What is the legal structure of the project?
Each project involves at least four legal entities: a System Owner, who finances the project and owns the Project Company. The Project Company serves to hold the solar PV system and related assets. The Utility Company supplies net metering credits and the Power Purchaser receives them.
All power produced by the solar PV system is exported to the grid as excess electricity, in exchange for which the Utility Company applies net metering credits to the Power Purchaser's utility account.
Co-op Power plays the role of project developer. We form coalitions of project stakeholders, including those mentioned above as well as contractors to build solar PV systems. We educate stakeholders on the nature of the deal, execute contracts to formalize their engagement, and then partner with financiers who can make use of the tax credits that nonprofits cannot in order to pay for projects. Financiers may be power purchasers themselves (as in our direct purchase model), high net worth members of Co-op Power, or mission-aligned solar financing firms. In exchange for this work, financiers pay us a developer fee, typically equal to about 10% of the total project cost.
What is Co-op Power's role in the project, and how does Co-op Power make its money?
What if the Utility Company refuses to supply net metering credits to the power purchaser?
Utility companies are required to supply power purchasers with net metering credits by state regulations, e.g., 220 CMR § 18.00 in Massachusetts. While net metering regulations may change in the future, it is unlikely that future changes will apply retroactively to completed projects. In other words, a policy change effected tomorrow is unlikely to impact a deal inked today.
That said, this unfortunate scenario is precisely what happened recently in Nevada, where the Public Utilities Commission (PUC) elected not to include a net metering grandfathering provision in new policy. This decision was so harmful to the solar industry in the state that the PUC already being compelled to add a grandfathering provision in the face of widespread backlash — backlash that would be even more intense if such a policy were to be proposed in a relatively progressive state like Massachusetts or New York. Nonetheless, it is important for potential Power Purchasers to consider any agreement's inherent legislative risks.
Does net metering policy constitute an unsustainable grid subsidy by non-solar rate payers?
No. Many independent analysts have investigated this issue and found that the value added to the grid by distributed generation capacity like solar is best reflected by retail — and not wholesale — electricity prices. For more information, this report by the Brookings Institution is a good place to begin.
We typically connect Solar PV systems to the grid via standalone meters. This means that power goes directly to the grid, and does not directly affect hosts' electricity usage. All value is delivered to hosts via net metering credits.
Day-to-day fluctuations in the building's electricity usage will not have any adverse impact on the performance of the solar PV system.
Will the way my building uses electricity affect the performance of the solar PV system?
What if the section of my roof that holds the solar array requires maintenance?
As a rule, we do not install systems on roofs more than 10 years old. We arrange financing for projects based on the understanding that the panels will remain in place for the duration of their useful life, typically at least 25 years. This is why we thoroughly analyze potential hosts' roofs as part of our due diligence process.
Based on historic trends, Department of Energy analysts expect the cost of solar systems to continue to fall by 5% - 10% per year. At the same time, the efficiency of solar modules tends to increase each year. So why not wait to go solar?
Many people weigh whether or not they can afford to go solar. We would ask, can you afford not to go solar? To put a sharper point on it, it is unlikely that you will ever not invest in energy. The question is, do you want to continue to buy power from a system that drives us to consume 1.6 times as many resources as the earth can produce in a year while enriching large corporations at the expense of low income communities and communities of color?
Or would you prefer to invest in a better system? If you could invest in a better system today, would you do it?
Why go solar now, instead of waiting for prices to drop and technology to improve?
Co-op Power guarantees the long-term performance of the system under an Operations & Maintenance Agreement that it sets up between the System Owner and the contractor that installs the system. We ask that the Power Purchaser make the system accessible to the installer as needed for routine maintenance.
The system's power output will naturally decrease at a rate of about 0.5% per year, and the system will require a new inverter after about 12 years. We account for both of these contingencies while designing and financing projects so that Power Purchasers will not be impacted by them.
Who is responsible for the long-term performance of the system?
Will the solar Power Purchasing Agreement ever require me to pay more for power than I do currently?
Co-op Power typically sets up Power Purchasing Agreements (PPAs) to include annual escalators of 1.0% - 1.5% to account for inflation. The cost of power under the agreement increases each year at the rate of the escalator. Because our PPAs always begin at a minimum 10% discount compared to prevailing electricity rates, it would take multiple consecutive years of flat or falling electricity prices to put solar Power Purchasers in the position of paying more for solar power than they would pay for electricity from the grid. This is unlikely because electricity prices should continue to increase each year, according to the U.S. Energy Information Administration:
In spite of the likelihood of savings under the PPA increasing rather than decreasing, energy markets tend to be volatile, and potential Power Purchasers should consider price trends and savings targets before executing the PPA.
The PPA rates that Co-op Power offers power purchasers will always be at least 10% below prevailing market rates; we often offer savings of greater than 10%. We occasionally structure PPAs as net metering agreements, which may cause the PPA rate to appear to be higher than what the host institution currently pays for power. However, this is not the case.
Under a net metering agreement, the host institution receives value not in the form of power that spins its meter backwards, but rather in the form of net metering credits (NMCs). The value of the NMCs may be higher than what the host institution currently pays for power. For example, the host institution may currently pay $0.17/kWh for power, while NMCs may be worth $0.23/kWh. In this case, Co-op Power would base the host institution's discount on the value of NMCs, not on what the institution currently pays for power. In other words, Co-op Power could sell NMCs to the institution for $0.20/kWh, a 13% discount on the NMC price of $0.23/kWh. For each NMC purchased by the institution for $0.20/kWh, it would receive a credit worth $0.23/kWh on its utility bill and so realize a net benefit of $0.03/kWh. This is how we can still provide a >10% discount while apparently charging a higher per kWh rate than the host institution currently pays.
It may be helpful to think of NMCs as gift cards for electricity. Each $20 gift card that Co-op Power sells the host institution may be exchanged for $23 worth of electricity from the electricity company.