Local Energy Rules

Minnesota’s community solar garden program may be the envy of the nation — once the utility’s stall tactics have been stopped — but it needs a little help to fulfill the vision of bringing solar to all.

That’s where Julia Nerbonne, executive director of Minnesota Interfaith Power & Light, comes in. In June 2015, John Farrell talked to Nerbonne about opening up community solar for everyone — not just for people with high credit scores — and what people of faith can do about it.

https://ilsr.org/articles/solar-for-all-an-article-of-faith-episode-26-of-local-energy-rules/

Minnesota’s community solar garden program may be the envy of the nation — once the utility’s stall tactics have been stopped — but it needs a little help to fulfill the vision of bringing solar to all.

That’s where Julia Nerbonne, executive director of Minnesota Interfaith Power & Light, comes in. In June 2015, John Farrell talked to Nerbonne about opening up community solar for everyone -- not just for people with high credit scores -- and what people of faith can do about it.

Community Solar Comes to Minnesota

Community solar can mean a variety of things. In its pure form, it would be a solar array owned by a collection of people who share its economic benefits. In practice, it’s usually a form of shared energy. “Subscribers” pay an upfront fee (often around $1,000), and receive a share of electricity production from the solar project every month over the next 20-25 years. That solar share produces power that is then credited on the subscriber’s electric bill, saving the customer money each month. After about ten years (it varies by project), the subscription fee is paid off, and what remains on the subscription is pure energy savings to the subscriber.

In Minnesota, the community solar garden market exploded after the first rules were released in 2014, with more than one gigawatt of power entered into the queue. If every project were built, it could triple the utility’s expected solar power development by 2020. However, the incumbent electric utility, Xcel Energy, has stalled the program with several disputes over the rules and Minnesotans are still awaiting the first project installations.

A Tool for All to Cut Their Electric Bill

Community solar is more than just clean electric power. For faith communities, in particular, community solar symbolizes a nexus of economic justice and carbon mitigation. It’s an enormous opportunity to get everyone involved in clean energy.

“Low income, high income, doesn’t matter,” says Nerbonne. “Everybody should have access to be able to start saving money on their electric bill.”

Traditionally, community solar developers only targeted populations with good credit scores (above 700), cherry-picking those who are expected to make their payments. Nerbonne wants to challenge solar developers to use a pay-as-you-go process where anyone can participate, not where you have to be “accepted” or “declined.”

Interfaith Power and Light and others have a couple ideas for how to make community solar accessible without significantly increasing financial risk for solar developers and their financiers. One is to pool subscribers, high and low income. Another option is to have a community backstop; for example, a church could guarantee the subscriptions of its members, agreeing to temporarily or permanently cover payments if a member fell on hard times.  Another model involves a loan loss reserve fund, tapped when a person defaults on their pay-as-you-go payments. The fund could come from community anchor institutions, places of worship, or philanthropic organizations.

The key difference in Nerbonne’s approach is to distinguish between charity and creating an economic system for people. This is not giving away solar; it’s creating opportunity.

Community Solar in Progress

Already, Interfaith Power and Light is making progress. At the Shiloh Temple in Minneapolis, people from the community will be trained in to install the proposed community solar array. They plan to expand significantly.

Nerbonne notes it’s all part of a wider battle to fight climate change. With community solar gardens in mind, she describes her “three-legged stool” theory. One leg is practical change that people see and feel on the ground; another leg is the political process,

At the beginning of June 2015, ILSR released its Public Rooftop Revolution report, which described how cities across the nation put the shine on municipal rooftops with more than 5,000 MW of solar. That 5,000 MW is as much as one-quarter of all solar installed in the U.S. to date — and many cities could install solar little or no upfront cash. The energy savings would allow cities to redirect millions to other public goods.

ILSR’s Director of Democratic Energy John Farrell presented the report’s findings in a webinar, hosted by Applied Solutions, on June 9, 2015. But time constraints meant many unanswered questions. In the first guest-hosted episode, John answers questions from Carolyn Glanton of Applied Solutions on everything from the expiration of federal tax credits to the payback period for municipal solar arrays.

https://ilsr.org/articles/unanswered-questions-about-the-public-rooftop-revolution/

At the beginning of June 2015, ILSR released its Public Rooftop Revolution report, which described how cities across the nation put the shine on municipal rooftops with more than 5,000 MW of solar. That 5,000 MW is as much as one-quarter of all solar installed in the U.S. to date — and many cities could install solar little or no upfront cash. The energy savings would allow cities to redirect millions to other public goods.

ILSR’s Director of Democratic Energy John Farrell presented the report’s findings in a webinar, hosted by Applied Solutions, on June 9, 2015. But time constraints meant many unanswered questions. In the first guest-hosted episode, John answers questions from Carolyn Glanton of Applied Solutions on everything from the expiration of federal tax credits to the payback period for municipal solar arrays.

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Rooftop Revolution Webinar – Unanswered Questions

Read the Public Rooftop Revolution report

Watch the webinar or just click through the slides

 

Q: What opportunities are available with the expiration of the federal tax credit for wind and solar?

John Farrell: That’s a great question. The way I look at this is that all of the financial and financing structures revolve around that federal tax credit, the 30% federal tax credit. That means that any entity, whether it’s a for-profit or a nonprofit, is trying to find some sort of partner that can take advantage of that and lower the cost of the installation.

But these middle always take a cut of that. And it creates problems. So for example, during the financial crisis in 2008, when a lot of the Wall Street firms that had traditionally taken these incentives, did not have any tax liability because they were losing money hand-over fist. All of a sudden it was difficult for solar developers, whose businesses were continuing to grow, to find partners that they could work with for financing. Because nobody needed these tax credits. The federal government had to step in and transition it to a cash grant for a two-year period between 2009 and 2011.

What I see then, with that background, is that the expiration of those tax credits is going to give us a chance to look at financing tools that don’t involve those middleman, that there might be institutional investors that, for example, expect lower returns than Wall Street firms that will be willing to lend money at lower interest rates and lower project costs. And I think there’s already some evidence that suggest we could cover the loss of at least one of those tax incentives, the tax credit or depreciation, simply with lower financing costs in the near. So there might be some really good opportunities to expand lower cost financing and make it a bunch more accessible to different entities.

Q: Do you have any advice on financing for countries other than the US, such as local councils in Africa? What kind of legal issues does one have to put into consideration in such a venture?

John: I’m going to have to be very general in my response, because I don’t have kind of expertise with the finance and policy structures of other countries, or very limited experience. What I would say though with that policy framework is that policies like what Germany and Denmark and other countries have used, called a feed-in tariff (it’s much more common in Europe), are much better in terms of setting up the financing structure for renewable energy projects. They basically say anybody who wants to connect to the grid with a wind or solar project can get a guaranteed 20-year project at a guaranteed price, enough to make back their costs and make a small return on investment.

There are a lot of stories on residential rooftop solar but few if any on what cities are doing to make themselves energy self-reliant by using their own buildings and lands to generate power.

In Public Rooftop Revolution, ILSR estimates that mid-sized cities could install as much as 5,000 megawatts of solar—as much as one-quarter of all solar installed in the U.S. to date—on municipal property, with little to no upfront cash. It would allow cities to redirect millions in saved energy costs to other public purposes.

This report is being released in serial format, beginning Monday, June 1 through Thursday, June 4. CHECK BACK TOMORROW FOR UPDATES.

Read the Executive Summary

Read Part 1 of the report

Read Part 2 of the report

Read Part 3 of the report

Listen to our podcast conversations with a few of our Featured Five municipal solar cities:

Lancaster, CA city manager Jason Caudle, listen to the podcast, read the interview summary.

Raleigh, NC renewable energy coordinator Robert Hinson, listen to the podcast, read the interview summary.

Spillover Effects of Municipal Solar

Municipal solar installations serve a purpose beyond city energy savings. Their presence on city buildings supports solar development in the private sector in several ways:

Copycat: The visibility of solar on public buildings can inspire individual residents or businesses to invest in solar.

Market experience: Public building installations also provide valuable installation experience to local solar companies, driving down costs.

Internal experience: The installation of solar arrays on public buildings provides valuable experience to affected city staff such as building, electrical, and fire code officials who regulate the private solar market. 

Local policy: The city’s interest in solar can lead to more favorable rules and regulations for private solar installations, reducing permitting and licensing requirements. Denver, CO, is given a “Best” score by Vote Solar, and has among the easiest and lowest cost permitting rules in Colorado. Lancaster, CA, is given a “Good” score from Vote Solar, with many streamlined processes. New Bedford, MA, has below average permitting fees compared to other Massachusetts municipalities. Kansas City shortened permit waiting times to 8 hours or less, provided online permitting, and lowered inspection times to eight hours or less.

State policy: A municipal solar project may also help change state policy. In Dubuque, IA, a proposed solar installation using a power purchase agreement sparked a legal battle when the utility objected. The Iowa Supreme Court ultimately determined that power purchase agreements were legal, and the ruling has generated substantially more interest in public sector solar installations.

Solar on public buildings can also serve as a starting point for municipal interest in deeper clean energy opportunities, beyond solar. Municipal electric vehicles could charge from municipal solar arrays, for example, as they do in Lansing, MI. City buildings with solar could also incorporate storage, making them safe severe weather shelters. Florida’s SunSmart Schools and Emergency Shelters Program has installed 115 10-kW PV systems with electricity storage at Florida’s schools to create emergency shelters. Rutland, VT, is building a microgrid with solar plus battery storage to power the public shelter during severe weather emergencies. New York City is interested in installing 800 megawatts of distributed generation,

There are a lot of stories on residential rooftop solar but few if any on what cities are doing to make themselves energy self-reliant by using their own buildings and lands to generate power.

In Public Rooftop Revolution, ILSR estimates that mid-sized cities could install as much as 5,000 megawatts of solar—as much as one-quarter of all solar installed in the U.S. to date—on municipal property, with little to no upfront cash. It would allow cities to redirect millions in saved energy costs to other public purposes.

This report is being released in serial format, beginning Monday, June 1 through Thursday, June 4. CHECK BACK TOMORROW FOR UPDATES.

Read the Executive Summary

Read Part 1 of the report

Read Part 2 of the report

Listen to our podcast conversations with a few of our Featured Five municipal solar cities:

Lancaster, CA city manager Jason Caudle, listen to the podcast, read the interview summary.

Raleigh, NC renewable energy coordinator Robert Hinson, listen to the podcast, read the interview summary.

Kansas City, MO project manager Charles Harris, listen to the podcast, read the interview summary.

 

The Third Party Trump Card

Although cities face a number of challenges, economic and otherwise, to installing solar, the third party ownership option—if available—ought to trump most of them. For suitable sites that won’t need a near-term roof replacement, third party ownership removes virtually all of the financial barriers to solar, and covers maintenance and operations. While some barriers (like lack of aggregate or virtual net metering) remain, most cities have a substantial solar opportunity.

ILSR estimates that over 5,000 MW of solar could be inexpensively installed almost immediately on municipal property in states with laws allowing third party ownership. This amount is more than a quarter of the nationwide total solar capacity through September 2014, and it only includes the municipal buildings of the approximately 200 cities with 100,000 or greater population.

We arrive at this number by estimating the solar potential for cities in states where third party ownership is allowed, based on the following four estimates of rooftop solar potential ILSR obtained. The estimates are shown in the table below.

Although there’s an impressive range of potential from this small sample, ILSR estimates that each city can, on average, install 25 MW of municipal solar. For comparison, the city with the most municipal solar Watts per capita, New Bedford, MA, has 16 MW, but is also smaller than 100,000.

The result is an impressive array of municipal solar potential in 23 states (plus DC) with third party ownership and 201 cities larger than 100,000. Cumulatively, these cities could have third parties install over 5,000 MW of solar on municipal buildings, as shown in the map below. Note that two states allowing third party ownership have no cities larger than 100,000 population, Vermont and Delaware.

Though the map says it powerfully, it’s worth repeating that there’s an enormous solar opportunity waiting for cities to seize it.

As a word of warning, this estimate may not account for the wide variation in solar net metering laws. While solar-leader New Bedford can obtain over a third of its solar for municipal use off-site (using virtual net metering) and apply solar produ...

There are a lot of stories on residential rooftop solar but few if any on what cities are doing to make themselves energy self-reliant by using their own buildings and lands to generate power.

In Public Rooftop Revolution, ILSR estimates that mid-sized cities could install as much as 5,000 megawatts of solar—as much as one-quarter of all solar installed in the U.S. to date—on municipal property, with little to no upfront cash. It would allow cities to redirect millions in saved energy costs to other public purposes.

This report is being released in serial format, beginning Monday, June 1 through Thursday, June 4. CHECK BACK TOMORROW FOR UPDATES.

Read the Executive Summary

Read Part 1 of the report

Read Part 2 of the report

Listen to our podcast conversations with a few of our Featured Five municipal solar cities:

Lancaster, CA city manager Jason Caudle, listen to the podcast, read the interview summary.

Raleigh, NC renewable energy coordinator Robert Hinson, listen to the podcast, read the interview summary.

Kansas City, MO project manager Charles Harris, listen to the podcast, read the interview summary.

Public Solar Economics

Although the cost of installing solar has been falling rapidly (by nearly 75% over the past 5 years), cities have a substantial disadvantage to private property owners when installing solar. The primary incentive for solar is the 30% federal tax credit, a deal that doesn’t apply to local governments. The federal government also provides accelerated depreciation for solar projects, resulting in a tax write-off worth nearly another 30% of a project’s value.

To access incentives and avoid upfront costs, cities have sought legal arrangements to lease or purchase solar energy via third parties. After all, even half an incentive (typically what’s left for the city after one of these arrangements) is better than no discount, and many cities are reluctant to use their borrowing power for solar in competition with other potential capital expenses.

The chart below from ILSR illustrates the challenges for tax-exempt entities like cities in financing solar. A city’s best option is to purchase electricity from a third party (a power purchase agreement, or PPA), but that’s only legal in about half of U.S. states. A lease is second best, but usually allows only capture of the tax credit or depreciation. Direct purchase by the city means no federal incentives can be used. thus more costly energy. Private entities that can use federal tax incentives get the lowest solar prices of all. Using cash grants instead of tax credits—as was done during the aftermath of the financial crisis—would put cities on par with private entities in access to incentives.

The following chart illustrates the lifetime benefit (also known as net present value) for three primary ways a city can finance a solar array: municipal bonds, a power purchase agreement (with a fixed rate), or a lease. We use the same cost assumptions for all three scenarios, although they differ most in that a city-financed solar array gets no incentiv...

Kansas City, MO, has neither the abundant sunshine nor high cost of electricity that have driven solar installations in other cities. Despite this, the city has close to 1.5 MW of solar in 59 separate installations on municipal properties. Thanks to utility rebates, two department leaders, and a unique opportunity that allowed it to access the 30% federal tax credit, the city was able to make solar work in an otherwise challenging climate of modest sun and low electricity prices.

In April, ILSR’s John Farrell interviewed Charles Harris, project manager with the Kansas City. Harris suggested that the project got its start in 2006, when the city established a Climate Protection Plan to reduce greenhouse gas emissions from municipal buildings while getting 15% of their energy from renewable sources.

https://ilsr.org/articles/kansas-citys-royal-effort-to-solarize-city-rooftops/

Kansas City, MO, has neither the abundant sunshine nor high cost of electricity that have driven solar installations in other cities. Despite this, the city has close to 1.5 MW of solar in 59 separate installations on municipal properties. Thanks to utility rebates, two department leaders, and a unique opportunity that allowed it to access the 30% federal tax credit, the city was able to make solar work in an otherwise challenging climate of modest sun and low electricity prices.

In April, ILSR’s John Farrell interviewed Charles Harris, project manager with the Kansas City. Harris suggested that the project got its start in 2006, when the city established a Climate Protection Plan to reduce greenhouse gas emissions from municipal buildings while getting 15% of their energy from renewable sources.

Read more about Kansas City and other cities putting solar on their own property in Public Rooftop Revolution

Kansas City’s Solar Opportunity

Like many municipalities, Kansas City feels cash strapped, Harris said. So when Kansas City Power & Light (KCP&L) offered a $2 per Watt rebate for solar, it became very attractive for the city. After negotiating with two city departments, KCP&L and Brightergy agreed to buy the solar materials, install them on the buildings, and guarantee a certain amount of solar production for the city. In return, the city entered into two separate 20-year leases with the companies, each requiring no money upfront, with the monthly lease amount based on a guaranteed amount of energy produced.

Limitations on Solar

While the rebate from KCP&L amounted to $50,000 per system, it was also a limiting factor for solar installations. The program capped the size of rebate-eligible projects at 25 kilowatts (kW), so none of the city’s 59 solar arrays exceeds that size. In a followup email to the interview, Harris said there was a possibility of putting another 330 kW of solar on the buildings with solar, if there was no installation size cap for the rebates.

Other limitations in finding solar-suitable buildings included small roof space, low building energy usage, and the short offer period of KCP&L’s rebate. The building energy usage problem reflects a policy issue. Under Missouri net metering rules, the city cannot aggregate its building energy consumption, allowing it to use a solar array on an operations building to offset energy use at city hall, for example. This policy, aggregate net metering, is available in 17 states. Missouri also lacks virtual net metering, allowed in 11 states, permitting cities (and other entities) to offset energy use on its buildings with solar installed anywhere else in the utility’s service territory.

70 Megawatts of Solar?

In the development of the Public Rooftop Revolution report, the regional government for the Kansas City metro area—Mid-America Regional Council—modified its solar suitability map to identify rooftop solar potential on city-owned buildings. Their map, shown below, indicated that the city could install nearly 70 megawatts of solar on its buildings.

John asked Charles if that was a reasonable number for city building-sited solar installations. Harris didn’t know where that number came from, but his first thought was that the city didn’t own that many buildings. In a followup email, Harris took a look at our map of 70 MW of solar potential for KC’s city-owned buildings and concluded that well over 90% of the buildings would not be right for solar. The reasons for this run the gamut: vacant buildings, vacant parcels of land, structural integrity, surrounding geometry, not enough utility use, among others.

The Keys to More Solar

If there were more opportunities for rebates,

There aren’t many solar success stories from the Southeast, making Raleigh, NC, stand out in a region with low-cost electricity and modest sunshine. With just over 2 megawatts of solar on public property––providing close to 7% of municipal building peak demand––Raleigh’s solar success comes despite state rules preventing the city from buying electricity from any non-utility entity.

In April 2015, John Farrell talked to Robert Hinson, renewable energy coordinator with the City of Raleigh, NC. In lieu of third-party power purchase agreements, Raleigh has pursued solar in three ways: by leasing space on public property to solar developers; owning solar and selling power to Duke Energy; and net metering a city-owned solar array.

https://ilsr.org/articles/duking-it-out-over-municipal-solar-in-raleigh/