Steps to success for utilities moving into community solar projects
U.S. electric utility companies plan new or additional renewable energy investments, particularly in solar, thanks to the enacted Tax Cuts and Jobs Act of 2017, which retained renewable energy development incentives, according to industry analysts.
“NextEra Energy Inc., Duke Energy Corp., and Dominion Energy Inc.’s utilities are among a number of companies in the sector contemplating significant solar investments in the near-term. Other companies, including Xcel Energy Inc. and Alliant Energy Corp., are undertaking large wind projects in the near-term, but are considering ramping up solar investments in the coming years,” according to the March 28 S&P Global Market Intelligence report summary, “With eye toward growth, utilities plot ambitious solar CapEx in coming years.”
The reason U.S. electric utilities and their competitive energy divisions “are moving ahead with certainty on planned solar investments,” according to the S&P Global summary, is to take advantage now of the federal solar investment tax credit (ITC) before it permanently decreases to 10 percent after 2021 for commercial and utility solar properties.
In fact, companies are sprinting to qualify for the 30 percent ITC for projects under construction by December 2019, according to analysts in the S&P Global summary, adding that capital expenditures (CapEx) for planned renewables are expected to increase to roughly $10.7 billion that year, while the CapEx is forecast at approximately $9.7 billion in 2018.
“Many utilities have not provided detailed CapEx plans past 2020, but considering our observations of recent years, utility investments in renewable energy, including solar, could continue to rise in the coming years against a backdrop of supportive state and regulatory policy as well as ongoing improvements in solar panel technology and efficiency,” according to the S&P Global report summary.
For instance, while the main objective of Alliant Energy’s renewable energy expansion plans is largely aimed at adding wind assets, the company’s Wisconsin Power and Light and Interstate Power and Light are slated to add 3.5 MW of solar to the utilities’ respective combined-cycle Riverside and Marshalltown power plants, according to the report.
“The solar projects are expected to support the retirement of older coal-fired generating units, while increasing customer access to solar energy,” the analysts write. “Upon completion of 1,200 MW of wind energy projects by 2020, Alliant plans to pivot its focus to the addition of utility-scale solar projects. The company forecasts that approximately 30 percent of its capacity will be from renewable energy by 2024.”
Utility strategy
One of the existing solar options for utilities includes investments in community solar projects — sometimes known as a shared renewable energy plant or a solar garden. These are a single solar power plant producing electricity that gets shared among multiple customers who receive credits on their utility bills for their portion of the power produced, according to the Solar Energy Industries Association (SEIA).
Among the many shared renewable energy models is the utility-sponsored model in which utilities provide customers with the option to purchase renewable energy from a shared facility at a fixed rate (which might be a bit higher than the current retail rate) for a set term (usually a number of years, say 10 or 20 years) that’s designed to provide protection and stability against rising rates for grid electricity, SEIA says.
Brian Newton, city administrator and general utility manager for the City of Fremont, Neb., convinced local officials and residents with tweaks to the utility-sponsored model that the adoption of renewable energy was a smart choice for their rural town, which is located about 35 miles northwest of Omaha, population roughly 27,000.
Newton, who joined the Fremont utility in 2015, said the company had been in the electric coop business for 30 years and had no renewables.
“I immediately started talking about diversifying our portfolio, but I didn’t get a great warm and fuzzy feeling,” Newton said during an April 5 webinar sponsored and hosted by the Smart Electric Power Alliance (SEPA). He and other presenters provided tips for how utility companies might overcome challenges associated with establishing community solar programs.
With 12,000 accounts, the city-owned utility needed to come into a new century, Newton said. Luckily, after seeking and being awarded a federal grant to fund research, data confirmed that residents also were hip to renewable energy.
Hence, the Fremont Community Solar Farm was born. With the help and guidance of SEPA and the National Renewable Energy Laboratory (NREL), Newton said the original plan was to develop a 500-kilowatt (kW) system. But the idea quickly expanded to building a 1 megawatt (MW) capacity farm when Fremonters lined up in droves to register for the solar program. Even that wasn’t big enough, however, and the plan got expanded again to 1.55 MW on just over 12.5 acres, Newton said.
One of the biggest selling points for residents, he said — in addition to the environmental benefits of solar — was the fact that Fremont “came up with a very simple agreement; it’s two pages” on how residents could buy solar power.
The Fremont Community Solar Farm has two options for customers: 1.) A customer may buy one or more 315-watt individual solar panels, which cover up to 80 percent of a customer’s total residential consumption and pay a 3-cents-per-kW hour (kWh) maintenance fee for 20 years. Each customer owns the panel; the city handles maintenance and operation. Each panel costs $180 and customers receive the 30 percent ITC. 2.) A customer may purchase only the power generated by buying a block of output. A block is 150 kWh and cost 6 cents per kWh, a fixed rate for 20 years.
“The city learned that it was cheaper to buy and own our project and sell panels,” Newton said. “But we didn’t want to abandon the solar share aspect either, so we offered the option to buy energy blocks at a slight premium over current rates.”
To prevent customers from becoming power generators, he said share purchases are limited at 80 percent for residential customers and at 50 percent for commercial customers.
When the program sold out in five weeks, “we had such a demand that we went to the supplier and had to order more panels. Then we sold out those in two more weeks,” Newton said.
Phase 2 is now in development and there’s a waiting list already with more than 100 names on it, he added.
Newton also went above and beyond his city duties in advocating for the community solar program in Fremont by personally taking ownership of the project. In addition to holding more than a couple dozen public meetings about the solar farm, Newton said, “We had a home show with a couple meetings and I had a weekly radio show to talk about it. It really paid off to talk about it.”
