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Solar "Cooperative" Concept....Plan.....Reality?‎ > ‎

Below will be an ever-changing set of scenarios to be shared and vetted by Community Solar Wisconsin advisors and guests to this page. The basic goal is to find a business model that allows for individuals to support the development of solar projects in their "community", while taking advantage of the Federal Investment Tax Credit, Focus on Energy cash-back incetives, State and Federal Depreciation on equipment, as well as other incentives enjoyed by individuals and businesses who put solar on their own property.

Please see http://www.wiserearth.org/group/commsolarmadison under File Folder-Focus on Energy Grant Docs to see the recent research project completed on this topic. Email any comments or contributions to solarconnections@gmail.com . Thank you in advance for your feedback!

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The most recent model includes solar "investors" contributing to a "Solar Loan" fund from which solar PV (and thermal at some point) projects could be funded. How the investors contribute to the loan fund is under question right now.

Forming a cooperative will allow the members taking part in this venture to better understand the nature of this business venture including the benefits and risks involved. Membership may allow access to making loans. Securities registration and offering / loan documents may need to be arranged before any promise of return or any commitment of funds could be executed.

These scenarios are being used to explore possible business models and do not constitute a promise for a return on investment.

Scenario A is a model being examine more closely in March and April of this year to see if it provides the best way to attract both lenders and borrowers, and which can be an engine for rapid and scalable solar devlopment in the years to come. One added feature being vetted is having the borrower transfer the Renewable Energy Credits (RECs) to the cooperative for more effective valuation through aggregation.

Scenario B is the individual "micro-finance" scenario which is a yet-to-be vetted way this transaction could take place.

SCENARIO A: Solar Cooperative Solar Loan Fund.

Community Solar members could pool their resources in order to make a "Solar Loan" to a homeowner or business owner whose property could best exploit the sun's power. Unlike a 3rd-party solar investor, the landowner can take advantage of the tax incentives and enter into a standard interconnection agreement with the utility, either through net-metering or through a solar buy-back program. The Community Solar entity would serve the all-important role of financing solar projects that would otherwise go undeveloped due to the high up-front costs of this technology. The landowner would pay down the loan over 10, 15, or 20 year loan options, including an interest rate that would be attractive to borrowers and could still sustain a loan fund over time.

Example: Site owner develops a 10 kW solar project that is 100%-financed by CSW. $80,000 is raised by cooperative members who agree to take a low-interest return on their investment contribution, with the cooperative obligated to pay members perhaps 2-4% interest on this investment if set up strictly as a loan fund. The site owner for solar would pay somewhere between 4-6% interest on this note, A 20-year note at 4% interest could be structured so that the early years include scheduled "balloon" payments to take advantage of the cash grant, rebate, and/or investment tax credit in the first year, and the state and federal depreciation values in years 1-6. Balloon payments from the borrower can be used to capitalize the next solar loan project, so that multiple solar loans could be made in the first few years of the initial project. CSW benefits from these loan payments in the early years, and gets either a security interest in the property or ownership of the property after year 5, and continues to benefit from the loan or lease payments after year 5. The landowner gets to lock-in energy costs for several decades, and the community gets to benefit from the displacement of "Brown" power from fossil fuels or from nuclear.

See File Library at http://www.wiserearth.org/group/commsolarmadison for reports on legal and financing research.

See attached spreadsheet below for a "Solar Loan" calculator to estimate the cash flows and Return-on-Investment numbers for different loan term options.

SCENARIO B: Individual Micro-Funding through an online service.

Somewhat akin to what www.prosper.com allows micro-investors to do, Community Solar Wisconsin Cooperative could allow individuals to learn more about POTENTIAL solar projects that are being offered for funding.

Example 1: This homeowner on the eastside of Madison would like to install a 5 kilowatt PV system on his garage roof, which faces 10 degrees west of south and a 40 degree pitch from horizontal, with approximately 7% shading from solar pathfinder readings. Mr. Smith's credit rating is 650 from agency X, and 676 from agency y. The project cost is $40,000.00 forty-thousand dollars. So far, this project is 35% fully funded (could include graphic bar indicating percentage of project funded vs. yet to fund). The closing date for funding this project is April 30th, 2010. The terms of the loan are as follows: 5 year note, monthly payments, interest rate = 5.5%. (full prospectus including transaction costs and origination fees as well as explanation of risks could be found through a link) (picture and other information would be provided in listing)

Example 2: This small business owner would like to install a 20 kilowatt PV system on his south-facing metal roof (with no shading) at a 25 degree angle from horizontal. This business has a AA credit rating. This borrower DOES qualify for a Rural Energy for America 25% grant for the project costs. This 20 kW fixed array has a start-up cost of $155,000.00 (One hundred fifty-five thousand dollars). The terms of the loan are as follows: 10 year note, monthly payments, interest rate = 3.99%. (full prospectus including transaction costs and origination fees as well as explanation of risks to be found at this link) (picture and other information to be provided in listing)

Example 3: This hotel would like to install a solar hot-water system capable of handling 200 gallons of hot water a day. The price of this sytem is $xxxxx.xx. This business qualifies for the following state and federal incentives: xxx, yyy, zzz. The borrower is willing to pay 3% interest on a 5 year loan for this system. This project is 25% funded at this point, with a funding close date of April 15th, 2010). (full prospectus including transaction costs and origination fees as well as explanation of risks to be found at this link) (picture and other information to be provided in listing)

Please feel free to comment below and/or email any comments or contributions to solarconnections@gmail.com . Thank you in advance for your feedback!