FAQ - Frequently Asked Questions
1. So, what exactly is Community Solar?
A community solar project, also known as a community solar farm, is a large solar electric power generation system that feeds solar power directly into the grid. Members of the community own shares in the system. Taking advantage of Vermont’s net metering and group net metering laws, the revenue from the ‘sale’ of solar electricity into the grid is distributed into the utility accounts of the owners of the shares, in proportion to their share of ownership. Since solar is now cheaper than the grid, buying these shares would ensure that you would save money in the long run, once your shares are paid off with the savings in your electric bills.
2. What is net metering and how does it work in Vermont?
Net metering is the practice of installing and connecting a solar photovoltaic (PV) system to the grid electric lines coming into your house in such a way that it spins your meter backwards. (These days, of course, with smart digital meters, the energy generation is captured and recorded on a separate channel on the meter but the net effect is the same.) When the sun is shining and you’re using power at home for your appliances, the energy output of the solar electric system directly offsets some or all of your usage. In the night, you would continue to consume electricity from the grid. During the day, any excess solar energy production ends up on the grid. The utility maintains a balance of your production and consumption in your account. At the end of the month, you may get a positive or a negative bill depending on whether you consumed more or produced more. This rolling account is carried forward for one year from any month. There will usually be months, especially in the summer when you produce more than you consume while in the winter, the equation is reversed. A well designed solar PV system would produce as much in a year as you consume since, in general, utilities do not pay you back for excess production on an annual basis. In most net metered systems, the cost savings accrue at the rate at which you buy electricity. In Vermont, your residential electricity rate is around $0.15/kWh. With net metering, every kWh of solar energy that is fed back into the grid or offsets your usage, is also at this rate.
In Vermont, in addition to offsetting your electricity cost at the residential rate, solar PV owners get paid $0.04/kWh for every kWh of electricity produced by your solar PV system, for the next 10 years of operation. This incentive is called a ‘solar credit’, and in practice, this benefit is used to offset any excess electricity charges such as due to excess electricity consumption (over and above solar production capacity) and daily service charges. In sum, while you may pay $0.15/kWh for your energy usage, you get paid $0.19/kWh for the solar energy generated by your system. This allows you to ‘undersize’ your system by about 30%, to only generate enough energy so that the revenue from the sale of solar electricity would zero out your electricity bill.
3. What is group net metering?
Group net metering is a convenient mechanism to combine a bunch of utility accounts which could be a mix of residential, commercial, industrial, etc, into a group and split the output of a single large solar PV system among the members of the group in a preset fashion. The main advantages of group net metering are that larger solar PV systems are more economical (lower $/watt costs) than multiple smaller ones, and group net metered solar PV systems could be optimally located to deliver maximum benefit to members of the group who may not all have good sites for solar PV.
4. Ah, so is a community solar farm a group net metered system?
Exactly! Community members who own shares in the system provide their utility accounts via a group net metering document to Green Mountain Power, along with the percentage of share ownership. GMP then splits the revenue from the PV system among all the accounts in proportion to their share of ownership.
5. Summarize for me then, the advantages of community solar.
6. What incentives are available for doing solar?
7. What is the cost of my share to eliminate my electricity bill?
If your annual electric bill is $1,000, you would need to buy 12 shares each costing $825 for a cost of about $10,000, before the 30% federal tax credit. Accounting for the tax credit, your net cost is $7,000. Your share of the annual operating expenses is $140. This means your net annual savings are $1,000 - $140 or $860. Payback = Net cost/Net savings, or 8 years. After paying off the system you will enjoy savings for the next 17 years worth $13,000. Of course you can buy as many or as few shares as you want to.
Are you a business owner? The numbers get even better with state tax credits and accelerated depreciation. Your share pays off in under 6 years!
8. Is this a good deal? I have heard that solar has come down a lot in price. Is that true?
Solar PV installed prices have indeed come down dramatically in the last few years! In many parts of the country, the installed cost of solar today, is cheaper than the grid, even before incentives. Base installed costs for large ground mounts today are half of what they were 7 years ago. Larger installations are generally much less expensive than smaller ones, due to volume pricing and economies of scale. Ground mounted solar installations are generally a bit more expensive than roof mounts, but the difference disappears when you look at large systems. With good siting and layout, lower panel temperatures, better control of tilt, orientation and system maintenance (particularly snow removal), the economics of large ground mounts are superior to those of roof mounts of equal size.
9. Why is this better than doing solar on the roof of my residence or a ground mount on my property?
Here are some answers for 2kW roof and ground mount and 5kW roof and ground mount at your residence. They assume an ideal south-facing site with no shading. Roof mounts assume a newish roof, requiring no replacement during the solar lifetime. The upfront costs also include the inverter 25-yr warranty, which is part of the community solar upfront cost. Other than that, there is no system maintenance or annual costs assumed for your residential system. There are no property taxes on small systems in VT and no insurance increases are assumed.
All cases except the 5kW roof mount are worse than community solar, in terms of simple payback. Only the 5kW roof mount matches the community solar in payback. Roof mount larger than 5kW would have a better value proposition than the community solar. Residential ground mounts would have to be about 12kW or larger in size to match the community solar value proposition.
So, unless you have a newer roof with a perfect southern exposure and no shading and you have usage exceeding the revenue potential of a 5kW system, you would be a great candidate for community solar!
10. What other costs should I expect to see in this community solar arrangement?
The following table lists the major annual fee items incurred by the entire system. These fees would be split among the members in proportion to their share. The total annual fee is under $40/kW.
11. Are there any risks if state laws change regarding net metering?
The state of Vermont has committed to reach 90% renewables by 2050 and solar is a very large component of that. GMP is an active partner in transitioning to a distributed generation grid and are shaping their business model with this in mind. So it's highly unlikely that net metering would go away.
12. What are Renewable Energy Certificates and why should I care?
Renewable Energy Certificates* (RECs) are an important part of Vermont's goal of 90% renewable resources by 2050. RECs document the environmental attributes of the power produced from renewable energy projects such as solar arrays. They may be sold separately from commodity electricity and can be purchased by corporations and other entities to offset their carbon emissions when they cannot or will not reduce emissions any other way. Purchase of RECs allows polluters to avoid the need to clean up their operations. Thus many companies may claim to be “carbon-neutral,” or committed to investing in renewables, when they are simply buying RECs to meet arbitrary standards. Selling RECs has often led to deceptive marketing practices by solar companies and false claims of renewable energy consumption.
According to the Vermont Law School Energy Clinic, net metering customers — like the members of Southshire Community Solar — who retain and retire their RECs in Vermont are counted as consumers of renewable energy, and our state’s renewable consumption levels increase accordingly. When owners of solar generators sells their RECs out of state, they are not considered to have consumed renewable power because they have sold that right to another entity. Thus, projects in Vermont that sell RECs out of state do not increase regional renewable energy deployment.
Furthermore, sales of RECs out of state from the Vermont net metering program do not provide a financial benefit to ratepayers. When RECs are sold by private developers, they receive all revenue from these REC sales. Vermont’s ratepayers are harmed by these sales because Vermont is not credited for the renewable energy that customers are paying for. The current rate of compensation for net metered projects is only fair to Vermont ratepayers if the rate includes the value of REC retirement.
All RECs generated by Southshire Community Solar are retired; in other words, they are not sold separately. This is not always true of commercial solar projects.
* RECs are also known as renewable energy credits, green certificates, green tags, or tradable renewable certificates.
13. To be clear, who owns the Renewable Energy Certificates?
Unlike some community solar arrangements, with Southshire Community Solar, the individual shareowner gets ownership of the solar renewable energy certificates (RECs) in proportion to the owner's share. Why is this important? RECs are a way to make solar more financially attractive, by selling the ‘green attribute’ of solar into a clearinghouse set up to trade these attributes. The problem with doing this is that once you sell the ‘green attribute’ you would have given up the right to call yourself renewable and you would have sold it to some polluting out-of-state entity, which has decided to buy these attributes as a shortcut to compliance with environmental regulations. In addition, doing so would mean that the installation does not contribute to Vermont’s goal of transitioning to 90% renewables by 2050.
We, at Southshire Community Solar, think there is a better way. We get to keep the renewable energy credits and in doing so, we do our part in contributing to a cleaner, greener Vermont!
Information about the Southshire Community Solar LLC and other links can be found here.
Intrigued? Contact Bhima Nitta <mailto:[email protected]> for the next steps, or you can reach out to any of the local community members listed on our Contacts page whom you may already know: all will be more than happy to assist you.
A community solar project, also known as a community solar farm, is a large solar electric power generation system that feeds solar power directly into the grid. Members of the community own shares in the system. Taking advantage of Vermont’s net metering and group net metering laws, the revenue from the ‘sale’ of solar electricity into the grid is distributed into the utility accounts of the owners of the shares, in proportion to their share of ownership. Since solar is now cheaper than the grid, buying these shares would ensure that you would save money in the long run, once your shares are paid off with the savings in your electric bills.
2. What is net metering and how does it work in Vermont?
Net metering is the practice of installing and connecting a solar photovoltaic (PV) system to the grid electric lines coming into your house in such a way that it spins your meter backwards. (These days, of course, with smart digital meters, the energy generation is captured and recorded on a separate channel on the meter but the net effect is the same.) When the sun is shining and you’re using power at home for your appliances, the energy output of the solar electric system directly offsets some or all of your usage. In the night, you would continue to consume electricity from the grid. During the day, any excess solar energy production ends up on the grid. The utility maintains a balance of your production and consumption in your account. At the end of the month, you may get a positive or a negative bill depending on whether you consumed more or produced more. This rolling account is carried forward for one year from any month. There will usually be months, especially in the summer when you produce more than you consume while in the winter, the equation is reversed. A well designed solar PV system would produce as much in a year as you consume since, in general, utilities do not pay you back for excess production on an annual basis. In most net metered systems, the cost savings accrue at the rate at which you buy electricity. In Vermont, your residential electricity rate is around $0.15/kWh. With net metering, every kWh of solar energy that is fed back into the grid or offsets your usage, is also at this rate.
In Vermont, in addition to offsetting your electricity cost at the residential rate, solar PV owners get paid $0.04/kWh for every kWh of electricity produced by your solar PV system, for the next 10 years of operation. This incentive is called a ‘solar credit’, and in practice, this benefit is used to offset any excess electricity charges such as due to excess electricity consumption (over and above solar production capacity) and daily service charges. In sum, while you may pay $0.15/kWh for your energy usage, you get paid $0.19/kWh for the solar energy generated by your system. This allows you to ‘undersize’ your system by about 30%, to only generate enough energy so that the revenue from the sale of solar electricity would zero out your electricity bill.
3. What is group net metering?
Group net metering is a convenient mechanism to combine a bunch of utility accounts which could be a mix of residential, commercial, industrial, etc, into a group and split the output of a single large solar PV system among the members of the group in a preset fashion. The main advantages of group net metering are that larger solar PV systems are more economical (lower $/watt costs) than multiple smaller ones, and group net metered solar PV systems could be optimally located to deliver maximum benefit to members of the group who may not all have good sites for solar PV.
4. Ah, so is a community solar farm a group net metered system?
Exactly! Community members who own shares in the system provide their utility accounts via a group net metering document to Green Mountain Power, along with the percentage of share ownership. GMP then splits the revenue from the PV system among all the accounts in proportion to their share of ownership.
5. Summarize for me then, the advantages of community solar.
- Economies of scale for panels and construction costs.
- Siting that provides more efficient solar exposure than might be available at your house.
- Low financial risk with shared coverage of annual costs to protect your investment.
- Legal assistance to set up the LLC Operating Agreement and Lease & Agency Agreement provided by Lon McClintock, using case law and best practices from other community solar models in the state.
- You own your shares. You can sell your share of the project to any Green Mountain Power customer. Banks and credit unions will accept your share of the output of the system as collateral for a loan to purchase a share. If you move to another location in the GMP service area you can take your shares with you.
- Reduced individual up front costs, as well as tax deductions and sharing in other benefits of the project. The system will pay for itself in under 9 years for residences and 6 years for business.
- Low interest rate loans are available for community solar, through the Vermont State Employees Credit Union and the Heritage Credit Union.
- Renewable energy credits (RECs) stay with the project, making the energy generated truly green and contributing to Vermont’s goal of 90% renewables by 2050. This is critical because not all community solar projects are truly green. Some trade their RECs in out of state exchanges, which essentially means those projects cannot claim to be green anymore.
6. What incentives are available for doing solar?
- The biggest and most well known incentive is the federal income tax credit of 30% for solar PV systems. If say, your share costs $10,000, your tax credit is $3,000. If the system were installed and operational in 2017, when you file your federal taxes for the 2017 tax year, you would offset your federal taxes by $3,000, so effectively the share is costing you $7,000. What if you don’t have a tax burden of $3,000? The law allows you to ‘carryover’ the excess tax credit for a certain number of years. If you’re uncertain about your tax situation, talk to your tax accountant, a CPA or a trusted financial advisor. A guide to the Residential Renewable Energy Tax Credit is available at http://dsireusa.org, under Federal Incentives.
- In Vermont, in addition to offsetting your electricity cost at the rate you are currently paying for energy, solar PV owners get paid $0.043/kWh for every kWh of electricity produced by your solar PV system, for the next 10 years of operation. This incentive is called a ‘solar credit’, and in practice, this benefit is used to offset any excess electricity charges such as excess electricity consumption (over and above solar production capacity), energy efficiency charges and daily service charges. Due to rule changes, the savings decrease by 10% in 2017—however, since our permits were filed in 2015 and 2016, we are eligible for the higher incentive! This makes it all the more important to invest in our community solar project!
- If you are a commercial or industrial owner of a solar photovoltaic installation, you may be eligible for a 7.2% uncapped corporate state tax credit. You may also be eligible for accelerated depreciation benefits. Net of all such benefits, your payback may be in the range of 5 years! Please consult your tax advisor for details and eligibility.
- All solar photovoltaic installations are sales tax exempt, in the state of Vermont.
7. What is the cost of my share to eliminate my electricity bill?
If your annual electric bill is $1,000, you would need to buy 12 shares each costing $825 for a cost of about $10,000, before the 30% federal tax credit. Accounting for the tax credit, your net cost is $7,000. Your share of the annual operating expenses is $140. This means your net annual savings are $1,000 - $140 or $860. Payback = Net cost/Net savings, or 8 years. After paying off the system you will enjoy savings for the next 17 years worth $13,000. Of course you can buy as many or as few shares as you want to.
Are you a business owner? The numbers get even better with state tax credits and accelerated depreciation. Your share pays off in under 6 years!
8. Is this a good deal? I have heard that solar has come down a lot in price. Is that true?
Solar PV installed prices have indeed come down dramatically in the last few years! In many parts of the country, the installed cost of solar today, is cheaper than the grid, even before incentives. Base installed costs for large ground mounts today are half of what they were 7 years ago. Larger installations are generally much less expensive than smaller ones, due to volume pricing and economies of scale. Ground mounted solar installations are generally a bit more expensive than roof mounts, but the difference disappears when you look at large systems. With good siting and layout, lower panel temperatures, better control of tilt, orientation and system maintenance (particularly snow removal), the economics of large ground mounts are superior to those of roof mounts of equal size.
9. Why is this better than doing solar on the roof of my residence or a ground mount on my property?
Here are some answers for 2kW roof and ground mount and 5kW roof and ground mount at your residence. They assume an ideal south-facing site with no shading. Roof mounts assume a newish roof, requiring no replacement during the solar lifetime. The upfront costs also include the inverter 25-yr warranty, which is part of the community solar upfront cost. Other than that, there is no system maintenance or annual costs assumed for your residential system. There are no property taxes on small systems in VT and no insurance increases are assumed.
All cases except the 5kW roof mount are worse than community solar, in terms of simple payback. Only the 5kW roof mount matches the community solar in payback. Roof mount larger than 5kW would have a better value proposition than the community solar. Residential ground mounts would have to be about 12kW or larger in size to match the community solar value proposition.
So, unless you have a newer roof with a perfect southern exposure and no shading and you have usage exceeding the revenue potential of a 5kW system, you would be a great candidate for community solar!
10. What other costs should I expect to see in this community solar arrangement?
The following table lists the major annual fee items incurred by the entire system. These fees would be split among the members in proportion to their share. The total annual fee is under $40/kW.
- Maintenance Contract
- Land Lease
- Uniform Capacity Tax, State
- Municipal Property Tax, Solar
- Municipal Property Tax, Land
- Insurance
- Corporate Tax
- LLC Tax Reporting
- Reserves
11. Are there any risks if state laws change regarding net metering?
The state of Vermont has committed to reach 90% renewables by 2050 and solar is a very large component of that. GMP is an active partner in transitioning to a distributed generation grid and are shaping their business model with this in mind. So it's highly unlikely that net metering would go away.
12. What are Renewable Energy Certificates and why should I care?
Renewable Energy Certificates* (RECs) are an important part of Vermont's goal of 90% renewable resources by 2050. RECs document the environmental attributes of the power produced from renewable energy projects such as solar arrays. They may be sold separately from commodity electricity and can be purchased by corporations and other entities to offset their carbon emissions when they cannot or will not reduce emissions any other way. Purchase of RECs allows polluters to avoid the need to clean up their operations. Thus many companies may claim to be “carbon-neutral,” or committed to investing in renewables, when they are simply buying RECs to meet arbitrary standards. Selling RECs has often led to deceptive marketing practices by solar companies and false claims of renewable energy consumption.
According to the Vermont Law School Energy Clinic, net metering customers — like the members of Southshire Community Solar — who retain and retire their RECs in Vermont are counted as consumers of renewable energy, and our state’s renewable consumption levels increase accordingly. When owners of solar generators sells their RECs out of state, they are not considered to have consumed renewable power because they have sold that right to another entity. Thus, projects in Vermont that sell RECs out of state do not increase regional renewable energy deployment.
Furthermore, sales of RECs out of state from the Vermont net metering program do not provide a financial benefit to ratepayers. When RECs are sold by private developers, they receive all revenue from these REC sales. Vermont’s ratepayers are harmed by these sales because Vermont is not credited for the renewable energy that customers are paying for. The current rate of compensation for net metered projects is only fair to Vermont ratepayers if the rate includes the value of REC retirement.
All RECs generated by Southshire Community Solar are retired; in other words, they are not sold separately. This is not always true of commercial solar projects.
* RECs are also known as renewable energy credits, green certificates, green tags, or tradable renewable certificates.
13. To be clear, who owns the Renewable Energy Certificates?
Unlike some community solar arrangements, with Southshire Community Solar, the individual shareowner gets ownership of the solar renewable energy certificates (RECs) in proportion to the owner's share. Why is this important? RECs are a way to make solar more financially attractive, by selling the ‘green attribute’ of solar into a clearinghouse set up to trade these attributes. The problem with doing this is that once you sell the ‘green attribute’ you would have given up the right to call yourself renewable and you would have sold it to some polluting out-of-state entity, which has decided to buy these attributes as a shortcut to compliance with environmental regulations. In addition, doing so would mean that the installation does not contribute to Vermont’s goal of transitioning to 90% renewables by 2050.
We, at Southshire Community Solar, think there is a better way. We get to keep the renewable energy credits and in doing so, we do our part in contributing to a cleaner, greener Vermont!
Information about the Southshire Community Solar LLC and other links can be found here.
Intrigued? Contact Bhima Nitta <mailto:[email protected]> for the next steps, or you can reach out to any of the local community members listed on our Contacts page whom you may already know: all will be more than happy to assist you.