Solar
RE Magazine
Solar INSERT
ROADMAP
Insights
Resources
co-ops considering
a PV Project
Visit REMagazine.coop for additional solar content or
August 2015
to download a PDF of this insert.
A1
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WELCOME to
the SOLAR
INSERT
During my almost 30 years with electricity utilities, I’ve seen a lot of “next greatest things” come and
go. But in all that time, I’ve never experienced the
breadth and speed of change that solar power generation has brought to our industry. In just the past five or
six years, this market has gone from niche to ubiquitous. Distribution co-ops across the country that hadn’t
given a minute’s thought to solar a decade ago now find
themselves embarking on utility-scale PV arrays big
and small and leading the industry with community
solar projects.
Chances are you and your boards have already had
discussions on this topic. Two recent webinars NRECA
held on solar attracted participants from more than 30
percent of our distribution cooperatives and half of our
G&Ts. Many of you are hearing directly from your consumer-members looking for your leadership on solar.
This special insert is designed to build on our collective
knowledge and offer you ideas on what options are
available when considering a solar project.
In it, we look closely at CoServ Electric, a large
Texas co-op whose strong participation in the DOE-
backed/NRECA-led SUNDA project culminated in
the construction of CoServ’s 2-MW solar array. Their
experiences are highly informative for any co-op
wrestling with the solar question, and I want to
thank them for their willingness to share their story.
Within this insert are also multiple links to resources
on NRECA.coop and Cooperative.com to help in
your research and planning, plus articles on rates,
community solar, and more.
While this insert is not an exhaustive look at solar
deployment, it’s an excellent place to start if you’re
just beginning the process. I hope you find it a useful
and informative tool in your deliberations and decision-making.
Jim Spiers
NRECA Vice President for Business
and Technology Strategies
Your Solar Energy Partner!
August 2015 A3
By John Pulley
A4 Solar Insert
For CoServ, investing in a 2-MW-capacity solar
farm made all kinds of sense. As the cost of hardware
dropped, the market for solar in Dallas’s sprawling outskirts grew. Co-op members who wanted rooftop panels had their pick of installation vendors eager to serve
them. Large commercial developers were asking for solar energy. The regulatory environment favored renewables. And CoServ’s board of directors had committed
in its strategic plan to embrace innovation, in part by
“looking at things on the horizon in the energy world,”
says Donnie Clary, CoServ’s president and chief executive officer.
“We felt we had to do this [solar project] to get
ahead of the game.”
From Truck Shed to Peanut Field
CoServ’s move into solar energy began in 2009 as an
outbuilding experiment, installing solar panels on the
roof of a truck shed. The demonstration was a success,
generating an average of 136,000 kWh annually and
providing an easy way for the co-op’s leadership to get
comfortable with the technology and assess its value.
Around the same time, recalls Curtis Trivitt,
CoServ’s senior vice president of energy services, the coop saw a handful of members putting solar panels on
their own roofs, and a vocal contingent began calling for
more solar-derived energy on the CoServ system.
As a group, those members are relatively young and
mobile, Geer says, and many of them “are not familiar
with co-ops.”
They are, however, familiar with choice. In Texas’s
deregulated energy market, CoServ is surrounded by
competition, and its members are well aware of what
electricity providers are offering in the Dallas-Ft.
Worth region.
“Our members have high expectations,” says Clary,
who fully supported the decision by CoServ’s sevenperson board to unanimously approve the solar project. That decision meant that CoServ would become the
first co-op in Texas and one of the first distribution coops in the country to build a 2-MW solar farm.
“We wanted to take control of solar,” adds Brown.
Location, Location, Location
Of all the steps involved in building a solar station,
the most challenging for CoServ turned out to be one of
the most mundane: figuring out where to put it. “That
took longer than anything,” Geer recalls.
The region’s growing population is driving up realestate prices, and many otherwise acceptable sites were
either too costly or too far from the nearest substation.
Or they were in incorporated jurisdictions and subject
to restrictive zoning and permitting regulations that
would have delayed deployment and pushed costs “out
the roof,” as Geer puts it.
Looking back, Brent Bishop, CoServ’s vice president
and chief financial officer, advises co-ops to use a
“good land broker” when seeking a solar site.
“Our land broker was instrumental in finding a site
that would accommodate the solar station,” he says.
“The way North Texas is growing, finding the right
piece of land for a reasonable price was difficult to do.”
Size Matters
Doug Danley, technical liaison to NRECA’s Business
and Technology Strategies Department, has spent a lot
of time crunching data on solar installations. The magic
number from a cost-benefit perspective, he says, is 1 MW.
“That’s where solar makes sense,” he says. “Ultimately, each co-op has to decide what makes sense for
their members. If smaller works better, so be it. But in
terms of return, economies of scale, versatility, 1 MW
seems to be the place to start.”
Initially, that was the size CoServ had planned to
make its array. But when projected costs started coming in, Trivitt says it became clear that bigger was better. “We learned early on that 2 MW would fit on the
land we purchased, so spreading land cost, site preparation cost, and contractor mobilization costs over a
larger installation made sense economically.”
Equipment procurement and construction, which
began in January, went well, though there were snags
and setbacks. Trucks had a tendency to become mired
in the site’s sandy soil. Crates of inverters and more
5/20/15
3/26/15
Racking
delivered
3/23/15
Construction begins
CoServ
interconnection
5/29/15
Substantial
completion
5/14/15
Energize
inverters
JULY
2015
6/11/15
System complete
Visit REMagazine.coop to see an interactive timeline.
Photos courtesy CoServ
August 2015 A5
than 8,000 solar panels, delivered ahead of schedule,
sat unopened on the construction site for most of January and February. May’s record-breaking rains in north
Texas caused severe soil erosion that required emergency intervention.
Throughout the design and construction phase,
CoServ looked at various manufacturers, comparing
delivery lead times, product quality, price, and company histories. Engineering-design services came from
PowerSecure, a SUNDA affiliate. The PV panels were
made in Germany by SolarWorld. And CoServ got a deal
on 600-volt inverters from Advanced Energy. Schletter,
a company that makes solar mounting systems, won
the contract to provide the support racks that hold the
PV panels in place. (PowerSecure and Advanced Energy
are part of the NRECA National Discounts Program.)
The project also required more than 30 miles of wire,
most of it buried underground.
The Finances of Solar
Interest in the CoServ Solar Station during the “soft
launch” phase in the spring came from more than 150
members throughout the co-op’s six-county service
territory—in both rural and suburban areas. But a
proven demand was not the main motivation for the
state’s second-largest co-op.
“Some co-ops build when the project is paid for,”
Clary says. “Ours is more a ‘Field of Dreams—build it
and they will come.’”
As one of the country’s largest co-ops with more
than 180,000 meters, CoServ had the finances to break
ground without excessive deliberation over how to pay
for it. “We didn’t do a lot of financial analysis or have
angst over doing the project,” Clary says. “Two megawatts gets lost in the noise when you have a 1,200-MW
load. We can absorb the [project’s] cost even if nobody
signed up.”
CoServ also paid for the project without having
to borrow money, in part because its for-profit gas
division provides equity distribution and the “tax
appetite” needed to receive the federal investment tax
credits that reduce the project’s cost. (Co-ops lacking
a tax appetite can turn to other mechanisms, such
as tax-equity flips, that allow them to indirectly tap
the benefit of investment tax credits. See “sponsored
content” in this magazine from CoBank and CFC for
more information on financing.)
CoServ’s board is considering a base rate for solar
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of 12.5 cents per kWh, slightly higher than its average
residential rate. Members will have the option of
buying solar-derived electricity in blocks of 200, 400,
600, and 800 kWh per month at $25, $50, $75, and $100
respectively. A member’s minimum usage during the
prior 12 months will determine the maximum monthly
amount of solar energy that can be purchased. To
recover fixed consumer related costs, CoServ’s solar
members will pay a $30 monthly customer charge
compared to the standard residential charge of $10.
With the higher customer charge, solar members will
pay a lower per-kWh charge for use in excess of the
solar block purchase.
“Exisiting residential retail rates today typically
don’t take into account the under-recovery of fixed
costs associated with solar power. This under-recovery
ultimately results in an unfair shifting of costs to nonsolar members,” Trivitt says. “Our solar program rate is
designed to be a sustainable assessment that does not
rely on subsidies to succeed.”
‘Sooner Than Later’
Having presided over CoServ’s board at a time when
the co-op went solar, Geer has advice for co-ops considering such projects: “Don’t put all your eggs in one basket,” he says.
The message resonates with Golden Spread Electric’s Hayden, a former energy trader in Houston who
saw firsthand the Enron debacle and the devastation
caused by insufficient diversification. “You want a diversified portfolio,” he says. “Having everything in gas
or coal can be dangerous, but wind and solar are not
nirvana.”
Hayden wouldn’t commit to when Golden Spread
Electric might take the solar plunge. The G&T serves
16 co-ops and their 282,000 members in the mostly
rural Texas Panhandle and Oklahoma, and Hayden
surmises their residents aren’t likely as keen on solar
as CoServ’s. “It’s a different kind of member,” Hayden
says.
From a financial perspective, however, solar could be
viable in north Texas. Responses to a solar RFP issued by
Golden Spread Electric returned “some aggressive numbers,” Hayden notes. “From a resource point of view, it’s
starting to make sense. It’s not an issue of ‘if.’ It’s how
much and when, and I believe it’s sooner than later.”
RESOURCES:
Solving the Solar Puzzle – RE Magazine:
remagazine.coop/solving-the-solar-puzzle
SUNDA: nreca.coop/SUNDA
RATE MAKING
SOLAR ASCENDENCY PUTS
PRESSURE ON CO-OPS TO
RETHINK HOW THEY CHARGE
FOR POWER
By Tracy Warren
How do you rate? It’s a question that electric cooperatives have answered in largely the same way for the
past 75 years: Rates are structured to recover costs primarily with kilowatt-hour sales.
But the ascendency of rooftop solar and other member-owned generation, coupled with stagnant load
growth and a recent focus on energy efficiency, is cutting into those sales and forcing utilities to re-examine
how they charge for the power they provide.
“The historical pricing approach needs to be
reconsidered,” says Dave Mohre, executive director
of NRECA’s Energy and Power Division. “Consumers
need to know the true price of the electric services they
receive.”
Details vary, but many co-ops are doing the difficult
work of decoupling operating revenue from member
electricity use.
In 2010, Sioux Valley Energy, a co-op serving 22,000
members in South Dakota and Minnesota, was worried about declining kilowatt-hour sales. The board
approved a five-year strategic rate plan that would increase the monthly fixed charge by $5 a year until it
covered 70 percent of the co-op’s operational costs. The
co-op also eliminated its declining block rate structure, which rewarded its highest energy consumers
with lower rates.
Staggering the rate increase helped gain member
acceptance. In response to initial pushback from members, the co-op launched an education effort to explain
utility costs and highlight the need for a rate structure
that is fair for all members.
Other co-ops have adopted formulary rate plans, a
dynamic billing method that offers greater flexibility
in meeting specific, changing circumstances. In
regions with strong growth in residential solar, coops are also adjusting rate structures to allow for
net metering, which compensates members with
distributed generation for the electricity they produce.
“This is a big job, and a hard one,” Mohre says. “But
for many co-ops, it will be essential.”
RESOURCES:
NRECA Distributed Generation booklet: nreca.coop/
wp-content/uploads/2013/12/DG-Booklet.pdf
Survey: Electric Cooperative Fixed Cost Recovery (Power
Systems Engineering) powersystem.org/docs/publications/
aligning-rate-and-cost-structures-rjm_1410.pdf
Solar Cost and Financial
Screening Tool
NRECA has released a new utility-scale solar Cost
and Financing Screening Tool that offers fast, accurate cost estimates of solar projects across a range of
sizes, financing models, and locations. Developed as
part of the Solar Utility Network Deployment Acceleration (SUNDA) project, the tool can analyze more than
60 variables to determine the local cost to produce electricity from photovoltaic cells. A downloadable Excel
file and a web version are available. There is also an
online tutorial. For more information, contact Andrew
Cotter at andrew.cotter@nreca.coop or Paul Carroll at
paul.carroll-contractor@nreca.coop.
LINKS
Excel file: nreca.coop/what-we-do/bts/
renewable-distributed-energy/sunda-project
(Evaluating Solar tab)
Web version: omf.coop/quickNew/solarSunda (Chrome
browser only)
Tutorial: youtube.com/playlist?list=PLpJntTwNLWwqCAJnAsUl4_JNHqLFTh_GY
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ADVERTORIAL SPONSORED CONTENT
An Array of Options
Alternative Ways of Financing Solar Installations for Electric Cooperatives
By Nivin A. Elgohary and Todd E. Telesz
A
s rural electric cooperatives
increasingly turn to solar to
meet state-level renewable energy
mandates and satisfy demand for
“clean” energy from their memberowners, the economics can be
dauntingly complex. Because
cooperatives as a rule are taxexempt, it is far more difficult for
them to take advantage of the
Investment Tax Credit (ITC). Some
end up deploying solar installations
without being able to capitalize
fully on the federal subsidy.
In addition to traditional
financing options like cash or
term loans, there are alternatives
that can make sense, but many
of them run up against the same
obstacle when it comes to the
ITC, which is the cooperative’s
tax-exempt status. Even
“CoBank’s assistance
allowed us to maintain
our focus on other
aspects of the
project and leave the
complexities of the
CREBs to them.”
– Doug Elliott , Kootenai Electric Cooperative
cooperatives that have for-profit
subsidiaries in place typically
don’t generate enough profit in
the subsidiary to offset 30 percent
of the total cost of a solar project
that may cost $1 million or more.
Leasing a Solar Array
One solution is to lease a
solar array through CoBank.
This financing strategy enables
the co-op to finance 100 percent
of the cost of the project, with
no down payment and minimal
out-of-pocket costs. The 30
percent federal solar tax credit and
depreciation are retained by the
lessor as owner of the array, and in
exchange for these tax benefits, the
lessee is provided a lower cost of
financing than would be available
using a traditional term loan.
Financing through CREBs
Another option would be to
finance the solar array through
Clean Renewable Energy Bonds,
or CREBS. For 2015, the IRS
has reallocated up to $1.4 billion
in new CREBs, $597 million
of which has been allocated for
government entities. These bonds
may be used to finance qualified
renewable energy plants that
generate electricity from solar,
wind, hydroelectric and other
types of renewable facilities.
CoBank has been working
with co-ops on this financing
option for years, including helping
Kootenai Electric Cooperative
in Hayden, Idaho, open a landfill
gas project in 2012. “CoBank’s
assistance allowed us to maintain
our focus on other aspects of the
project and leave the complexities
of the CREBs to them,” says
Kootenai general manager Doug
Elliott. “CoBank did a masterful
job leading us through this
complex process.”
About the Authors
Utilities Division. CoBank is a $106 billion
financial services institution serving more
than 500 electric cooperatives and other
rural borrowers across the United States.
The bank offers a wide range of financial
products and services to customers in the
rural power industry, including term debt,
project finance, lines of credit and leasing.
The bank is also one of the nation’s largest
financiers of renewable energy projects, with
a total portfolio exceeding $850 million. For
further information about CoBank and its
services, visit www.cobank.com.
Nivin Elgohary is the Senior Vice President
of the Electric Distribution, Water and
Community Facilities Banking Division for
CoBank, and Todd E. Telesz is the Senior Vice
President of the bank’s Power, Energy and
LEASING a Solar Array
through CoBank:
FINANCING a Solar Array
using CREBs:
Photos by Joshua McGhee
A tour of a Wright-Hennepin solar facility
Community Solar:
About a Lot More
than Just Energy
By Michael W. Kahn
I
t will generate power to help keep the lights on—not
to mention generating some buzz. But if your electric cooperative is on the fence about whether to build a
community solar project, there are benefits to consider
that might not be so obvious.
“It’s about preserving the member relationship.
If they put solar on their house, our relationship, the
value we offer them, is changed,” says Steve Nisbet,
vice president of external relations and power solutions
at Wright-Hennepin Cooperative Electric Association.
“If you think about it, this is really the first time
somebody is going to compete with us,” Nisbet says.
While big players including SolarCity and Home Depot might be reaching out to your members, Nisbet believes co-op community solar can level the playing field.
“We’ve got this long relationship. We’re trusted.
We’re in the community,” he says. “So if I sell you something like a community solar array, I’m accountable
to do it right. It’s where I really think the co-ops are
uniquely positioned.”
Wright-Hennepin already has two community solar
arrays with a combined 243 panels up and running behind its headquarters in Rockford, Minn., near Minneapolis. A third array with 300 panels is being built at a
substation up the road.
While there are state renewable energy requirements to meet, for Wright-Hennepin, community
solar is about a lot more. Members want it, and the
co-op wants to keep them satisfied.
“It really is about the relationship. How do we
protect the relationship as technologies evolve, and
as solutions evolve, and as we’re asking members to
A10 Solar Insert
become more engaged in those solutions,” says Kelly
Frankenfeld, vice president of renewables and alternative energy.
At Wright-Hennepin it means more than just
selling panels on an array. Frankenfeld says when
someone makes a two-decade commitment for a panel,
“they’re looking for reinforcement that they made
a good decision.” That’s why, she says, follow-up is
crucial to preserving the member connection the co-op
has spent decades cultivating.
“It impacts their experience and their longer-term
relationship with us,” Frankenfeld says.
Alan Shedd, director of energy solutions at Touchstone Energy® Cooperatives, says Wright-Hennepin’s
timing is impeccable.
“Interest in solar is growing. Members have questions,
while some are looking to install systems or invest in renewable sources of energy,” Shedd says. “The community
solar project demonstrates Wright-Hennepin’s commitment to the future, provides the co-op with experience
and credibility to maintain their position in the community as a trusted information source, and offers a cost-effective option for those members who are looking to buy.”
And at Wright-Hennepin, the community aspect of
community solar is real. Panel owners have their name
on a sign that stands in front of each array, and many
come by to take a look.
“People really want to see it and go up and be near
it. We have a lot of cars come through here,” Nisbet
says. “The first comment out of everybody’s mouth is,
‘That is so beautiful.’ I never thought anybody would
say that about a bunch of metal.”
CO-OPS LEAD THE
COOPERATIVE SOLAR ELECTRIC
WAY ON COMMUNITY PV
By Kristin Laubscher
Solar is surging across the utility industry, but there’s
a part of that boom where electric cooperatives are headand-shoulders above the rest: community solar.
As of June 2015, 40 co-op community solar projects
were up and running, producing a total of 12 MW. According to NRECA data, another 30 are currently in the works.
Co-ops structure these projects in various ways,
but essentially they are a way to invite members and
businesses to share in the benefits of a utility-scale
photovoltaic (PV) array.
Some co-ops allow members to purchase the output
of one or more panels or even the portion of a panel.
Others lease units and offer a credit on the member’s
bill. Still others offer members the option to lock in
solar rates for an extended period of time. Co-ops have
even designed hybrid programs in which the output
from unpurchased panels is incorporated into the
power supply.
“The community-owned model offers several
advantages over rooftop solar, including a better
economic value without the risks associated with
installing a solar array on the roof of the member’s
home,” says Andrew Cotter, a program manager
with NRECA’s Business and Technology Strategies
(BTS) Department. “The responsibility for installation,
maintenance, and operation remains with the utility or
partnering developer.”
On average, utility-owned solar costs 30 to 50 percent
less than residential rooftop systems. The co-op can purchase materials in bulk and take advantage of standardized
designs, which lowers the cost. Co-ops can also locate and position the arrays to catch the most sunlight, either throughout the day or at times of peak demand. In areas where the
cost of electric power is high, community solar may even
offer members an opportunity to save on their bills.
According to research funded by the Department of
Energy for NRECA’s SUNDA project, utility-scale solar becomes cost effective at 1-MW. In some areas of the country,
arrays larger than 1 MW can produce electricity at a cost
below the retail rate.
“Each co-op has to decide what size project makes sense
for itself and its members,” says Doug Danley, technical liaison to BTS. “But from all of our data, 1 megawatt is the magic
number.”
Resources:
NRECA Solar interactive:
nreca.coop/wp-content/plugins/nreca-interactive-maps/esri-solarstory-map/index.html
Growing Solar – RE Magazine: nreca.coop/growing-solar
NRECA PV Manuals: nreca.coop/pv-manual-and-sunda-reference-designs
August 2015
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