Rural Electric Cooperatives: 3 Different Approaches to Reducing the Cost of Community-Scale Solar
This is the fourth in a series of blog posts on RMI’s Shine program. Shine is innovating and unlocking the community-scale market. Download the insight brief.
In a previous blog post, we explained how rural electric cooperatives could become a multi-GW market for community-scale solar by 2020. Co-ops want solar to save money, diversify energy supply, meet renewable portfolio standard (RPS) requirements, and meet member needs. Yet in order for the co-op solar market to achieve its potential, co-ops need to better understand the value of community-scale solar and need to access compelling community-scale offerings.
Below we describe three rural electric cooperatives that are accessing compelling community-scale solar offerings. While each co-op has adopted a different approach, their collective experience shows that costs can be reduced through utility-supported development—when utilities proactively support aspects of the development process—and aggregation—when multiple community-scale projects are aggregated into a portfolio.
1. G&T Led Community-Scale Solar: Dairyland Power
In February, Dairyland Power, a Wisconsin-based generation and transmission provider, announced plans for 15 MW of solar, a huge project in a state off the radar for most solar developers. The 15 MW will take the form of 12 projects ranging between 0.5 MW and 2.5 MW each.
Dairyland decided to pursue solar in order to diversify its energy portfolio, remain ahead of RPS and other mandates, and meet the needs of consumers of distribution co-op members who are asking for more solar.
In response to its request for proposals (RFP), Dairyland received bids for large centralized solar farms as well as portfolios of community-scale projects. The winning bids, from groSolar of Vermont and SoCore Energy of Chicago, were for portfolios of community-scale projects sited on the distribution grid in the territories of Dairyland’s member co-ops.
Craig Harmes, business development manager at Dairyland explains, “There was not a significant difference in prices between centralized projects and distributed projects, and distributed projects provide multiple benefits. Smaller projects can be better absorbed by the local distribution system, they can be located adjacent to substations—minimizing the need for infrastructure upgrades, and by dispersing projects throughout the system we diversify weather conditions. Most importantly consumers of member co-ops prefer distributed systems because they like to know that their renewable energy is local.”
Laura Caspari of SoCore explains that though distributed portfolios sacrifice some economies of scale compared to central systems, they save on interconnection costs. “Connecting at the distribution level saves money and time. You don’t have to go through the lengthy MISO study process, and transformer and other tie-in hardware costs are also reduced.”
The 15 MW of Dairyland projects are not shared solar; the power is directly sold to one off-taker (Dairyland). Several member co-ops, however, have expressed interest in developing shared solar to add on to the project. Caspari expects that distribution co-ops will add an additional six or eight shared solar projects around 100 kW to 250 kW each.
2. Portfolio of Projects with Shared Solar Option: Pedernales Electric Cooperative
Serving nearly 280,000 accounts in Texas Hill Country, Pedernales Electric Cooperative (PEC) is one of the largest distribution electric cooperatives in the country. In November, PEC released a request for information for a portfolio of community-scale systems. After a competitive procurement process, Pedernales is moving forward with plans to purchase up to 15 MW from several distributed solar sites across its service territory.
PEC sees solar as a means to diversify its energy supply, meet member demand for solar, and secure long-term competitive pricing. Instead of developing one 15 MW project in a sparsely populated region of its service territory, Pedernales developed a portfolio of distributed projects. According to Dr. Peter Muhoro, PEC’s director of energy research and strategy, “By sizing our projects just under 1 MW we were able to realize the true benefits of the system being on the distribution side. There is also value in members being able to view the assets. When they can view the solar assets, our members feel more connected to the co-op and our clean energy generation.” In addition, projects less than 1 MW avoid some costly and time-consuming ERCOT wholesale generation requirements.
PEC was deliberate about procuring solar in a way that reduced total cost. One way it did this was by bundling individual projects into a portfolio, which reduced its power purchase agreement (PPA) price by approximately $10 to $15/MWh. Those cost reductions include economies of scale from bulk procurement, efficient labor use, and efficient equipment usage.
Another way PEC reduced cost was by identifying and securing land for the developers, saving between $3 and $5/MWh on PPA prices. “In some cases, it’s easier for us to find land in our service territory,” Muhoro explains. “We know the local landowners, they trust us, and they are willing to make a fair deal.”
Though PEC’s projects were developed as economic additions to PEC’s generation mix and not as shared solar, PEC is exploring options for members to subscribe to the systems. According to Muhoro, “The concept of community solar is not new to co-ops. For nearly eight decades, co-ops have served their member-owners in a similar fashion as community solar, where the member is an owner of the co-op. We believe that co-ops are best positioned to provide community solar solutions as they already have the culture of member ownership.”
3. Aggregating Across Co-Ops: Kit Carson and Springer Electric Co-Ops
While PEC serves almost a quarter million Texans, Springer Electric Cooperative serves just over 3,000 meters in northern New Mexico. After an RMI-hosted workshop in Santa Fe, when Springer CEO David Spradlin wanted to expand the co-op’s solar portfolio, he teamed up with neighboring Kit Carson Electric Cooperative (KCEC) to procure community-scale solar. RMI’s Shine program is supporting the co-ops with scoping, procurement, vendor selection, and PPA execution. Earlier this month, RMI released an open RFP for 3 MW from three 1-MW systems on behalf of Springer and KCEC.
These are not the first solar projects for KCEC or Springer. Springer has signed PPAs for power from two 1-MW systems in its service territory. KCEC has signed PPAs with multiple community-scale projects including a recent PPA with Picuris Pueblo, one of New Mexico’s 19 pueblo tribes.
Though KCEC and Springer are already experienced solar buyers, both co-ops saw value in participating in a collaborative procurement process and receiving RMI support on RFP development and evaluation. Both co-ops are motivated to procure solar to save money and meet member needs.
Saving Money through Utility-Supported Development and Aggregation
The three examples above show how co-ops can reduce the cost of community-scale solar through utility-supported development and aggregation.
Figure 1: Community-Scale Solar at Utility-Scale Prices
Buyer-owned levers include buyer-supported siting, buyer-supported interconnection, and buyer-supported permitting. Collectively these levers are called buyer-supported development or, when the buyer is a utility, utility-supported development. RMI analysis suggests that utility-supported development can reduce PPA prices by around $9/MWh.
The co-ops described above supported development by securing sites (Pedernales), identifying leads on sites (KCEC/Springer), and facilitating interactions with local authority having jurisdictions (AHJs) (Dairyland member co-ops).
When multiple community-scale projects are aggregated into a portfolio of projects, developers save on hardware procurement, equipment rental costs decrease, and developer labor can be more efficiently utilized.
Dairyland, Pedernales, and Springer and Kit Carson each aggregated demand into portfolios of community-scale projects. RMI analysis suggests that volume aggregation can reduce PPA prices nearly $3/MWh. Muhoro of Pedernales believes that savings from volume aggregation may be much greater, perhaps as high as $15/MWh.
The examples above are just three of many instances of co-ops pursuing community-scale solar. The market will continue to grow (we estimate to an installed base of 6 GW by 2020) as more co-ops access appealing community-scale solar offerings and as more co-ops learn from the experience of their peers— corresponding to a market opportunity of $8–10 billion over the next 5 years.