BARC Launches Virginia’s First Community Solar Project

Solar farm maintained by the Delaware Electrical Cooperative.

Solar farm maintained by the Delaware Electrical Cooperative.

by James A. Bacon

Governor Terry McAuliffe traveled to Lexington yesterday to flip the switch on Virginia’s first community solar project, installed by the tiny BARC Electrical Cooperative.

“BARC’s community solar project is an excellent model for stabilizing and reducing energy costs, while delivering clean solar power to a large segment of households on the grid,” McAuliffe said at the commissioning ceremony. “”I do hope this is a model for the rest of our utilities.”

With a three-acre bank of solar panels generating up to 550 kilowatts, BARC will provide 25% of average monthly consumption to 212 residential and  business customers in a service area encompassing Alleghany, Augusta, Bath, Highland and Rockbridge counties, reports the Roanoke Times. Another 25 customers are on the waiting list for when the project expands.

The electricity generated by the solar farm will replace power that BARC would have purchased from the wholesale electricity market.

BARC, a rural electrical cooperative serving more than 12,500 metered customers, had seen considerable interest among members in rooftop solar but observed that little was happening. Either upfront costs were too high, or there were physical barriers such as shading. But building utility-scale solar changed the equation. BARC had the heft to line up financing, it could acquire a shade-free location to place its solar panels, and it enjoyed economies of scale in installation. The coop also acquired a $500,000 grant from the Appalachian Regional Commission (ARC) and another from the U.S. Department of Agriculture to offset upfront financing costs.

CEO Michael Keyser explained the business model to Southeast Energy News:

We settled on a fixed-rate model because we determined one of the key barriers to solar is the  upfront cost.  It was also vitally important that the project self-sustain its own growth. We need to get the levelized cost of energy low enough so that a portion of every subscription would be set aside in a revolving fund to pay for project expansion. As long as there is a waiting list, like right now, the project will continue to pay for its own growth. It’s tremendous.

[The size of the project] was essentially a balancing act between building a system large enough to serve a meaningful number of members, while keeping the total capital costs manageable so that it was not detrimental to our balance sheet.

The value proposition to customers? Subscribers will pay $5 more per month for that 25% block of electricity consumption. But the charge for that block will remain fixed for 20 years, not subject to rate increases.

Bacon’s bottom line: The project required significant subsidies in the form of federal grants — the ARC grant amounted to more than $2,300 per customer. Without the grants, it is unlikely that solar energy in this case would have been cost competitive with the wholesale electricity market. It’s not clear if the solar farm also benefited from federal tax credits. Nothing I have read so far indicated the existence of an intermediary legal entity that would have utilized the tax credits, however, and BARC is a non-profit coop, so it could not have employed them. If I’m right and BARC did in fact build the facility without the tax credits that most other solar projects require to obtain financing, that is a significant accomplishment.

Also, it is interesting to see that so many customers are willing to pay a $5-per-month premium either to be “green” or to lock in a fixed price for electricity for 20 years. The beauty of the project is that customers subscribe voluntarily. No one is being coerced into paying higher rates for a service they don’t want.

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25 responses to “BARC Launches Virginia’s First Community Solar Project

  1. can you provide a link for the ARC Grant?

    thanks

  2. This is very interesting. It points out many issues. First, this is cost competitive now (within $5 per month) without making use of the 30% tax credit. Customers are aware of the high probability of rates rising in the future. Dominion is predicting that natural gas prices will be 250-300% higher than today within the next 10 years. That means wholesale energy costs 100 -150% higher from their gas-fired power plants. They probably supply much of the energy to this co-op (through PJM).

    In 5-10 years new solar costs will be 50% lower. Just points out that we must be cautious about overbuilding our natural gas infrastructure.

    Community solar (or Solar Garden) projects are popping up all over. They help customers whose homes are too shaded or oriented the wrong way get solar and overcome the upfront costs.

    These projects are unlikely to occur in Dominion’s or AEP’s territory but many of the co-ops in the state could certainly promote them. The solar projects help reduce their wholesale energy purchases during the most expensive time of the day.

    • Tom, do you know for a fact that community solar projects do not use solar tax credits? I was conjecturing that to be the case. Do you know it for a fact?

      • I don’t know the specifics. I only know that the Investment Tax Credit is a dollar-for-dollar offset of the federal income taxes owed by the owner of the solar panel. Non-profits such as schools and governments cannot take advantage of it. Many homeowners and small businesses do not owe enough tax to make full use of it. That might be the case for co-ops too. Co-ops often return a significant share of profits to their members. Perhaps this project was small enough to be within the taxes owed on the retained earnings of the co-op so they could utilize the ITC.

        Unfortunately, these solar projects vary case by case, so it is difficult to make blanket assumptions about their costs, financing and the application of tax credits. I was making my comment based on your statement that it did not appear that any other entity was involved to use the tax credits.

        The current 30% credit will begin to phase out in 2020 going to zero by 2023. Commercial and utility tax credits will be 10% after 2023.

        I know there is a wide variety of opinions about subsidies. I prefer to use subsidies only to get useful new industries off the ground and then phase them out. Many are not aware that fossil fuel and nuclear subsidies are greater than for solar. The fossil fuel subsidies have been with us for 100 years. They go to well-heeled investors who have enough influence to make sure Congress won’t make any changes in those programs.

        Here is the Solar Industries Association’s opinion about the value of the solar subsidy:

        “The ITC is nothing short of a tax policy success story and we expect this fact to continue to play out over the next several years.

        Specifically, we expect the roughly 27 gigawatts of solar energy cumulatively installed in the US at the end of 2015 to reach nearly 100 GW by the end of 2020. Moreover, the roughly 210,000 Americans currently employed in solar is expected to double to 420,000 in the same time period – all this while spurring roughly $140 billion in economic activity. The continued success of the ITC demonstrates that stable, long-term federal tax incentives can drive economic growth while reducing prices and creating jobs in one of America’s fastest-growing industries.”

    • BARC is the acronym for the Bath-Augusta-Rockbridge Cooperative. According to its January newsletter, “our purchased-power portfolio is comprised of several sources, including Old Dominion Electric Cooperative (ODEC), the Southeast Power Administration, and Morgan Stanley Capital Group.” ODEC is a wholesale electric co-op itself buying from multiple sources including PJM and its own generation. Dominion sells power to PJM and also to ODEC, so some Dominion electricity ends up in BARC customers’ homes, but I don’t know if BARC buys any power directly from Dominion.

  3. I do not know the specifics of this installation but there are ways to get investors involved in order to make use of the tax credits. They are complicated financial arrangements.
    The CO company that I tried to bring to NOVEC 4-5 yrs ago had software that could be grafted onto the local utility’s billing system so that a lot of purchasers could receive the net metered credits, but in Virginia those credits could only be given to the owner of the land on which the panels were located.

  4. I got curious about the ARC grant. Turns out that ARC is a Federal version of the Va Tobacco Fund – not in terms of it’s funding but in terms of it’s goals – to help the Appalachian Region and there are a large number of grants for a wide variety of purposes – 23 pages worth: https://www.arc.gov/images/grantsandfunding/ARCProjectsApprovedinFY2015.pdf

    of which it appears the solar is the only one.

    so this is not a subsidy for solar – it’s a grant for projects that are deemed to help Appalachia and in this case it is for a solar project.

    I suspect if this project is “successful” that more grants throughout the region will be proposed… and perhaps we’ll see declining coal replaced by solar …. regardless of the Federal credits…

  5. it only cost the customers 5 dollars extra every month–but what does it cost the other taxpayers who pay for the subsides needed to operate that system?
    without their knowledge or their consent?
    they don’t count?–they have no voice?–they are just pawns to be used as others seem fit?
    to make a few people to feel good, everyone else have to pay?
    nothing is for free, somewhere, sometime, someone is going to pay for everything–with money that could of gone somewhere else doing even more for our country
    not condemning green energy—but unless it pays for it’s self, it is a drain on our economic growth, regardless of claims to the contrary,
    –lets face it–if that idea worked, just put everyone to work for the government, and borrow their paycheck from other countries, until they come here and foreclose on all of us
    with 19 trillion in debt?–how far away is that?

  6. I like solar projects, for sure. But part of the reason USA previously went full-out on coal was an assumption of extremely high future natural gas prices. The opposite actually happened: natural gas prices collapsed, proving false many of the prior power plant construction decisions. It is prudent and necessary for Dominion to assume future price increases in natural gas prices and carbon taxes. Even 300% over today’s rock bottom price is quite low historically for natural gas. There is a balance.

    • Quite right TBill there is need for a balance. That was the point of my comment. Bloomberg New Energy Finance predicts that natural gas will be the primary choice for new power plants between now and 2025. There should be an adequate supply of reasonably priced gas for at least ten years. It was the financial bubble that caused the collapse in the price of fossil fuels. The world’s central bankers seem willing to keep fueling a bubble economy.

      After 2025 renewables will be the primary choice, with solar generating 50% of U.S. electricity by 2040, because of the significant cost savings. That will be just about halfway to end of the useful life of the new gas-fired plants built today. What then? Who pays for the remainder of that plant when it is used far less than expected?

      That is why I was recommending moderate or “balanced” development of natural gas power plants and related projects rather than the rush we are seeing today. We are in the midst of a major shift in our energy landscape. Bloomberg projects that electricity use in the U.S. will be 9% lower in 2040 despite significant growth in population and economic activity. In the meantime, Virginia regulators and utilities are assuming at least 40 more years of business as usual. It will be the ratepayers and the state economy that will pay for this lack of foresight.

      • Agree with you, TomH, that a rush to natural gas risks a significant overabundance of NG units during their useful life. In traditional utility ratemaking terms, that means that ratepayers would end up amortising an investment in rate base that could not earn enough to pay for itself. They would “own” equipment that would sit there unused most of the time.

        What are the options for the utility planner at a place like DVP today? I would want to see any such company striving to replace its obsolete generation with modern units that allow it to face the Clean Air Act with reasonable efficiencies and competitive retail rates. That means build NG, and increasingly, solar. Or, change direction and buy from the wholesale marketplace (and let others compete to make the sale and take the risk of what to build).

        My strong bias is in that, market-based, direction. In my opinion Dominion is long past overdue to start weaning itself from its “vertically integrated utility” model — as most traditional electric utilities north of here have done. It’s the market itself that says build solar and wind, now; so let the market do so! Let the independent generators and their investors be right (or wrong, if that is the verdict of the market) in that judgment, and let DVP concentrate on transmission and retail sales and spin off its generation rate base (as it tried to do once before) and buy capacity and energy from the marketplace, and let Dominion Generation build and sell whatever is competitive in the broader PJM marketplace or beyond, totally separately.

      • Let me add, Dominion Generation already has a large portfolio of “merchant” generators along with its rate-based “utility” units. See the full list at: https://www.dom.com/corporate/what-we-do/electricity/generation

        • what happened to this one:

          JPOWER | Birchwood Power Partners

          The Birchwood Facility is a 242MW pulverized coal-fired cogeneration facility in King George County, …

          http://www.jpowerusa.com/index.html

          • I believe Birchwood has a contract to sell its output to DVP, Larry. Most of the “non-utility generation” (or, NUG) contracts DVP entered into with independent generators back in the 1990s are expiring and not being renewed. If the plant remains economically viable, it can sell into the PJM market. But, as a small coal plant, I don’t much like its chances of clearing in the market.

  7. well… likely DVP is going to build their base-load gas plants and run gas and if gas gets scarce – just add it to ratepayers via fuel adjustment.

    In the meantime – solar is going to become a way to counter that electric bill with increasing fuel adjustments.

    as people peel off and use solar – the remaining ratepayers will pick up the shifted costs which is going to accelerate the adoption of solar – as well as increased energy conservation.

    there’s a real question of stranded costs and who will pay them if solar expands… I don’t think DVP will be able to insulate themselves from that trend.

    and perhaps their plan is to just have ratepayers – even the ones who start using solar or conservation – to still have to pick up the stranded costs.

    DVP is a well run company in several dimensions -one of which is providing value to their investors… so for them to have positioned themselves to accommodate these expected trends.. and to insure their investors are protected.

    DVP is not in business to be a benefactor to electricity users. Their mission is primarily to their health as a corporation and to their investors.

    That’s not evil or nefarious… they’re going to assert their interests… and ratepayers will assert theirs… and DVP has their bases well covered with the Virginia GA and the SCC and the chances that Virginia will transition to a Public Utility model is somewhere between a snow ball in hades and the Redskins becoming a dynasty.

    😉

  8. “That’s not evil or nefarious… they’re going to assert their interests… and ratepayers will assert theirs”

    I am not saying that Dominion is evil or nefarious. I agree with what Acbar has said. I believe that Dominion has done an effective job of utilizing the current rules to serve their customers and attract investors. But no one is served by pitting investors against the ratepayers.

    My concern is that continuing to extend the policies encouraged by the current rules well into the future will harm both the ratepayers and the investors, and ultimately Dominion. Someone must step forward and lead Virginia into the 21st century. The habit in this state seems to be to wait on Dominion to tell the policy makers what to do.

    I think it is unlikely for a utility to do this on their own. In other states the momentum has come from a leading politician or other group of influential policy makers who have a better vision of the broader interests. Whoever has long-term plans to fill Kaine’s senate seat might step forward and develop a plan for Virginia’s future prosperity centered around a modern energy system. Or perhaps if that is in conflict with Dominion’s plans that would be political suicide. Someone needs to save Dominion from themselves. There are too many intelligent people there to not recognize the trends. Maybe they see it but want to build a long-term revenue base for as long as they can. But eventually ratepayers will revolt in whatever way they can. Then the utilities we need to maintain our modern grid will no longer be healthy. Now is the time to sow the seeds of change. It will take long enough, even if most people agree with the need to change. And most folks don’t have a clue. They will just wake up one day and wonder how their utility bills got so high.

  9. Oh I agree – completely and for all the worries Jim has about “subsidies” for solar – I’ve never heard him fret as much about – ” Dominion spokesman Richard Zuercher said the company has yet to make a decision on the new nuclear unit but acknowledged that Dominion has spent nearly $600 million to date on it, including about $301 million authorized by the General Assembly to be recovered from customers’ pocketbooks.”

    so I do wonder how much solar 300 million of subsidies would buy.

    and I wonder when/if Jim acknowledges that 300 million to subsidize a Nuke – is much , much worse than the niggling subsidies he seems obsessed with for solar.

    • For the record, I share the concerns about the multibillion-dollar nukes. However, I think Dominion is holding the nuke option in reserve only in case regulations squeeze out so much coal and gas (CO2-emitting fossil fuels) that nuclear is the only option left for providing base-load capacity.

  10. 300 million dollars could build a LOT of solar that could use a LOT LESS gas to run when solar was not available

    why is the 300 million subsidy for nuke better than 300 million subsidies for other fuels?

    Haven’t you made a value judgement here about the viability of nukes verses the viability of other sources and in doing so violate your own stated ethic that subsidies of any kind are wrong?

    they’re “ok” for nukes, why?

    the non-nuke path would be to harvest the solar when it is available and not use other fossil fuels as long as solar reamained available then when it’s not -use the gas but in doing things that way – you end up cutting the use of gas just as much as if it was replaced by nukes except Nukes cannot be moderated – they’re either full on or off and would still need gas for peaks

    if you maintained an equal opposition to subsidies – you should oppose both – let solar/gas hybrids compete against solar on cost because both of them are viable and both will reduce the use of gas.

    you’re in essence, willing to pick winners and losers with subsidies for the ones you believe will win… right? Isn’t that a clear bias against actual free market competition?

  11. Here is a part of an article from RMI that was evidently in Forbes last month re nuclear … by Amory B. Lovins http://blog.rmi.org/blog_2016_07_11_closing_diablo_canyon_nuclear_plant_will_save_money_carbon

    “The CEO of one of America’s most prominent and technically capable utilities, Pacific Gas & Electric Company—previously chairman of the Nuclear Energy Institute and the Edison Electric Institute—just announced its decision (subject to regulatory approvals) to close PG&E’s well-running twin nuclear reactors at Diablo Canyon because they’re uneconomic and won’t be needed.

    Unlike previous nuclear shutdowns, some of which were too abrupt for immediate replacement with carbon-free resources, PG&E’s nuclear output will be phased out over 8–9 years, replaced timely and cost-effectively by efficiency and renewables. That means no more fossil fuel burned nor carbon emitted, all at less cost to ratepayers. How much less? Natural Resources Defense Council (NRDC) says at least $1 billion (net present value to 2044).

    PG&E also agrees that removing the inflexible “must-run” nuclear output, which can’t easily and economically ramp down much, will help integrate more renewable power reliably into the grid. Midday solar, rather than being increasingly crowded out by continued nuclear overgeneration, will be able to supply more energy. As Germany found, integrating varying solar and wind power with steady “baseload” plants can present challenges for the opposite of the reason originally supposed: not because wind and solar power vary (demand varies even less predictably), but because “baseload” plants are too inflexible.

    Diablo Canyon enjoys the scale economies of a two-unit plant, is ably staffed, has a large and sophisticated owner, and is running well—rated in the top tier by the Institute of Nuclear Power Operations. Persistent seismic concerns aren’t currently in the foreground. Rather, as PG&E acknowledges, market forces have made California’s last nuclear plant redundant. As customers use electricity more productively, solar roofs generate homebrew power, and competitive renewables flood the wholesale market, Diablo Canyon has become superfluous—and cheaper to close than to run.

    The big economic lesson here is that nuclear power’s ability to displace fossil-fueled generation is not simply about tons of carbon dioxide saved. Nuclear power also incurs an operating cost that for many reactors, including Diablo Canyon, has become very high. Saving and reinvesting that avoidable cost can buy a larger quantity of cheaper carbon-displacing resources, saving even more carbon.”

    Seems like Larry’s comments are right on … about inflexibility and cost that could actually save more carbon. The phase out seems an appropriate and sensible solution to closing down Diablo. Why are we talking of a new nuke on the fault line?

  12. well.. not opposed to Nukes – any way, shape, or form.

    they’re clearly better than coal.

    and I do have concerns about squandering gas for base load when to this point I do not see any other fuel that used to ramp up and down quickly in response to varying demand – and varying input from solar

    without gas – we’d have to “burn” baseload all the time and “dump” the excess when not needed by disconnecting the turbines …

    we’ll probably never be totally depleted of gas but it could get very scarce and very expensive if we do not conserve it.

    it’s a keystone fuel. it complements baseload – and renewables.

    without gas – to provide for peaking demand – you’d have to run more baseload 24/7 and that would, in turn, render solar no place in the cycle to be able to supply generation.

    gas is the key. it allows solar to generate and gas steps in when solar ebbs.. and baseload just continues to run at a static rate with gas and solar handing off to each other – a symbiotic relationship.

    gas also provides you with a distributed – load-balanceable grid. Without gas – dynamic load-balancing basically means running the baseload 24/7 and disconnecting the turbines when it’s more than the grid needs.. no place for solar to run in tandem unless you just idle the baseload – wasting it since there is no way to “turn it down”.

  13. They have some pretty hilly country out there. Wonder why the went solar vs. wind? The subsidy?

  14. Need to read the article JohnB. The subsidy was from ARC – the Appalachian Regional commission. They fund (subsidize) a wide variety of projects for Appalachia – water towers, sewage treatment plants, roads, hospitals, schools, etc… and this proposal was given a grant – it could have been wind or solar and in the future you may see both if the Commission sees such projects as ones that provide jobs and help Appalachian communities.

    here, take a look:

    https://www.arc.gov/images/grantsandfunding/ARCProjectsApprovedinFY2015.pdf

  15. LtG, it’s a nice spreadsheet listing of projects but I don’t see how that answers my question of why solar vs. wind.

    • The grant does not care if it’s one or the other – it’s up to the person doing the project – then they pitch it as a project that benefits the Appalachian region.

      it could be anything – wind, solar, a road… a clinic… a wastewater treatment plant.

      the ARC folks don’t care… you could pitch wind or solar and it would make no difference in terms of getting the grant.

      capishe?

      it doesn’t even necessarily have to have a particular cost-benefit as far as I can tell – as long as it’s considered a benefit to the community… for instance a clinic or a water tank – .. they’re grants , not loans..

      or am I still not understanding your question?

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