How do community solar farms work?

[MVal]

Last month my utility company announced that coming soon will be the opportunity to lease solar panels (around $400) in exchange for reduced utility bills. They have not given any details yet about how much one's bill might be reduced or at what rate, so I'm very curious what kind of a deal this could turn out to be.

Does anyone know about these community solar programs and if they're a Mustachian move?

[gardeningandgreen]

My utility did something similar. I love the idea of owning solar and our house is not a good fit at all(large old shade trees that are awesome). Looking more into it it didn't make sense for us. The reduction on our bills it was estimated would work out to something like $2-$5 per month with a similar buy in. I don't remember all of the details but for us it would never pay off. Make sure to look into the details!

[MVal]

My utility did something similar. I love the idea of owning solar and our house is not a good fit at all(large old shade trees that are awesome). Looking more into it it didn't make sense for us. The reduction on our bills it was estimated would work out to something like $2-$5 per month with a similar buy in. I don't remember all of the details but for us it would never pay off. Make sure to look into the details!

Thanks. Yes, I'm afraid it might be something similar for me. I have a small house and my electric charges are rarely over $75-100/month, so unless the savings will be significant, I doubt a $400 buy-in would work for me. My house is a rental, but it does get a lot of sun exposure. I would like to look into how hard/expensive it would be to implement a solar panel and if my landlord would let me.

[BigHaus89]

You likely don't get any solar panels yourself. You basically are buying solar "units" ($400 in this case?) that are at the utility's solar site and you get payback on what your "unit" generates. So, you pay $400 and get $5 back per month(or whatever it generates) over the course of 10-20 years. Ideally, the $400 pay back is relatively quick and you get the "profit" in the form of a discounted power bill.

[MVal]

You likely don't get any solar panels yourself. You basically are buying solar "units" ($400 in this case?) that are at the utility's solar site and you get payback on what your "unit" generates. So, you pay $400 and get $5 back per month(or whatever it generates) over the course of 10-20 years. Ideally, the $400 pay back is relatively quick and you get the "profit" in the form of a discounted power bill.

Right, I get that.

I'm just curious what others' experiences have been with this kind of system and if it's worth it.

[kudy]

I evaluated a similar offering a few years ago and decided against it - the payback time was too high (here's a post summarizing my thoughts: http://www.monetarymusings.com/626/should-i-buy-solar-in-a-community-solar-array-clean-energy-collective/) - the math might have improved for the project you're being offered though?

[omachi]

Here's how it works at one company I looked into in MN. May vary elsewhere but should be similar. Might be upfront costs elsewhere with cheaper rates, etc.

First, the utilities are required by law to buy power from small producers, like individual houses with solar panels or the community solar gardens in the topic. So these community solar companies put up a number of panels somewhere flat and sunny. They then sell you power at the price it takes them to finance the install, maintain the site, and make some small profit. In cases of modern solar, this is probably 1-2 cents cheaper per kWh than the power company charges. The utilities are generally in the loop, so they still bill you but they show a credit at their rates based on what your portion of the community solar produced, the bill to the community solar for your usage, and charge you what is owed.

A simple example to drive it home:

You subscribe to a solar garden at 1000 kWh per month for 10 cents per kWh. Your utility charges 11 cents per kWh. You actually use 1100 kWh. Your utility bills you for 1100 kWh at 11 cents, or $121 for the power. You get a credit from producing 1000 kWh from the garden at the utility rate or 11 cents, giving you a credit of $110. You have to pay your subscription cost of 1000 kWh at 10 cents, or $100. So the final bill is $121 + $100 - $110 = $111, which is $10 cheaper.

Now, there are potential downsides. The company I looked at had a 25 year subscription with fees to leave even if you moved and transferred the subscription to the new home owner. They increase their rates on a yearly schedule and if the utility increases don't match or exceed the rate increase the deal gets worse or possibly more expensive than buying from the utility. It also seems that if the whole solar array produces less than expected, you might not get the full output you were expecting, but that just reduces the benefit proportionally.

Finally, cost of solar output has been dropping for a while, waiting another 5 years might or might not provide larger benefits. Hard to say.

[Huskie87]

I recently posted something similar to your question OP and I'm doing this now.  If your decision is purely motivated by return on investment, this is not going to be the best use of your money.  However, the way I see it, I would pay more for electricity from solar panels than electricity from nat gas or coal.  If you look at the opportunity cost of putting your money into the solar panels instead of the stock market, you'll end up 3-5% better per year by putting the money into the market.  IMO, I'd prefer the solar energy and the lower rate of return that comes with that decision. 

If I have to work an extra month at the end of my career to afford renewable energy for the next few decades, I'm very ok with that.

[MVal]

I recently posted something similar to your question OP and I'm doing this now.  If your decision is purely motivated by return on investment, this is not going to be the best use of your money.  However, the way I see it, I would pay more for electricity from solar panels than electricity from nat gas or coal.  If you look at the opportunity cost of putting your money into the solar panels instead of the stock market, you'll end up 3-5% better per year by putting the money into the market.  IMO, I'd prefer the solar energy and the lower rate of return that comes with that decision. 

If I have to work an extra month at the end of my career to afford renewable energy for the next few decades, I'm very ok with that.

So in other words, this is fine if your motivation is mainly altruistic and you look at it as investing in the greater good/progress? That's interesting. I might consider doing that.