Community Solar Gardens

January 2019:

Dear Sustainability Sam,

I have gotten several ads for solar energy/joining on a solar energy grid. Not sure how it works, or if it’s a scam. Anybody using? Would love to participate if it helps save energy, and if it’s legit too, of course.

-Joan

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Dear Joan,

I have heard this question asked by several neighbors and am guessing many others are wondering the same thing.

The advertisements you are getting are likely asking you to subscribe to a Community Solar Garden.  Several years back this new product took shape in Minnesota as a way for residents and businesses to invest in and “use” solar energy without installing panels on their own roof.  

It works kind of like subscribing to a CSA, where you sign up to get a certain amount of vegetables from a local farmer.  With Community Solar Gardens, you subscribe to a certain amount of energy from the solar developer’s “garden” based on the amount of electricity your home (or business) uses.  The exact electrons from that solar garden don’t go into your home, they go into Xcel’s electricity grid that powers our city, but you are offsetting your home’s usage with solar.  The solar garden itself may be located anywhere in the same or adjacent county to your home. Although some solar gardens will be on urban rooftops, most will be in rural fields due to economies of scale from the large fields, and difficulty in finding urban buildings to host.  

When you subscribe, you pay the solar developer for your subscription and Xcel Energy reimburses you for the energy your subscription produces.  This reimbursement comes in the form of a credit on your Xcel Energy bill.

Why has this product become so popular?  In addition to the environmental benefits, it can offer projected financial savings for the subscriber.  Part of the projected savings comes from a government credit that makes your solar energy worth slightly more than conventional non-renewable energy.  Another part of your projected savings may come from the ability to lock into a subscription rate structure that is expected to be better than future energy costs, saving you money over time.  

When considering participating,  you should evaluate the savings projections to see if you agree with them and are comfortable with the terms. It’s also important that the language in the contract aligns with what you’ve been told.  If a salesperson uses high-pressure tactics, that could be a red flag; you should be allowed time to read the subscription contract before signing.

With a pay-as-you-go subscription, (which most are), you shouldn’t have to worry about whether the solar garden produces well or not.  The logistics would likely be that you pay your monthly subscription based on anticipated production, you get monthly reimbursements from Xcel based on actual production, and there would be an annual reconciliation to adjust for any difference between anticipated and actual production, so that you only pay for what was produced.  For example, if you subscribe to 2% of a garden you pay for 2% of its production and get reimbursed by Xcel for 2% of its production, (and the rate you are reimbursed is hopefully more than the rate you pay.)

The thing that gives most people pause is that subscriptions are typically for 25 years.  Nearly everyone says, “I don’t know where I’ll be in 25 years”. Solar developers know that and will include language in the subscription contract about what happens if you need to exit your subscription early.  You’ll want to pay attention to the early termination terms.

1. In answer to your question about whether these are “legit”, yes as a product they are legit.  But, contract terms and sales methods will vary from one developer to another. Below are some key variables to pay attention to in a subscription contract (of course you’ll want to read the full contract before signing).
2. Subscription rate (price you pay per kWh in year 1)
3. Escalator (% your subscription rate increases each year)
4. Early Termination… what happens if you
   1. Move and become ineligible for your subscription (note: you can likely transfer your subscription to a new home if it’s in the same same or adjacent county to the solar garden).
   2. Downsize to a home with smaller energy use
   3. Pass away

The idea is that while you hopefully benefit financially, you are also offsetting your electricity with clean, renewable energy.  

For more information, the MN Department of Commerce has some guidance on their website.

Sincerely,

Sustainability Sam