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Community Solar Lessons Learned in Vermont – Jeff Forward @ Renewable Energy Vermont 2012

At the beginning of October, Renewable Energy Vermont held their annual conference. There were a number of amazing presentations and some struck me more then others. For the ones I really enjoyed, I decided to follow up with the presenters to get more color on the topics they presented about. I learned a lot at the conference and there was a lot of activity around what needed to be done to push the industry to the next level. If you’re working in the renewable energy industry in Vermont, you should join REV.

Community Solar

Community solar, which is also called group net metering, or virtual net metering is a rather simple concept. It means that power generated from a single renewable energy project can be applied against the utility bill of many meters, as long as all of the meters (the production and end use meters) are in the same utility service territory.

It’s a great concept and it has received support from the industry because many peoples’ roofs won’t work with solar, but they want to buy solar power. Community solar solves this problem. It also solves some issues around monetizing tax credits. Massachusetts also has community solar, but it’s referred to as virtual net metering. This allows (insert huge bank name here) that is based in downtown Boston to buy 10 acres of land outside of Boston and put a huge solar array on this land. They can then apply the power production to reduce their bills in the Boston location, and also monetize all the tax credits directly.

Back to Jeff 

Jeff Forward was looking for an investment that provided a reasonable return and helped the environment. He decided to build a community solar project on his farm.  He then recruited 3 of his neighbors to join his group and they now pay him for the solar credits they receive from their utility.  He figures his $30,000 net investment returns him about $3,000 in revenue for a 10% return on his investment.  Not bad considering bank CD’s are returning less than 1% and his retirement investments seemed to always lose money.

Jeff’s presentation materials provide a very complete story and I encourage everyone to read through it.

 

I decided to follow up with Jeff to get some color on a few of the points he discussed.

What were your huge lessons learned around group net metering? It sounds like billing was an issue. 

▪   Setting up a simple and transparent billing process has been frustrating.  The whole model is based on a revenue stream from the group members and for it to work, group members need to be able to see on their bill how much they are being credited. It seems like such a simple thing, but it’s unbelievably difficult. So far I have spent an entire year working with my utility to get a summary of the solar credits that were attributed to each members bill and we have still not completely resolved it. To be fair, this requires the utility to make changes to their billing software and that apparently is more difficult than it would seem. And utilities have been reluctant to go too far down the path of changing their billing system until the state has signed off on all the standards and procedures for net meter billing.  It will be easier once  the state said “this is how you do it” and then require all the utilities do it the same way.

What would be the ideal billing situation?

▪   On every bill it should say: 1) how much power a member  consumed; 2) what was the output of the array; 3) what was their share of the solar production; 4) how much they were credited for the solar production; 5) and then how much they now owe for power.  Each members bill would then be the net of what they used minus what they were credited.  The solar credit should be a line item on the front of the bill so that each member knows exactly how much is being credited each month.  It needs to be transparent.

▪   Where we ran into problems is that initially the only thing the utility was reporting was the net usage, but they would not show the methodology. So, nobody could figure out how much of their bill was supposed to go to me (as the owner of the community solar project). The group members also could not figure out how much power they used.  It has been terribly confusing and frustrating.

You mentioned large groups might be a problem. Why?

▪   For my scale system, the output is still quite small.  The total cost of the project was $85,000, but with tax credits, incentives and depreciation deductions the net cost was about $30,000.  However, the revenue is only worth about $3,000 per year.  With that small a revenue stream, there is not a lot of room for administrative costs.  You couldn’t for example hire someone to do the billing or it would eat up a good portion of the revenue. Perhaps the easiest way to set up a group would be to get one or two large members.  Then perhaps the billing would be easier.

▪   The margins are pretty low.  While I like the rate of return I am getting, it is still pretty small in absolute terms.   Small things like a customer service charge can have a measurable impact on the return.  For example, I am required to have  an additional meter at the site to record the solar output. The meter charge is $16.75 per month. This is nearly 7% of the revenue of the system over a year.  Clearly I am not going to get rich off this investment.

After doing it, do you think community solar could be a business model by itself? i.e. could a business just do community solar in Vermont or will installers start offering as part of their service?

▪   Absolutely there is a business model and potential for it. I like the idea a lot. There are a lot of folks that just don’t have a good solar resource at their home and would like to be in the game. There are other folks who don’t have the resources to invest, but would much rather their power came from a clean renewable source. Consider the Vermont Cow Power program. It was introduced about 10 years ago. In this program you can pay more for your electricity, up to $.04/kWh more.   The utility then uses that money to pay farmers $.04/kWh over the wholesale power rate for electricity they produce from an on-farm anaerobic digester. It is very, very successful. Before launching the program, they did a survey of their customer base and found that between 2% and 5% of their customer base would be interested in such a program.  That estimate has proven to be true.  My community solar project is similar except that my group members don’t pay anything more for their electricity at all.  Sure, I get all of the financial benefit, but I took all of the risk too.  I am sure other models could be developed whereby members could share in the risk and the financial benefit.

▪   Finally, there are a lot of people that would like to invest in something that they believe in, rather than handing their savings over to Wall Street.  Community solar, or community wind for that matter, offers a vehicle for folks to make a moral investment and make a reasonable return on that investment.  In Europe, there are places where average folks can invest in shares of a local renewable energy project and then receive a  return based on the project’s production.  Folks sink their retirement savings into these projects and then receive a predictable dividend for life.  What better place to put your retirement investments?  Renewable energy projects can generate a highly reliable and predictable income over a long period of time.  I would much rather invest in a specific project than I would in a company producing a product.  Companies come and go.  But the sun always shines and the wind always blows.  Where else can you get such a great dividend?

Are you thinking about doing it again?

Absolutely! In fact, we are breaking ground in the next phase of this project next week.  It will be completed before Christmas.  We are essentially doubling the size of our array.  When I installed the first phase, I buried an extra conduit so that I could expand without a lot more trenching.  By the first of the year our system will be 25 kW and we will be completely powering five households.

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Keeping Vermont on the Cutting Edge of Clean Energy and How You Can Get Involved

Vermont has long been on the cutting edge of renewable energy and energy efficiency. They like to get stuff done, from solar permitting to efficiency and biomass. Two weeks ago, I spoke with executive director of Renewable Energy Vermont, Gabrielle Stebbins to learn a little more about the current state of the industry, and where private companies can get involved to help further develop the industry.

What would you say is the current state of the renewable energy industry in Vermont?

Vermonters strongly support renewables and a clean energy economy, as exemplified in many of the “firsts” led by the state: the first efficiency utility, the first legislated Feed-in-Tariff, the first solar registration (as opposed to permitting) process for solar projects 10 kW and below, and a net-metering program that has continually evolved and improved over the years.

With all this good news from Vermont, it must be stated that Vermont is small, and therefore when federal policies and subsidies and incentives are decreased for renewables, the funding opportunities for Vermont to move forward more quickly, become constrained.

What policies are driving clean energy adoption in the state?

See above. Feed in Tariff, net-metering, strong cow-power program, majority of utilities supportive of renewables, strong public support, Comprehensive Energy Plan with goal of 90% of ALL energy being supplied by renewables by 2050, solar registration process, etc.

What technologies are leading and which ones are lagging? Why

Solar pv and wind have been leading. wind now has some challenges due to the PTC uncertainty and that impacting larger, national industry growth that trickles into Vermont. Bioenergy technologies vary widely. Many homes are heated with cord wood – so in a way Vermont has always been at the forefront of biomass if one considers cord wood. Pellets are becoming more widely available and there is growing interest. Solar hot water also has strong market interest. Biofuels are used by many farmers on-farm, but has not taken off. Farm methane has been supported for many years through state policy and a Vermont public interest in supporting our farmers. Geothermal varies– there are many installations, but generally the industry has not come together as a unified force and therefore market growth has not been as advanced as wind and solar. Retrofitting existing hydro has been a slow, long process due to the extensive FERC permitting – a new law passed this year that allows for a pilot program of a few projects going through state review PRIOR to FERC review, may help to identify good opportunities for retrofits at sites that environmental regulators and project proponents can work together on to generate power. So this could become a new opportunity for many towns that own old dams, etc., depending on the location along the river system and ecological impacts, the state of the dam and how much rebuilding is required, and the cost-benefits of the project.

The 2012 year we witnessed a lot of legal developments in Vermont assisting renewable energy

2012 Legislative Results: Thank you to all the REV members that weighed in and got involved this Legislative Session. Countless members (and associated businesses) testified, provided data analysis and policy support, wrote to and called their Elected Officials, helped fund the Legislative effort and finally, attended bill signings, REV’s press conference and REV’s “day at the Statehouse”.  All of these efforts really did (and does) make a difference.  The following bills have been signed into law, or should be in the next few days:

House Bill 475: The net-metering bill raises the solar net metering registration capacity from 5 kW to 10 kW, addresses several technical fixes with regards to net-metering, and also defines solar Standard Offer projects based on inverter capacity. Click here to read this bill.

House Bill 468/ Senate Bill 214: The Renewable Portfolio Standard and Standard Offer Bill became S. 214, a bill that no longer includes an RPS, but does increase the Standard Offer Program to a total of 127.5 MW over the next 10 years. It includes several studies, including a report regarding how to move Vermont towards comprehensive energy planning via a Total Energy Standard (includes thermal, transportation and power mandates). The bill also sets a new policy directive to utilize distributed generation as a means to address transmission and distribution constraints, and peak load issues. Click here to read this bill.

House Bill 782:  This tax bill should ensure the Clean Energy Development Fund receives approximately $3 million/year through a generation tax on Vermont Yankee.  Estimated availability is Fall 2012, which does not necessarily prevent a funding gap that may occur prior to Yankee’s payment in 2013.  It will also require that the renewable energy community and REV go to the bat annually to ensure this funding is appropriated from the General Fund to the CEDF, as opposed to other competing needs.

House Bill 679: This tax bill ensures all solar projects 10 kW and smaller are tax exempt, for solar projects larger than 10 kW it requires a $4/kW annual state property tax, and brings wind projects 1 – 5 MW in size into the same tax rate as projects wind projects 5 MW and larger. Click here to read this bill.

Senate Bill 148: A hydro bill that allows for preliminary reviews regarding retrofitting existing hydro sites, without going through an expensive FERC process first. Click here to read this bill.

Senate Bill 237: The Gund Institute for Ecological Economics at the University of Vermont is now tasked with developing a genuine progress indicator (GPI) to be used by the state of Vermont along with the state’s gross domestic product when assessing the overall economic health of the state.  A GPI broadens the GDP economic analysis to include not just economic impact, but also environmental and social impacts resulting from economic activity. This is important because it means our economic analyses may start to include the upsides of clean energy – a cleaner environment, better air and water quality and resulting human health impacts, etc. Click here to read this bill.

Are there any specific pieces of legislation that are lacking, that you’re pushing for in Vermont? How, specifically, can private companies help push this legislation forward?

Ideally, we need to move towards a place where an increase in electricity generated by renewables is part of the energy plan. Our buildings need to be made as efficient as possible, making it more easily feasible for renewables to heat them, and to enable electric vehicles to move into Vermont and address the challenges that our rural state face – with a considerable amount of oil and money spent on transportation.

The RPS did not pass this year, but this allows for the opportunity that in a next round, we have a Total Energy Standard – one that addresses heating/cooling, transportation and power needs.

TAKE ACTION

 

If you do business in Vermont, there’s a number of things you can do to help develop the renewable energy industry in Vermont.

  1. Keep up to date and help with legislative action. Right now there is nothing press because the Vermont legislature is not in session, but this is the best place to keep up to date with –> http://www.revermont.org/main/about-us/policy-and-advocacy/
  2. Join Renewable Energy Vermont –> http://www.revermont.org/main/join-rev/
  3. Attend REV’s yearly conference: http://www.revermont.org/main/events/conferences/
  4.  Join the Friends of Vermont Wind at www.windworksvt.org . This group can write letters to the editor, get facts from the wind worksite website about how wind energy works, etc. Ideally, REV hopes to develop a large enough group of players that we can give the people who support wind energy (more than 70% in VT) enough support so that they will speak up at public meetings when others are shouting against wind energy….but that will take time to develop.
  5. Subscribe to the newsletter. If you you want to watch what is happening an get involved at a later date, the newsletter is the best way to keep in touch http://www.revermont.org/main/join-rev/

 

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