Solar Gardens – Part I

Posted on: December 7, 2012

Not every home or business is suitable a solar electric (often called photovoltaics – PV) installation.  Challenges from building orientation (no southern exposure), shading, lack of space, or lack of authority, such as apartments or condominiums, can limit opportunities for installing PV.  The National Renewable Energy Lab estimates that only 22%-27% of residential buildings are suitable for hosting a solar electric system.  A community energy system, often called solar gardens, can offer an alternative ownership model.

The basic concept is rooted in collective ownership, where a centralized PV array is owned or leased by multiple subscribers.  The array is connected to the grid, and utility customers in the area are able to own a portion of system, receiving credit for the production from their PV panels, while avoiding the problems of having an installation their property.  A third-party, such as private company, cooperative, non-profit, municipality, or utility, controls and maintains the system on behalf of the subscribers.  Operations and maintenance is the responsibility of the third-party, with a small fee assessed to subscribers.

Solar gardens often take advantage of economies of scale by constructing a PV array larger than the 4-10 kW a typical home would need.  This can reduce per unit costs of the installation.  Often the solar garden is placed at a building with a larger electric consumption, such as a religious building, school, or library, but this is not necessary for the model to work.  Maintenance and repair funds are also generally placed in escrow.  The production from the panels appears as a credit on an individual customer’s bill; you don’t actually receive your own “electrons!”  The local utility may take a “wheeling” fee for moving the electricity, so the payment may be less than is offered under typical net metering arrangements.

Collective ownership of electricity-production is an old concept that is still prevalent across Wyoming and Montana in rural electric cooperatives, so why are there no solar gardens in our states?  Although the technology and basic concept are relatively simple, numerous policy and regulatory obstacles hinder the formation of solar gardens.  These include:

  • Securities Law – If a private company owns the solar garden and sells shares to the public, the issue is regulated by securities laws.  This adds a layer of complexity to the initial organization and recruitment of subscribers.
  • Incentives – The principal incentive for PV systems is a 30% federal tax credit available to either businesses or residences.  Currently, federal law does not allow offsite ownership by a residential or business customer to claim the tax credit.  Therefore, a for-profit business needs to own the system to claim the credit.  Also, cooperatives and non-profits cannot use the tax credit.
  • Net Metering – Wyoming and Montana net metering laws do not address offsite renewable energy systems, and they generally prohibit “meter aggregation.”  In short, the renewable energy system must be hooked up to the same meter where electricity is consumed.   These state policies make “distributing” the energy from a centralized PV array difficult.
  • Regulated Utilities – In Montana and Wyoming, the state government grants selected utilities the exclusive right to market electricity in a geographic area.  Therefore, you cannot install a PV array and sell the electricity to your neighbor – the electricity would have to go to the regulated utility.  Currently, the regulated utilities have little incentive to offer a solar garden concept to its members.

Please see Solar Gardens II – Planting a Solar Garden in Montana or Wyoming to learn how a solar garden could overcome these obstacles.