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How to Power an entire Neighborhood with Solar Energy

How do you help a community transition from passive consumers of energy into active producers?

One way to accomplish this is to start a neighborhood solar co-op.

That’s just what the Mt. Pleasant neighborhood of Washington DC did.   How did they do it?

  • A neighborhood couple did the all of the work required to successfully install solar panels on their home.  Naturally, they wanted to share the benefits of that research with the community.  So, they formed a co-op and rallied the neighborhood (signs, fliers, etc.)
  • They then interacted with people in the neighborhood to understand what their objectives were and whether solar could help them.  One good tip: they did a survey that got people to look at the kWh they use and think about potential savings.
  • The group grew to 350 families, the installs began, and the group was able to lobby the local government for an increase in incentives.  The success of this group spawned solar co-ops in eight other neighborhoods across the DC area.

Here’s a video if you want to get more detail.

So, why is a co-op necessary?

It’s simple.  The biggest stumbling block to purchasing a solar system is navigating the government incentives that make it affordable.  Here’s an example from the Washington DC area (incentives are all over the map):

  • A 3 kW solar panel system costs ~ $20,628 installed.Solar panels on house roof
  • The DC incentive is – $6,426
  • The Federal Tax Credit is roughly – $6,188
  • The final step is forward sell your renewable energy credits for five years – $5,552
This leaves a final cost of $2,462 for the system.  That’s a very affordable system at a little under $1 a kW.   This results in an estimated savings per year of $559, and it will only grow over time.  The pay-off period is a little over 4 years.

The Ideal Solar Co-op

This example suggests that an ideal co-op would do three things:

  1. The co-op would negotiate group rates for the purchase and installation of solar panels, driving down costs.  Optimally, the co-op would have employee members who live in the neighborhood.  The co-op employees would install and maintain the solar panels for customer members.
  2. Employee members or volunteers would help co-op members navigate government rebates, tax incentives and the sale of renewable energy credits.
  3. It would lend members the money required to purchase the panels at a rate that is less than the annual rate of pay-back on the system from cost savings.  Community financing methods could provide the start-up capital required to make these small loans.  It’s also likely that this fund would generate a rate of return much higher, with lower risk, than the returns seen on almost ALL retirement funds.

Here’s a final thought.  In some places the incentives available won’t be as aggressive as the example above.  This means that community financing will be needed to bridge the gap.   If the investment could be packaged in the right way, I suspect there won’t be a shortage of people willing to invest in their neighborhood’s energy system.

Your always looking for an edge analyst,

 

JOHN ROBB

 

PS:  Here’s a suggestion on timing: take advantage of these government incentives while they are still available.   A financial crisis that will sweep all of these incentives away (in both the US and the EU) is right around the corner.

PPS:  An alternative to the co-op business is a micro-public company made possible in the US by the recent JOBS Act.  This is so new, we don’t have examples yet.

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Comments on this entry are closed.

  • David Fraley

    A good example, though it could go further. A 3kw system is +/- half the size it would take to take a single family home like the one in the photo all the way off the grid and all the way into the world of distributed generation. I would guess that an effort such as you illustrate is likely grid tied (as is my own home’s system, while I wait for the next generation of battery technology). The downside to a grid tied system is, absent your own storage, if the grid goes down, you’re as down as if you didn’t have the solar component at all, as you know. Nevertheless, it does illustrate one way for people to at least partially gain some control over their energy production as well as consumption.

    • johnrobb

      David, True. A co-op like this has lots of potential. The next steps, beyond the basic installs, would be to add a micro-grid — which allows it to offer storage, power smoothing, local markets, as services… JR

      • David Fraley

        A note on incentives and amortization; yes, the incentives are less than consistent nationally, and further economic deterioration could see them eliminated, but a portion of the math on payback is a simple bet on the future price of grid electricity. My home system, turned on in late 2010 amortizes in 16 years with the incentives that were applicable to my situation, but part of the math, the part that will only be answered on the back side of the equation is, what is the price of electricity going to do? My provider has increased rates in each of the years that the system has been in use. Each increase lowers the amortization. So far the bet has been a good one. The worth of independence may one day be the best part of the return.

        • johnrobb

          Thanks David. Exactly! JR

  • pragmatic sustainability

    There are lots of models for this. Like any good resilient/sustainability strategy they are site and context dependent.

    One block off the Grid – http://1bog.org/
    SolarCity – started out with this neighborhood group purchase model but moved away from it.
    PACE – Property Assessed Clean Energy financing was the most promising model for financing until FHFA used a nuclear option on it. http://pacenow.org/blog/

    This was a voluntary assessment on your property taxes to repay the loan for the energy improvements.

  • Excellent post! The value of community, again. Once I am a homeowner, I will be all over a solar co-op.

  • andy

    Patrick,

    If you haven’t run the numbers since 08, you need to run them again. My first panels in 08 were 175w Solarworld…..best price I could find them at was over $800. I added 10 more 245w last fall, and 50% more watts was down to $600. NOW I see them for under 400.

    • johnrobb

      Thanks Andy. JR

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