Community Renewables Projects (Text Version)
Cheryl: Hello, everyone, and good afternoon, and good morning to those of you on the West Coast. Welcome to today's webinar presented by the Department of Energy's Technical Assistance program. My name is Cheryl Jenkins, I'm with the Vermont Energy Investment Corporation, and I'll be joined later by Jason Coughlin with the National Renewable Energy Lab. And our subject today is Community Renewables Projects, and we welcome you to this presentation.
Here's an outline of what we're going to be covering today. I'm going to present a quick overview of the DOE's Technical Assistance Project and the assistance that it can provide to you. We want to talk about the context for community renewables projects, particularly as a means to provide some solutions to the challenges that individuals have in developing renewables projects. Jason is going to be discussing some resources for community solar projects and also for community group buy projects. We also want to provide you with some resources that will give you information on permitting, and interconnection guidelines, and provide an opportunity at the end of the presentation for some question and answers. We will be keeping everyone on mute until that point. So please type in your questions on the side and we'll address them when we get to the end of the presentation.
I do want to mention right now that the full presentation itself will be available on the DOE Solutions Center when we're finished, and the presentation is being recorded and a full transcript of the presentation will also be available at that time.
So by now I think most of you are probably pretty familiar with the Technical Assistance Program. This is a program of the Department of Energy specifically designed to support Energy Efficiency and Conservation Block Grant Program grantees, and the State Energy Programs, through providing assistance for you to implement successful projects.
And this webinar is one of a series that has been happening throughout the past few months of presentations on topics we think that you might find useful. Webinars are available in archive, as I mentioned this one will be, on the DOE Solution Center. You'll also find links there to the Technical Assistance Program blog where you can type in questions for experts and read some of the new things they have posted.
There are a number of other resources there. Best practices guidebooks, white papers, RSP library links and other such resources for your help. There is also available to you direct technical assistance where you can request something specific that you need to help implement your program or your grant. And the program also facilitates peer exchange through calls and regional meetings so that you are learning from the experience of others.
The kinds of resources we provide run the gamut from very technical things about equipment and its installation, program design and policy assistance, financing assistance, performance contracting. And we're particularly interested in helping you develop local capacity so that these programs can go forward and be sustainable for you.
Again, my name is Cheryl Jenkins, I'm with the Vermont Energy Investment Corporation. We are the lead of a team of regional experts in energy efficiency and renewable energy policy, program design, and program implementation. We are referred to as Team 4, one of the teams through the Technical Assistance Program. And I am a project manager with VEIC and have been doing energy efficiency and renewable energy program work for a number of years across the country.
As I mentioned, I'm going to be joined in a moment by Jason Coughlin who is going to talk about some of our resources. Jason is with the National Renewable Energy Lab, one of the four national labs who make up what we refer to as Team 5, who can provide of course not only the kind of assistance indicated here, policy and program design as well, and project assistance, but has a wealth of expertise in the specifics of the technologies and their technical components.
We're very excited to have Jason with us today. He is the NREL's project manager for the Solar America Cities project, and one of the co-authors of the very newly released Community Solar Guidebook that he'll be talking to us about a little bit later.
So launching into our content today. We're all aware that there's been a real increase over the last few years in interest from residential customers, from businesses, in investing in renewables projects as a way to provide assistance in greenhouse gas reduction and more and more people are seeing it as a benefit for a financial return.
We're also seeing communities wanting to provide support for renewable energy projects as a broader means of their approach to energy efficiency and conservation strategies for the communities. But there are some real challenges, particularly as individuals go forward and want to invest in renewable energy projects. The most obvious are the site-specific limitations that we have with a lot of the building stock. There certainly are shading and structural concerns for solar projects, both PV and solar hot water. A recent NREL study found that only about 25 percent of residences really have rooftops that are conducive to effective PV systems, and as many as 75 percent of the sort of industrial big box type buildings have enough structural support to support a PV system. So there can be a real limitation on the building stock itself for certain of these technologies. Limited space on a property can confine the use of pole mounted PV or wind turbines.
There's also often a poor perception of renewable system aesthetics. This is very obvious when we're talking about small wind systems that can certainly be true in some residential neighborhoods for things like solar PV.
There's often a real problem of split incentives if you're a renter, either a commercial lease or a person in a multi-family dwelling, and a condo owner, you may not have the control over the property enough to make an investment in renewables.
There are some additional challenges that are driven by the markets. These technologies almost all have high up-front costs, thee can be very high transaction costs to investing in renewables. The time and effort it takes to identify an appropriate contractor, identify the financial support available, find out what the paperwork is, can really drive a lot of people away.
There can be a general lack of just information of the benefits of renewable systems and how different technologies stack up next to each other.
A lot of commercial and institutional customers have very explicit and constraining requirements for investment that often don't really recognize the benefit to either investments that have really a long-term payoff, or that have payoff in some non-financial terms, such as greenhouse gas reduction.
There's a limitation on financing options in the market at the moment and some parts of the country have very limited installer markets. It's hard to find a contractor who will return your call, so that can be a real challenge.
And some communities also have permitting issues. There are not full-fledged effective permitting requirements in place that help renewable siting, or particularly group net metering and other kinds of permitting opportunities that can help with community type projects.
So given all of those barriers we're seeing more and more communities turn to group projects of various sorts as a way to overcome some of these limitations at the individual project scale. And what we really wanted to do today was really talk about some strategies and actions and give you some resources that can help provide a framework for conservation planning at the community level.
For renewables projects in particular, Jason is going to talk about a couple of different approaches and give a number of case studies of some effective new things that are being undertaken across the country. I want to mention that most of the examples that he's going to be talking about today are solar and particular PV examples, those happen to be the technologies with which we've made the most progress in really tying down some very effective ways of doing community projects. But I think many of the underlying concepts, and even some of the specifics in these guidelines could be readily applicable to other technologies as well.
So I'm going to turn over this presentation to Jason, and let him talk to you about resources for community solar projects. I think you should be able now to handle the slides, Jason.
Jason: Perfect. Thank you, Cheryl, and thank you for all those that have dialed in today. Again, I'm Jason Coughlin, I'm with the National Renewable Energy Lab. And just real quick for folks who aren't familiar with the lab, we are one of the national laboratories under the U.S. Department of Energy and we're located in Golden, Colorado. As relates to solar, we've been doing solar for nearly 40 years, so it's really one of the areas that we excel in. And I'm fortunate to be involved in the Department of Energy's Solar America Cities program, which you'll see if you go to the websites that I've identified later on in this presentation has been renamed Solar America Communities. And what I get to do is basically learn from 25 major metropolitan areas across the country and then relay on in venues such as this webinar a lot of the exciting things that they are doing as relates to implementing solar programs and solar projects.
So today basically what I'll do is use this access to these solar leaders at the Solar America Cities and share with you some of the things that they're doing. Under what I call Community Solar Projects, you can see there on slide 12, when we say "community projects," I break it down into two buckets. We've got Community Solar, which we're going to define today as one system, one large PV system with many participants. And this community solar structure could have a number of different ownership models behind it, as well as a number of metering and net metering options.
And then the second community project, if you will, is what we're seeing develop quite rapidly, this concept of community purchase programs, for many PV systems with many participants. And so simply it's this concept of a "group buy" where a neighborhood will bandy together and make a group purchase of individually installed rooftop solar installations and pick up some economies to scale in doing so.
What I'm going to talk about, the webinar is timely because we just released our Guide to Community Solar, which I give the link to later on in this presentation. So that's a resource guide that walks you through different project structures and sponsorship models for community solar, case studies and the like, and I'll reference that guide in the next few minutes here. But rest assured that everything I talk about you'll be able to find in greater detail on the Community Solar Guide. And then in January we'll have available a Guide to Community Purchases, a community purchase program, and similarly for the slides that I have on this topic, I draw from what is now a draft version of that guide. So you'll have two good resources in the next couple of months at your disposal to dig deeper into these topics.
So if we start off with community solar, again this concept of one system, many participants. Why are we seeing a lot of activity in this space? If you see in this slide here where I say there are a lot of folks that are interested in purchasing a solar system, or going solar, if you will, but for a number of reasons are unable to install PV on their rooftop. And then I have a laundry list here of some of these reasons.
First and foremost, they're renters. For example, we work with the city of Seattle under the Solar America Cities program, and I believe more than 50 percent of the folks in the city proper are renters. Renters obviously are unable to pursue and purchase individual rooftop solar systems. So some of these folks may be interested in a community solar program.
There's folks who own their own condos, but again, somewhat a similar situation as renters.
As the picture illustrates there from Sacramento, they might have a great tree canopy, but obviously that negates some of their solar resources and so they're not good candidates for a rooftop PV system.
I mention the roof does not have the proper orientation. By that I mean kind of a good south-facing exposure to maximize the solar production.
They may not be allowed to. There are certain HOA restrictions, Homeowners Association restrictions that may disallow solar systems and satellite dishes and the like, or make you put them on the back of the property which may not be the proper orientation for solar.
There are some folks that can't simply afford the entire cost of a single family rooftop PV system.
And then there are some folks that maybe want to "dip their toe" into the solar world. Maybe they can afford a solar system but they want to start small, if you will, and maybe participating in a community solar program is the first step to eventually owning their own rooftop solar installation.
Some of the examples, and again, you'll see these in great detail in the Guide to Community Solar. As I mention here, to date, most of the community solar projects that we see in the country have been sponsored by municipal utilities. And basically a utility owned by a local government has a lot more flexibility to try out new structures and maybe respond to their customers' needs maybe more quickly than an investor-owned utility. Ideally we hope to see investor-owned utilities pursuing community solar in the future, but for now most of our examples are municipal utility projects.
And really quickly as I walk down this list of some of these examples. SMUD stands for the Sacramento Municipal Utility District. They've got a real popular and well-known community solar program called SolarShares. It's roughly a 1 to 1.2 megawatt system which has been financed with a third party power purchase agreement, and then customers of the utility can subscribe to shares in the solar array. The program is sold out. I believe there are 700 participants in this project, and there's a waiting list for the next phase. And I understand that SMUD contemplates additional phases of its solar shares program.
Ellensburg, Washington is a much smaller system. I think they're up to about 80 kilowatts now with plans to go even larger, up to I think 165 kilowatts. This system in Ellensburg is often thought of as the first community solar system in the country, and so it's been a nice one to follow as they've raised additional funding and expanded the project over time.
Ashland, Oregon is roughly 63 kilowatts. What's unique about this project is that they financed the second phase with clean renewable energy bonds.
St. George, Utah has 100 kilowatts of installed PV with a second 100 kilowatt array going into play. What's interesting about Utah is that they have a state income tax credit for solar and with some adjustments to that legislation you can apply the state income tax credit to your participation in a community solar program.
And then finally, we're working closely with Seattle City Light under the Solar America Cities program. They're going to launch a community solar program sometime next year, and so stay tuned for additional information on that project as it develops.
One of the things I am seeing, which is exciting, is the emergence of what I'll call private community solar projects, or privately owned and developed projects. And two of them I want to point out, one the Clean Energy Collective here in Colorado. First round is a 78 kilowatt system not too far from where I sit here in Golden, Colorado. And then University Park, Maryland has a smaller system, a 22 kilowatt system.
But the idea behind these is you actually have investors that create the project, develop the project. In the case of the Clean Energy Collective, they then eventually bring in participants that are in the same utility district as the project and in a sense sell off shares in the system. And then you have University Park which hosts the PV system on a local church and there is a power purchase agreement between this investor group, if you will, and the church.
So again, in the Community Guide you'll find a lot more information about all of these projects.
On the next couple of slides I provide you with a couple of pictures, if I can get the slide to advance. There is the 1 megawatt PV system in Sacramento. Again, this comes from the guide. And on the next page you have a picture of the 78 kilowatt system here in Colorado developed by the Clean Energy Collective.
As I mentioned, we've recently finished this Guide to Community Solar, and at the bottom there you can see where you can find the guide. If you go to that website and go to the resource section and just search for Community Solar it will pop up as the first item. We posted it there last week. And as you can see, it was a collaborative effort with a lot of great partners, and so we really relied on Northwest Seed in Bonneville, and IREC and its partners at Keys and Fox, and the law firm of Stoel Rives as well, to really try to get into different project structures.
The tax and legal implications of different project structures - I think folks may assume that certain tax credits are available for community solar projects, and we're trying to get out ahead of what we see as kind of an emerging phenomenon of community solar so that folks don't get into any issues as relates to tax issues, legal issues, securities issues etc. There are a number of case studies, worksheets, and then finally IREC's Model Community Energy Rules. So please check that out. Eventually it will also be on the NREL website and the Department of Energy website, but for now you can find it as this link on the slide that I show on page 17.
So now let's switch gears a bit and let's talk about this group buy concept for renewables in general, but in my case, for solar projects. And if you think about why folks may trend towards the group buy, we see three primary reasons.
One, even though costs are coming down on individual rooftop PV installations, they're still expensive. As I note here a 3 kilowatt system can still cost you $15-20,000 if not more depending on where you are before incentives and tax credits. So it's still a significant purchase on the part of the homeowner.
Number two, the complexity of a solar purchase. And I have in parentheses there, actual or perceived. Maybe it's not as daunting as some see it as, but that doesn't really matter. If it's a perceived complexity it's still a barrier to a solar installation. And by that I mean trying to understand your technology options and trying to figure out does your house have the right orientation, will the roof support a PV system, how do I find an installer, how do I know I'm getting a fair deal etc.
And finally there's a long sales cycle between someone who first gets interested in going solar, if you will, and when they actually make the purchase. We've seen some references to it's a two year sales cycle from the time someone begins to research solar until they actually commit and do the installation.
So through group buy programs, our goal is to address these three barriers. And what we've seen so far is that it has been very successful. And I'm going to talk a bit about Portland as well as San Jose, and again, two of our Solar America Cities partners that are really leading the charge in partnership with local community organizations with this group buy concept.
So on slide 20, how do group programs help to overcome the three barriers I mentioned in slide 19? Well, first of all, you can run a competitive contractor solicitation process, where actually you put together an RFP as a neighborhood association or a credit union, and then you bid out the project, and in doing so, you can drive down the cost of the installation. And you can also express your preferences, if you will, because maybe the low-cost bidder is not always the contractor that the community group is going to select. They may select somebody who may have a bit higher price but is using more local labor, if you will. But anyway, you run a competitive contractor selection process to lower cost, and also, again, express some other things that you might want to play out in the process of this group buy.
I have here community led outreach and organization. What we've seen is that really the successful programs are built off of existing, either strong neighborhood associations in the case of Portland, or the San Jose Employees Credit Union in the case of San Jose. These folks lead the effort and then local governments look for ways to support them. And that's the next box there.
Support from local government can increase confidence and rates of participation. The caveat is that you don't necessarily want to get in between a private transaction between a contractor and a homeowner, but there are ways that local government can support these group buy programs by assisting with the development of the RFP, providing some basic education and outreach as far as what is solar and solar resources in a given community. But there's certainly a role for a local government to make these programs a success.
And then finally this concept of a limited time only offer. As I mentioned on the prior slide, there's this two-year sales cycle, and what we've seen is that these community group buys tend to have let's say a three-month window and you've got to sign up to get the discounted bulk purchase price. So what we hope to see is that we can convert some, maybe call them fence-sitters or folks that may eventually have purchased solar, but we get them to do that in the first three months rather than wait the entire two-year sales cycle.
So now let's talk about Portland, Oregon, and you'll see the word Solarize there in the graph. That's the brand name, if you will, for this neighborhood group buy purchase. We're all really learning from and benefiting from the City of Portland and their neighborhood associations and the Energy Trust of Oregon, because they've really gotten out ahead of everybody on this group buy purchase model.
And as you can see from the graph there, a pretty low level and somewhat constant number of installations from 2003 to 2008. But then in the latter half of 2009, you see the emergence of the first group buy program, and then in 2010 you can really see the Portland solar market, one, exploding in terms of the number of installations, but also with the group buy program representing roughly two-thirds to 75 percent of all installations in the community. So that's a nice graph, if you will, to show how you can really energize a solar marketplace by this group buy structure.
And some results that I've gotten recently from colleagues in the city of Portland for two of the neighborhoods, Solarize Northeast and Solarize Southwest. As you can see, in Solarize Northeast they had a thousand people sign up and a 180 of those were converted into installations. In Solarize Southwest you actually had a better conversion rate with 700 registrants and 168 I guess you would call it conversions to installation, and you'll see the new jobs created as a result of these new installations.
Again, the key takeaways we see from the Solarize Portland model is it's really a ground-up, community-led program with support from both the City of Portland and the Energy Trust of Oregon. But it didn't start at those two organizations, it was a groundswell, if you will, and the city and the Energy Trust of Oregon tactically supported these programs, and we've seen it being replicated across the State of Oregon and now across the country, and I'll share with you some of those examples as well.
Building off of Portland, the City of San Jose created a group buy program and then they added a financing element through the San Jose Employees Credit Union. And so again some similar characteristics to the Portland model with a competitive RFP process. This included both solar PV and solar hot water, so again building off of Portland and adding a few additional items to it. 130 participants in the first round going forward with solar PV and solar hot water installations.
And what's interesting about this program is in that retirees of the city of San Jose live across the state. Folks throughout California can participate in this group buy program. You can see it's a home equity based financing model with some competitive interest rates and some competitive terms. So here we're combining the discounts associated with a group purchase program with some financing for folks that want to take advantage of the financing elements.
Lastly I want to touch on a few other group buy programs. And what I've talked about on this slide, or really what's different or some tweaks to the model from the first two that we talked about. And again in the Solarize Handbook that will be coming out in January there will be details on all of these projects.
Solarize Salem is actually non-profit led. What they've done is they've actually incorporated a small per watt fee into the discounted purchase price of the solar installations to help pay for administrative costs.
You can see Solarize Pendleton is offering city-sponsored zero interest loans and they have actually used an AmeriCorps volunteer as the project manager, which is a pretty creative way to manage the project.
Moving over to Minnesota, they've actually got a solar hot water group buy plan in process, hoping to do 1,000 installations by 2012.
And then finally there's a for-profit model. One Block Off the Grid is a company out of San Francisco that basically goes to different communities across the country and creates group buy transactions and it negotiates with the selected installer for a bulk purchase discount.
So with that, let me wrap up my piece of the presentation with this Solarize Handbook. As you can see, it's in draft form now, it will be coming out in January 2011. It will be available on the same Solar America Community website where you can find the Community Solar Guide. And again, what we plan to share with you all in this handbook is the background on the group buy concepts, all of these case studies, lessons learned and considerations, additional resources, and a step by step "how to" guidelines if you will.
So really the Northwest Seed is leading the charge on behalf of the City of Portland, and so I've given you their websites as well, a lot of great stuff going on at both of those organizations as it relates to solar and renewable energy. So also check those sites out as well.
And with that I will turn it back over to you, Cheryl, until we take questions.
Cheryl: Thanks, Jason. I wanted to mention that particularly this group buy concept is really popping up everywhere. It's a great idea of an opportunity for some single focus to help out people who really ant to get into this market and are being a little hesitant.
Here in Vermont about six weeks ago one of our local non-profit environmental advocacy groups, the Vermont Public Interest Research Group, set up a group buy project. They essentially have negotiated discounts with experienced contractors in three different communities here in Vermont to start with. They've bundled the state incentives that are available and have arranged some attractive private financing, and are doing a lot of education and outreach to people to help them understand the benefits, and even doing things like arranging the site visits for the contractors to come and talk with people. So it's an opportunity for them to really forward their mission and to provide a real benefit to customers that are interested in this kind of thing.
So there's a lot of very creative ways that people are sort of taking this model and going forward with it, which is very exciting. It may end up being the next step as budget-constrained states and other entities find that it's harder and harder to fund things like rebate programs and incentive programs. These extra steps that overcome some of the upfront cost and financing barriers and just pure transaction costs and education barriers, may take the place of those kinds of actual incentive programs in the future. So it's an exciting way to think about going forward with these technologies.
As I mentioned earlier, I also wanted to provide you all with just some links to some resources for thinking about putting permitting in place that really encourages and makes renewable installations a little easier. The net metering is of course one of the most important things for electric renewable production equipment. The Interstate Renewable Energy Council, IREC, has been involved in a lot, as Jason mentioned, the model community project rules are part of the Community Solar Guidebook. They've also put together some net metering model rules that are available at this particular website that can be helpful if you're a jurisdiction looking for some help along those lines.
And while at this point there are net metering regulations in place in most of the states in the country, some of them just under utilities, but a lot of them led statewide. There are a few states that are doing a step beyond which are coming up with some sort of group net metering rules that make it easier for some of these collective projects to go forward. In particular in Vermont we actually have under statute a group net metering regulation that sets up for customers within the service territory of an electric utility, sets up an actual joint billing and a direct connection.
California and Maine and Massachusetts have set up something called Virt that's sort of like virtual net metering where the utility itself applies the credits to designated accounts with their utility territory, essentially really a billing proposal.
And also in Maine and in Washington state there are some community ownership type regulations where investors administer the payments and the incentives.
So one of the best ways to provide you with any information about what's going on in these places is to direct you to the DSIRE website, that's the Database for State Incentives and Renewables and Efficiency. It's a great, complete, and very well-maintained website for links to resources throughout the country on permitting and incentive structures and all sorts of really great information having to do with renewables and energy efficiency.
There's also a set of model interconnection procedures out there. Again, a really great resource developed by IREC for interconnection procedures, and EPA also has some good resources there if you're still working to refine interconnection procedures within your jurisdiction to benefit renewables.
And while model ordinances may not necessarily relate to community projects, they can really be something you might want to look at to put in place to help renewables going forward. Most of the model ordinances that have been established so far are siting ordinances for wind systems, which I think are a problem in many places. I listed this particular link in Oregon because it's a more general siting ordinance for all sorts of renewable technologies.
The Pace Law Library has a good page of links to resources, and again I direct you to the DSIRE site to see where you can search on other kinds of model ordinances and permitting resources.
So that ends the formal content that we wanted to give you this afternoon. Again I want to remind you that this webinar will be posted on the DOE Solution Center along with a lot of other resources, and you'll find help there, we hope. Should you have any specific questions that relate to your own projects, you're welcome to submit technical assistance requests through the DOE Technical Assistance Center and can certainly call the call center and ask for help there. But should you have any specific questions - oops, it didn't get to us yet.
I do want to post what the upcoming webinars through the Solutions Center are for the month of December so that you're aware of the things that we'll be presenting then. Sort of related we do have a Webinar coming up on Overcoming Barriers to Solar PV and Hot Water Heating Implementations the 8th of December. But here are contact information for myself and for Jason should you have any questions that we don't get to this afternoon or want some further resources on this particular topic.
So I see that we do have some questions. Again, I invite you to type in questions on the side there if you like, and I am now opening up the text boxes and see if we can give you any responses to the questions you've typed in.
How do we get a copy of the presentation slides?
As I mentioned, they will be up on the Solutions Center. Generally the presentation itself is posted within a few days and the transcript of the spoken presentation is within a week or so.
Is the PowerPoint also available for download?
We generally post both a PDF version and a PowerPoint if possible of the presentation. So check, if it's not, and you want the PowerPoint specifically, you're more than welcome to contact me and I'll be happy to send it to you
The link for the Community Solar Guide is included in the presentation. Go to the Solar America Communities website and click on the resources tab and it will direct you straight to the new solar guide.
What kind of payback time is associated with homeowner investment in a community solar system in general?
Is that something that you might have some sense of, Jason?
Jason: So the question is, the payback of participating in a community solar project, the one system, many participants?
Cheryl: That's the question, uh-uh.
Jason: Well, it really varies. So if you look at the Sacramento project, folks sign up for a monthly - so there's a fee associated with it and then in return you get the kilowatt hour production from your "share" of the system. As that stands now, as I understand it, over the course of the year you will have a net kind of cash outflow so it will cost you money, even though in the summer months you will likely see a net credit on your bill as a result of the production exceeding the monthly charge. Obviously over time, since those prices are locked in and as utility rates go higher, the expectation is that you'll see a positive cash flow result from your participation at that community solar project.
So from a payback perspective for the programs that are set up on a month by month basis, which many of them are, it's really on a monthly basis are you cash flow positive or cash flow neutral. Some of the programs that are set up with an upfront payment, if I try to refresh myself from some of the examples in the guide, I think we see some paybacks from high single digits maybe eight years up until - I mean some projects maybe in excess of 25 years. Some are structured in such a way that you may not see a payback of your initial investment for quite some time. So it's really all over the board.
One of the things that we've seen is that solar tax incentives tend to be for individually owned systems, and only now are we beginning to see things change to incorporate community solar into the tax code, if you will. And some of examples of that, I mentioned the state income tax credit for the State of Utah being applied to Community solar programs. The State of Washington has a production incentive which is now allowable for community solar projects, so that'll actually provide a nice additional return to a community solar project in the State of Washington. And here in Colorado we've got a relatively new solar gardens law where community solar projects can get access to the utility rebates for solar.
So I think what we're seeing is as community solar takes off, we're going to see kind of the tax and incentive structures catch up with it as well. The big one folks talk about is the ability to take the federal investment tax credit for a community solar project, and as of now you can't take the personal investment tax credit for your participation in community solar program, although there is some legislation, Udall Sun Act, for example, to allow that. But for now you're in a sense foregoing some of the investment tax credit benefits, which then negatively impacts your payback period.
So I would say some paybacks will be within ten years, some will be greater than that, and some may not pay back unless we factor in increasing utility prices. We've got some actual payback periods of projects in the Solar Guide that you can consult as well.
Cheryl: Thank you, Jason. There were a couple of other questions along those lines, and particularly people are interested in knowing whether or not the community projects that you showcased were benefiting from REC sales, and whether or not those RECs were actually important in the financial wellbeing of these particular projects.
Jason: Good question, and again going back to the guide, we call out how the RECs were utilized in each of the case studies. In some cases they're retired on behalf of the participants in a community solar project. In other cases they're retained by the utility. And then if I think about the University Park project in Maryland where the owners have a PPA with a church who's hosting the system, they're selling their solar RECs into the Maryland solar REC market.
So in certain markets, certainly New Jersey and Massachusetts and Maryland and Colorado where RECs have a pretty important dollar value to them, you'll certainly want to structure the transaction to benefit from RECs. In other places where they're less valuable, maybe they're less of an element to a project. But we've seen it all three ways - retained by the utility, retired by the utility on behalf of the community solar participants, and then sold into the SREC stock market, if you will, as is the case of University Park.
Cheryl: I did have a question with respect to group buy. How have the communities implemented any quality assurance processes into their programs?
Jason: Good question. I know in the case of the Portland project there's been a series of I guess going back and surveying the homeowners, making sure systems are functioning as advertised, if folks are happy with the installation process. So the results that I've seen from this after the fact survey, if you will, shows that overwhelmingly folks were satisfied with the process, satisfied with their installers, and satisfied that their solar systems are producing if not more than what they expected, at least what they were expected. So that hasn't seemed to be an issue yet.
Of course, from a technical perspective, all this stuff will carry warranties and workmanship guarantees and thinks of the like. So you've got kind of the qualitative after the fact surveys that have been done showing that most folks are very satisfied with the outcome. Plus you've got some of the other protections, if you will, in terms of production warranties as relates to your panels and your inverters and workmanship issues.
Cheryl: Which seems like that makes a lot of sense to build into the program.
Cheryl: One of the questions asked whether or not there are materials available, or perhaps available in your guide, that actually gives a sample business plan for a community solar project.
Jason: Actually we do have in the guide, probably not a sample business plan, we do have a sample budget, if you will, more to make sure folks are taking into account all the different potential expenses and potential revenues associated with a community solar project. And then we also have a, I call it a step by step from site selection to installation sort of list of bullets. So not a full-blown business plan per se, but some worksheets, if you will, to help you create a business plan.
And then we talk about one of the exciting things about having the participation of both Keys and Fox and Stole Rives, law firms that are very deep in the solar space, is they work with us in this guide and you'll see in one of the annexes on different business structures you can create to establish a community solar program, pros and cons, and things of that nature. So in summary there's probably not a business plan in there as folks might wish, but there's elements in the guide that allow you to create one.
Cheryl: That sounds helpful. There's a couple of kind of technical questions here, so I'll throw them at you and see if you can answer them. One of them is:
How large a PV system could be built before a FERC review is triggered?
And one of them wants to ask about the transmission fees that are charged in order to gain access to the grid for this kind of locally generated power.
Jason: So from the size perspective, so far what we've seen is what governs the size of these systems would be the net metering rules in a given state. And so with the exception of Sacramento which is 1 megawatt, or a little bit greater than a 1 megawatt system, all the other ones are less than a 100 kilowatts, and so all within the net metering limits in those given utility districts. So it doesn't seem to be an issue there.
As far as transmission goes, again, most of these are set up as behind a meter, and so we don't necessarily see any transmission costs passed along to the participants in the projects. Again, what we see is your net metering legislation will in a sense dictate how you get compensated for some of that excess power at a retail rate or some sort of retail rate minus some sort of distribution charge or transmission charge.
Once you're in the Community Solar Guide, if you look at the IREC model rules for community solar, they do a good job of talking about compensating the utilities for certain expenses and what might be a way to handle that.
One of the things we have found with the guide is that the guide is out there while most of the projects are still on the drawing board. So we look forward to version 2.0 next year when we can have more projects in the ground that we can report on. But so far we haven't seen FERC or the transmission issue be an issue for these projects that we highlight.
Cheryl: Which is really one of the advantages of net metering and why it's such a real positive for the whole industry to have good net metering rules in almost all the states now. So that's a great thing.
I did have one question from someone who says:
"I'm trying to really think about starting such a community purchase group, and is this a role only for already established community groups?"
Jason: No, again our sample size is relatively small and highlighted by the strong neighborhood associations in Portland, but I think you could certainly create an organization or some sort of structure to then organize a group buy. I know that there are some group buys that are done by employers. I think REI might have, Columbia Sportswear up in the Northwest has done a group buy. There may be other ways to think about what the proper organizational structure to launch a group buy. There are certainly benefits to building off an existing organization where there's knowledge and trust amongst the members of a given group. But I certainly think you could create one from scratch, it just might take longer to launch since you don't have that existing organization to leverage.
Cheryl: Thanks. I think this is just looking for a little clarification:
In a group buy, does the utility company do a power buy back from the solar community?
Jason: No, so in the group buys that we're highlighting here, all of these will be, assuming that these systems are behind the meter if you will, there will be net metering in place, so you'll get net metering credits if your system generates more power than you're using at any given time. In those areas where you have say production incentives or feed in tariffs, you would still get those.
So from a group buy perspective it's not any different than just someone putting solar on their roof. It's just a more efficient and cheaper way to do it. So all the net metering and production incentives and payment opportunities that are available in your local utility district will still be there for group buy. Once the systems are bought and installed everybody's kind of got their own systems and in a sense they default to what the kind of net metering policies are for that given area.
Cheryl: Thanks. Someone asks:
Are there any installed models, community solar models in the southwest, and if not, what do you think is the reason?
Jason: Depending on the definition of Southwest, we have the Utah project in St. George, Utah, which is kind of a partnership between an electric co-op and a municipal utility. As far as projects in Arizona and New Mexico, I'm not aware of any, but I wouldn't be surprised if there aren't some being developed and it's more a question of when rather than if, in my opinion. Certainly a lot of great stuff is going on in Arizona as relates to solar so I wouldn't be surprised to see some community solar programs getting put in place there.
What might be an issue is what structures are allowable. You know, if you're not allowed to do a third party PPA in certain states, then you have to look at some other ownership model, or hosting the system model, and things of that nature. I think it's a new concept across the board, and as I mentioned, both net metering legislation and incentive and tax credit policies are slowly coming around to include community solar. So I think we'll start to see community solar proliferate across the country, hopefully.
Cheryl: Quick question here that you may know the answer to:
What are the average project cost reductions that you've seen using these group buy models?
Jason: Well, I know that in San Jose the credit union got sub $5.00 pricing for the PV component, it was PV and solar hot water which was a discount to the greater than $5.00 pricing that you would get on your own. I think the Minnesota project talks about a 20 percent discount for the solar hot water group buy. I know Portland got sub $6.00 pricing for its Solarize programs which was below market.
An interesting thing that happened in Portland, and probably happens across the board, is with the competitive contractor selection process, in a sense you can help set a market price. If you will, there's a Solarize price in Portland, so even if you're not in a group buy, you may get that group buy price, because in a sense it's kind of set the market price at a lower level because folks know what their neighbors in the group buy are getting, so they can use that as a data point to try to negotiate a more competitive price.
So I don't have a lot of statistics on savings, but again, Minnesota says 20 percent. It looks like they're getting maybe a buck a watt discount in some of these other examples.
Cheryl: That's my understanding as well for the project here in Vermont, the new project, it's looking like people are being able to participate at something like about $5.00 a watt instead of the $6.00 or $6.50 a watt that we were seeing otherwise. And this one also being a non-profit I think they're taking a small fee to help them with administering the program. But that more than makes up for it in the difference in the group buy.
I want to respond to several of you that have specifically sent in questions and said can you have one-on-one conversations about these kinds of projects with you, or speak to us directly. Absolutely, please do contact us through the contact information on this slide. Or if you're looking for help with projects through the EECBG or SEP grant funds, either talk to us first or put in a request through the tax system, we'll be happy to respond to you.
And I wanted to thank all of you for participating today. We enjoyed putting together the presentation and hope that we see a year from now when we might do this one again, a whole lot more out there that we can talk about. So thank you and have a good afternoon.