One type of industry practice that has made solar energy feasible is “net metering”. In essence, you place solar panels at your place of residence/business, i.e. rooftop, and have the meter run backwards. When introducing the Solar Hosting Farm (SHF) concept, I was asked how this concept might deal with net metering in areas where a tiered rate system would make the economics unattractive. I must admit that this is a real challenge that will take some innovation, but, let’s not forget that existing regulations that govern our energy industry are not bound by the laws of physics, rather, they are man made. Therefore, they can be changed as easily as they were implemented.
Net metering is certainly a convenient method, but, it limits you to the service area of your utility. One way to address this issue via a SHF is to allow hosting customers to record the KwH they generate via their solar panels at a SHF on a periodic basis, i.e. monthly basis, and provide that information to the utility that provides the electricity to their home/business. The number of KwH generated at the SHF would be deducted from the KwH used in their service area thereby kicking them down to a lower tiered rate. The operator of the SHF could automatically provide that information to the utility each billing cycle.
The logistics of handling the payments received by the SHF customer could involve the use of an impound account (just like lenders do for mortgages). In order to have your panels hosted at a SHF, you must first have the SHF create an impound account with a bank for payments received by the SHF. Income derived from the generation of solar energy by a customer’s solar panels at the SHF would be deposited into the impound account. Thereafter, funds in the impound account would be withdrawn automatically by the utility that sells electricity to that customer in its service area. Such withdrawals would not be subject to any income taxes. If you have a balance at the end of each billing cycle, you simply carry it forward and even collect interest along the way. Any shortfalls between income generated at the SHF and electricity consumed at the utility’s service area would be paid directly by the SHF customer to the utility in the respective billing cycle. All of this information would appear on the billing statement from the utility, bank statement from the bank, and hosting statement from the SHF. The SHF customer would only be allowed to make one withdrawal per year to address situations where electricity usage falls short of the solar energy being generated by the customer’s solar panels at the SHF. The SHF customer would be required to declare these types of withdrawals as income on their tax return.
Unlike net metering, the SHF model would allow you to work with any utility throughout the country. For instance, a large company that is a SHF customer with multiple offices in the U.S. could have a single impound account and yet give authorization to multiple utilities to make withdrawals for payment from that single account. In fact, that same company could have solar panels on multiple SHFs, and still have the payments received from the multiple SHFs deposited into a single impound account and then allow multiple utilities to make withdrawals from that same account.
Finally, the SHF concept benefits from another perspective. There’s no double taxation at the SHF level. Income derived by the SHF operator from the sale of electricity to the grid is offset by the cost of electricity to the SHF operator since the SHF operator must purchase the solar energy from its hosting customers. The only income that SHF operator faces is the hosting fee income they generate from their hosting customers.