early stages, but plans are to build a 2-MW PV system on Seminole Electric property adjacent to its natural gas plant by the end of 2016.
Solar Growth Spurt
In Georgia, electric cooperatives are thinking big. They’re about to make a major solar play into territory where coal and nuclear power have dominated for decades.
By the end of 2016, Green Power EMC, a large renewable energy supplier owned by 38 Georgia electric co-ops, will add nearly 200 MW of solar capacity. The move will increase the percentage of solar power in member co-ops’ renewable portfolios from about 1 percent a year ago to 85 percent when the project is done.
The project is part of a concerted effort to get co-ops into a leading role on solar.
“To be credible in this part of the business, we need to find ways to build and buy solar,” says Green Power EMC President Jeff Pratt. “Second, we need to educate and inform our customers about solar energy’s strengths and weaknesses. Third, we need to engage our end-use customers with solar opportunities. We can’t implement those three initiatives fast enough.”
Green Power EMC currently has an agreement to buy all the output from a 20-MW solar farm, and it’s working on a contract for 50 MW at another facility. The co-op is also assisting members with several small-scale solar projects in their territories.
Pratt says this growth spurt was brought about by three primary developments:
One is the impending expiration of the 30 percent federal tax credit, which has helped contain the cost of deploying renewable resources. “Solar is not the cheapest resource to purchase, but it is a lot closer to the cost of wholesale energy than it was a couple years ago,” Pratt says, adding that construction and technology costs for solar have dipped, giving more oomph to the tax breaks.
The second is a requirement by the Georgia Public Service Commission that Georgia’s investor-owned utility, Georgia Power Co., must begin soliciting the purchase of solar energy before 2017.
“That helped draw significant solar investment to Georgia, bringing with it competitive development costs,” Pratt says.
And third is an increase in member interest in solar power.
“Having a part of our portfolio using solar energy is wise to do to meet end-use customer interest,” Pratt adds. “Participating in the solar market, even in a small way, helps meet those customer interests and needs.”
Third Parties at the Gate
Another motivating factor for Green Power EMC is a bill passed by the state legislature on March 27 that would allow national solar energy installers, such as SolarCity, to lease panels to residential customers, who could then sell excess power to utilities. Similar legislation is emerging in Florida and North Carolina.
Green Power EMC is working to help member co-ops with outreach and promotion of community solar and other options as alternatives to rooftop.
“We need to start now to find ways to help our member EMCs satisfy their customers using our strengths,” Pratt says. “We’re looking for ways to actively engage their interest in solar that are more affordable and easier for them to participate.”
Pratt figures serious third-party competition will arrive within six months or a year after the new law is signed.
“We’re moving very quickly to put some programs in place,” Pratt says. “We hope by late summer or fall, we will be in a position to officially roll those out.”
In the end, the solution to the solar puzzle comes down to something co-ops have thrived on since the beginning: listening to members.
“You always have to be willing to look at it from the member’s perspective, especially now when the member has choices,” says Stallons of Owen Electric.
Luis Reyes, CEO of Taos, N.M.-based Kit Carson Electric Cooperative, a national leader in utility solar deployments, agrees.
“Fit members’ economic status first,” he says. “Make it affordable whether they want to buy one panel, two panels, or even half a panel.”
Wright Hennepin’s Vogt says solar has the potential to either strengthen or diminish the relationship co-ops have with their memberships. It’s up to the co-op leadership to “find some middle ground and win that consumer and keep those kilowatt-hour sales within cooperative family.
“Solar has to be an opportunity,” Vogt adds. “If we don’t look at it and make it an opportunity, it’s going to turn into a threat. But one thing is for sure: It’s not going to go away.”