The next push in solar installations is the concept of community solar. This is a way that persons can participate in solar who do not want solar on their roof, or those who cannot afford to put solar on their roof, or live in apartment housing. In California Senate Bill 843 which would have created the opportunity for community solar was defeated. This bill would have made it possible for utility customers within the territories of PG&E, Southern California Edison, and San Diego Gas & Electric to purchase shares of power from these community-based facilities with medium-scale renewable energy systems (up to 20 MW).
Customers would sign contracts with the facility and pay a monthly fee for their share of electricity sent into the grid. These community energy facilities then report the customer’s percentage of the facility’s power to the respective utility. This amount of solar electricity would then be credited towards the the customer’s utility bill. This is how virtual net-metering would function with these community-based renewable energy facilities.
The renewable energy facilities’ economies of scale would have given way to a cheaper cost per kWh than standard residential systems- a savings that would keep the cost of electricity down for Californians who wish to utilize renewable energy through virtual net metering.
These small to mid-sized solar power plants could have been built at existing establishments such as schools or churches, reducing the need for large-scale solar power plants in the desert, which often pose environmental concern.
These community-based renewable energy facilities also would have created an estimated 12,000 jobs without spending any state funds.
This financial model does not require any up-front money from the developer. The concept is that a lot of electricity customers, like a community development, want solar but do not have the money to build a solar system themselves.
A solar company comes to the development and signs up 1,000 households who are willing to invest $10 per month towards a solar field for five years. Where the solar field is located could be on the community development property or anywhere empty land is available and not too expensive.
So, now you have a guaranteed an investment of $10,000 per month for five years which is a total investment of $120,000 per year, or $600,000 over five years.
Take the money to the bank and get a secured loan for 5% and borrow the $600,000 for the five years.
The cost of installing solar on the ground will be $3.00 per watt.
So for $600,000 you can build a solar system that will produce 200,000 watts.
On the average year, the solar system will produce 250,000 kilowatt hours.
The income from sales of the electric power produced includes two factors, the solar renewable energy credit which is worth $0.32 per kilowatt hour and the price of electricity of $0.11 per kilowatthour or a total of $0.43 per kilowatt-hour in New Jersey.
Your system is producing 250,000 kilowatt-hours times the income of $0.43 per kilowatt-hour, or $107,500 per year.
The loan will cost you $600,000 times 0.05 or $30,000 per year. Taxes amount to $4,500 leaving the net income at $73,000 per year.
You split the profit with the investors so you get an income of $26,000 per year and the remaining $27,000 is then split amongst the investors who will be getting $26 per year income.
That is a return on investment of 20%. At the end of the five years, you will have an additional income of $30,000 per year.
So with no money from you, you will have an income of $56,000 per year after five years from this one project. Not bad. Meanwhile the investors are still getting 20% per year on their investment. Of course, the rate of return depends on the sale of the generated electricity and if the price of solar produced energy is less than 43 cents per kilowatt-hour, then the rate of return will be lower. This does not include the tax benefits which will affect the bottom line increasing the rate of return.
That is how the system works. Now this is a simplified example but not too far off from reality.