In Midwest, rural co-ops taking a lead on community solar

Workers install the first panels on Tri-County Electric cooperative's 74 kW community solar array in Rushford, Minnesota in July. (Photo courtesy tri-County Electric)

Workers install the first panels on Tri-County Electric cooperative’s 74 kW community solar array in Rushford, Minnesota in July. (Photo courtesy Tri-County Electric)

On the front lawn of Connexus Energy’s headquarters outside the Twin Cities sits the largest community solar garden in Minnesota, a 245 kW installation comprised of 792 panels on a plot of land the size of a football field.

Connexus Energy is a non-profit cooperative that is exempt from Minnesota’s mandate that investor owned utilities produce 1.5 percent of their electric power from solar by 2020. Yet the interest was high enough among the co-op’s 128,000 members to warrant the project.

It’s part of a wave of community solar projects undertaken in the past few years by rural cooperatives – entities not often seen as being on the cutting edge of clean energy.

In addition to Minnesota, where recent legislation encourages such projects, significant co-op community solar developments are operating or underway in Kansas, Wisconsin, Michigan, Iowa and other states.

In nearly all cases, the co-ops say they’re responding to the demands of their memberships.

“We didn’t do this to make money, we did this to fulfill a need of our members,” said Don Haller, vice president of marketing and member services for Connexus. “We found there is a small number of our members are who are definitely interested in community solar and wanted us to provide it.”

Community solar allows customers to subscribe to a solar garden by paying roughly the cost of a panel or multiple panels (subscribers don’t technically own the panels, the utility does). In return, they receive a credit on their bills based on the energy the panels produce.

The 20- to 25-year solar garden contracts serve as a hedge against rising energy prices and allow customers without a good location for solar, or without the financial resources to install a full rooftop array, to participate in renewable energy.

Wright-Hennepin Electric Cooperative Association, the first co-op in Minnesota to open a community solar garden in 2013, has sold out two stages of its project for a total of 90 kW. A third section is under development.

The broader interest in community solar comes in part from Wright-Hennepin’s success, the state’s community solar garden legislation and market changes.

“The cost of solar has gone down so it’s much more affordable to build a solar garden,” said Shari Wormwood, communications specialist with the Minnesota Rural Electric Association. “The co-ops know they’re not going to get all their members to buy panels in a solar garden but they know there are enough to make it work.”

After Wright-Hennepin’s success the association held a solar conference where participants heard about the concept, she said. Several co-op leaders and their boards became interested in potentially starting one in their service areas.

‘It’s a complex sales process’

Connexus Energy’s 245 kW solar garden, large enough to power 33 homes, went live in September. Customers pay $950 for each panel, manufactured in China by Canadian Solar.

“The vast majority are buying one (panel),” he said, although a group of three siblings purchased ten. Because solar gardens are so new the co-op has to take time to explain to customers how the system works, the benefits, the investment payoff timeline (14 to 16 years) and other issues, Haller said.

“There’s at least a five to six week sales cycle,” he said. “This is a new concept and the question is always ‘tell me how this works.’ It’s a complex sales process because customers struggle to understand it.”

Connexus Energy has received three times as many inquiries as purchases, so Haller is banking on some of those customers moving forward. For now the utility wants the total cost of the panels paid up front, though a different pricing method could come into play in the future.

“Would it be nice to say we are sold out? Absolutely,” Haller said. “But it’s a new concept and we’re still seeing a lot of inquiries from customers.”

Lake Region Electric Cooperative in Pelican Rapids built its 40kW project last fall and sold all 96 tenKsolar panels — with a price tag of $1,500 each — by this October. The sales cycle began with great promise after the utility sold half the panels the first month they were offered, said Dan Husted, vice president of energy services.

The rest of the sales occurred over several months and required more marketing than the initial rollout, in part because many customers are part-time residents with cabins.

“Everyone is not paying attention at the same time,” Husted said. “Our members are spread out and they’re difficult to reach. They live in Minneapolis or Fargo. It’s hard to advertise to them.”

After the slowdown in sales, Lake Region added an “easy pay” option to allow for on-bill financing. Customers could pay for the panels over three years without interest.

“That helped, because $1,500 is a chunk of change,” he said. “I couldn’t even do it because I have other bills. That’s why we split it up.”

Unlike other co-op community gardens, Lake Region made its effort a for-profit venture.

“The reason for that is we didn’t want the ratepayer subsidizing it,” Husted said, noting the co-op earns a margin on every sale. “We wanted to demonstrate it could stand on its own and the business model could support it — and that we don’t need a mandate.”

Lake Region is likely to do another solar garden project.

“It became a natural part of our marketing portfolio, just like selling off-peak and dual-fuel and heating programs,” Husted said. “It’s become second nature…and I’m excited to do another one.”

However, sales are not as strong in other places.

Opened formally in October, Kandiyohi Power Cooperative’s 140-panel solar garden in central Minnesota has attracted just 13 buyers.

“It’s been very slow,” said Diane Maurice, marketing and customer service manager. “We have an ag base and things aren’t what they were. That’s maybe made some difference, but I don’t know.”

The population of Kandiyohi’s area trends older and poorer than in other areas, making the tenKsolar panels priced at $1,250 each a tougher sell.

To make it easier, the co-op created a 24 month leasing program with an interest rate of 5.98 percent, but Maurice said only one customer is using it.

The co-op’s board decided to create a solar garden to learn more about solar and “be on the forefront of what’s going on,” she said. Renewable energy isn’t totally foreign to Kandiyohi Power, which has 255 kW of wind and solar on its grid being produced by members.

Maurice concedes to taking it “personally” when sales didn’t take off. The board continues to support the garden and she’s sanguine for now that it may take a bit of time to create a community willing to invest in community solar gardens.

“Do I see it selling out? No,” she said. “If I was asked this question three months ago I would have said we would sell it out in nine months. It’s not a losing situation for us — instead of buying kilowatts from Great River Energy we’re producing it ourselves and locking in those kilowatt hours. We still have something to gain.”

‘We’re feeling like this is a real technology’

In Iowa, too, increasing numbers of rural electric co-ops are taking the plunge into community solar – or at least planting their toes at the pool’s edge.

The Western Iowa Power Cooperative currently has plans to install 300 kW solar arrays at each of its headquarters, located in Denison and Onawa. General manager Jeff Bean said the future depends somewhat on whether the co-op receives Rural Energy for America Program (REAP) grants, issued by the Department of Agriculture. He indicated that the first project is highly likely to score a federal grant – and to be producing by the end of this year.

The utility began looking into community solar because of member feedback.

“We’ve had a number of members inquire about solar,” Bean said. “We’re seeing where solar is going. We’re feeling like this is a real technology.”

The co-op is so sold on solar technology, in fact, that earlier this year it began to install solar panels for customers wishing to generate their own power. The co-op has installed two systems – both for livestock producers. A third one is in the works, and more customers are inquiring about installation.

Solar “is just another form of energy,” Bean said. “We’ve always touted ourselves as energy experts, and we want to remain the energy expert.”

Farmers Electric Cooperative, which owns the state’s largest solar array as well as a smaller community solar project, is making yet another addition to its community solar project. General manager Warren McKenna said he expects by week’s end to have another 18 kW added to the existing 36 kW system.

“They’re sold already,” he said. For $475 upfront, investors can typically generate an average monthly credit of about $3.40 from a 250-watt module. Investors reap the benefits for the life of the project.

Several other electric cooperatives in Iowa are considering developing community solar projects. The Southern Iowa Electric Cooperative is one of them. General manager Mark Aeilts said the board of directors is likely to vote on a proposal by February.

“Most likely it would be a community solar offering,” he said. “Some co-ops have done a pilot project without making an offering to customers. We are looking at making an offering to customers.”

The array probably would be installed right outside their office and would be modest in size, perhaps in the neighborhood of 40 kW, he said.

Aeilts said he’s pursuing a REAP grant, and is hopeful he might be able to tap into some other federal grant money by partnering with his co-op’s two largest customers – a couple of small municipal utilities.

“They have grant opportunities we wouldn’t have access to, like the Community Development Block Grant,” he said. “It’s a new world…..and I’m trying to make win-wins for everybody.”

Two other Iowa power cooperatives, Iowa Lakes Electric Cooperative and Midland Power, are considering moving into solar in some fashion. Rick Olson, the chief executive officer of Iowa Lakes, said he’s developing a business plan for a solar project that he anticipates taking to his board of directors in the next few months.

Jeff Bean, of the Western Iowa Power Cooperative, said he thinks there’s little doubt as to what the future holds.

“Personally, I feel solar is here, distributed generation is here, and as a utility, we’re going to have to learn to deal with it.”

Reporter Karen Uhlenhuth contributed to this story.

One thought on “In Midwest, rural co-ops taking a lead on community solar

  1. Are coop customers getting a good deal? $950 a panel seems a bit expensive, especially when the coop gets significant peak benefits.