Over the last couple of years there has been a surge of interest in community owned solar projects in British Columbia. There are now at least five projects that are under way or planned. We thought it would be helpful to compare Solshare Energy to these other projects.
Two Models
When we launched Solshare we chose a cooperatively owned model that is widespread in Europe. Some of the others have decided to use a “Virtual Net-Metering” (VNM) model that is newer and more common in North America. We feel the cooperative model has several advantages.
Below we compare the various models. The comparisons are based on limited information we have on some of these initiatives and we will update this as we have more information. Let us know if you have any additional information.
The Projects
Solshare Energy was the first project that allowed community members to have direct ownership and benefit in community owned solar projects. It has one plant that has been generating revenues for two years and another plant currently under construction.
Nelson’s Solar Garden was the next project to come along. A solar array is up and producing power. They use a virtual net-metering model that is open to customers of Nelson’s electrical utility.
New Westminster’s Solar Garden is in the process of signing up supporters who are customers of New Westminister’s utility. It is also a VNM model.
Fortis BC has a proposal before the BC Utilities Commission to install a large 240 kW array in the Okanagan and will also use VNM.
Island Community Solar Co-op is a Nanaimo based project that plans to use the cooperative model.
Parameters for evaluating the models
|
Current ROI |
Potential ROI |
Legal Ownership |
Portability |
Return of Capital |
Transfer-ability |
Voice |
Accessibility |
| SolShare |
4.0% |
7.00% |
Yes |
Yes |
Possible |
Yes |
Yes |
Open |
| Nelson Solar Garden |
2.80% |
5.70% |
No |
Limited |
No? |
Limited |
Indirect |
Limited |
| Fortis BC |
negative |
? |
No |
Limited |
N/A |
Limited |
No |
Limited |
| Island Community Solar Coop |
? |
? |
Yes? |
Yes? |
Possible? |
Yes? |
Yes? |
Open? |
| New Wesminister |
3.51%? |
? |
No |
Limited |
No? |
Limited |
Indirect |
Limited |
ROI
Most models require community members invest a sum of money in the solar array(s) and then they receive a regular benefit either in the form of dividends or saving on their electrical bill. The amount of savings or dividends compared to the initial investment allows one to calculate the return on investment (ROI).
Solshare created a business model that would allow us to pay a dividend that was better than the anuual return investors would earn in a savings account or GIC. However, it is still lower than the long term average from a diversified equity investment portfolio. We have been paying out an annualized dividend rate of 3.3% to 4% and expect to continue paying at lest 4%. The payments do qualify for a dividend tax credit. Note: caution should be used when comparing dividend rates with total returns from other investments. See the information on return of capital below.
Most of the VNM models seem to be offering a return that is less than this. The VNM model does have the advantage of being an after tax savings but if it the ROI is significantly lower that advantage is lost.
Fortis BC seems to be the worst of the lot and will have a negative ROI. Although this project does not require an up front investment the “rental” of the panels costs almost twice as much as you save.
We feel that promoting solar energy projects with a negative return on investment does not help promote renewable energy as a viable alternative.
Legal Ownership
With Solshare the investors become shareholders of the solar plants. They have legal rights as such. With VNM models it seems as the though utility retains ownership of the solar array. Fortis makes it clear that customers are only “renting” the panels.
We think that we need a more diversified ownership model for energy and that this has an advantage over concentrated ownership in the hands of a few utilities.
Voice and Democracy
Solshare is governed by a board that has representatives from both the workers that build the plants and the investors that own them. The investors can nominate board representatives using one person / one vote (based on cooperative principles).
The VNM projects do not appear to have a board that represents the community members. In the case of New Westminster and Nelson there is an indirect voice since they are owned by democratically elected governments. The Fortis project will be owned by a corporation which has its own board.
Return of Capital
Most projects will require an initial investment to help fund the acquisition of the solar array. It is not clear if the VNM investors can get this sum back if they withdraw from the scheme or move out of the utilities boundaries.
Although Solshare does not guarantee return on capital we do offer two mechanism through which this could happen. If there are enough new investors waiting to invest we will buy back shares from those wishing to sell. We will also set aside a portion of revenues after dividends as a reserve fund. At some point in the future this fund will be large enough to start buying back a portion of shares from investors.
Accessibility
Most VNM investments are only open to utility customers. If you are outside of the utility’s service area you are not eligible. If you are a renter who does not pay for your electrical service you are also not eligible.
Solshare investments are available to almost anyone in BC. In fact although we are primarily focused on making community investments open to BC residents we can also accept investments from elsewhere.
Portability and Transferability
With utility controlled VNM projects you may no longer be able to participate if you move outside of the utility service area. And if you want to sell or transfer your share you can only do so with other customers in the service area.
With co-operative models like Solshare you don’t have those restrictions.
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