Ashland Oregon's Solar Pioneers II
Background: Ashland’s Municipal Utility is governed by the City Council. Through Solar Pioneers I, the utility installed four PV systems, totaling 30 kW, using both public and private funds. Voluntary participants paid a green premium until the system costs were recouped. Participants of Solar Pioneers I did not receive any power, monetary benefits, or rights to claim RECs (environmental benefits associated with the power produced) from the project.
Program Goals: Through the Solar Pioneers II program, Ashland hoped to increase access to PV while, at minimum, matching the economic return of individual PV system projects that receive existing Federal, State, and City incentives. In Oregon, such systems can already achieve 10-17 year paybacks (residential) and 5-9 year paybacks (commercial).
Project Financing: Meeting or beating the financial return available to individual solar investors was a major challenge, as both the Federal and State incentives come in the form of tax credits, for which the City utility is not eligible. The IRS approved Ashland’s request to use Clean Renewable Energy Bond (CREB) financing (bonds sold at zero or very low interest), however, and the City also took advantage of the Oregon Business Energy Tax Credit (BETC) pass-through option. Bank of America purchased the CREB bonds at 1.25% and received tax credits, accordingly. Similarly, the Bank of the Cascades signed on to be the Oregon BETC pass-through partner, purchasing the 35% tax credit (taken over 5 years) in exchange for a one-time payment to Ashland equal to 25.5% of the system cost.
Ashland paid for project installation before members purchased shares of the project. Expenses associated with unsold shares were simply absorbed by the utility (“rate-based”) with the approval of the City Council.
Solar Pioneer II Incentives: Incentives offered by the City of Ashland for interconnected solar electric systems are $1.50 per Watt of a system installed on a residence, or $1.00 per Watt of a system installed on a business, to a maximum of $7,500 per site. Customers may now purchase the output of Solar Pioneer II panels for the remaining 17 years of the project for $701.75.
Costs: The installed cost of Ashland’s 63 kW Community Solar project, completed in 2008, was just under $7/Watt installed. The City had to revise their Request for Proposals (RFP) process to remove standard performance bond requirements for contractors, as well as permitting fees, in order to achieve this price per watt.
Shared-Ownership Mechanism: Solar Pioneers II members currently include both citizens and businesses (all ratepayers). These members make upfront purchases, in ¼, ½, or full solar panel increments, and receive payment for the value of the corresponding energy produced for a term of 20 years. Members also receive the rights to the associated RECs. These RECs are actually retired by the utility on behalf of the participating members, so the members can claim the environmental attributes as their own, but cannot trade or sell them.
Billing: A once-per-year credit, representing the monetary value (at retail rate) of power produced by each member’s share of the project is applied to the electric account for twenty years. The credit can be carried forward monthly until it is used. In the event that the credit is not fully used by the end of the year, the member will be paid for the remaining balance in the form of a check separate from the utility bill. Members can request that credits be transferred to any account within Ashland’s service territory. Any reimbursement for account transfers occurs between the customers.
Return: One panel ($825 upfront) is, at current electricity prices, projected to produce about $480 worth of savings over 20 years. This return does not meet the original program goal (a return at least equal to that achieved by individual system owners that use existing incentive programs). However, the Solar Pioneers II goals are broader than financial; the project successfully increases access to PV projects. And, even from a financial perspective, participation in the project can still serve as a hedge against rising electricity prices. As the price for electricity from the grid rises, the community solar participants’ return on investment improves.
Total Installed Cost $420,000
Cost after BETC pass-through $312,900
Participants’ investment as of 11/1/08 $82,500
Market Research: Market research was not conducted prior to constructing the Solar Pioneers II project.
Marketing & Participation: The Solar Pioneers II system was installed and began producing power in July of 2008. Ashland has marketed the project through direct mailings, a billing newsletter, events, exhibits, and gift campaigns for local charities. As of November 2008, 100 panels had been sold.