Yesterday, I wrote about Community Solar Gardens (CSGs) and their uses from an investment perspective. One of the goals of CSG legislation is to allow people without access to large amounts of credit the opportunity to invest in solar. Yet there is a clause in the bill that places the size of the smallest allowable CSG subscription at 1kW. A typical home system is usually between 2kW and 10kW, so a 1kW system does not seem unreasonable if the intent is to simulate a home system. However, if the intent is to allow people of all economic means to participate, the 1kW minimum may be onerous.
According to Rick Coen, Director of Engineering at Colorado solar installer Bella Energy, a 1 kW solar garden subscription would probably cost about $2,500 after current Colorado incentives and federal tax credits. Colorado incentives have been dropping quickly recently, as have solar panel prices, so this cost could either rise or fall, depending on which falls faster. Nevertheless, $2,500 seems like more money than most typical low income earners are likely to have at one time, so the minimum subscription may present a barrier.
A bill that was designed to allow low income earners to participate would either remove the 1 kW minimum, or provide for some type of monthly payment plan.
The Community Solar Gardens bill (HB1342) does allow the developer of the CSG to provide financing to subscribers, but for someone with low income, such loans would likely need to be secured against the subscription itself in order to achieve a low interest rate. If the income from the subscription came close to covering the payments on the loan, a CSG developer could package together a CSG subscription and a loan so that a 1 kW subscription could be bought on a monthly payment plan.
In sunny Colorado, solar farms often have capacity factors as high as 20%. At that capacity factor, typical monthly production for a 1kW nameplate system would be 146 kWh, which is worth about $14.60 a month at typical Colorado residential rates of 10 cents per kWh. Using a mortgage calculator, I found that the income from the subscription would be enough to pay off a $1,400 ten-year loan at 5%, an $1,800 fifteen-year loan at 5%, or a $2,200 20 year loan at 5%. That means that with $300 down, a low income subscriber could pledge the income from the CSG subscription for 20 years, and would eventually be able to use the income from it after the loan was paid off 20 years later. Solar panels can last for well over 20 years, so the subscription could still be worth something at that time.
A more likely option would be for the subscriber to make the initial $300 down payment on the 20 year plan, followed by smaller amounts each month to accelerate the debt repayment, and end up owning the subscription outright sooner.
Despite the potentially daunting $2,500 initial cost of a 1kW subscription, it looks as if developer financing could bring this down to a manageable initial payment. All of this assumes that incentives for solar do not fall faster than the price of solar installations, and that currently low interest rates stay low. On the other hand, if electric rates rise, the income from a CSG subscription might be enough to cover the entire subscription.
Truly Affordable Solar
While financing can in principle allow the low income earners to purchase a Community Solar Garden subscription, it remains to be seen if there will be enough demand for an asset that has no tangible value for twenty years among people without much cash to spare. I doubt that the demand will be sufficient to entice a CSG developer to offer such a complex financing arrangement. A much simpler way to make CSG subscriptions affordable would be to allow subscriptions smaller than 1 kW.