Getting Started with Solar Dividends
Of the many guaranteed basic income programs in the US, all but one of them are temporary pilot programs. For any of these pilot programs to become permanent, they face the daunting task of convincing politicians to commit ongoing funding for the program from taxes. But to date, no jurisdiction has been willing to do so.
But instead of paying guaranteed incomes from taxes, jurisdictions should make a one-time investment that can generate basic incomes on an ongoing basis. Any good investment can generate regular dividends, but one of the most reliable investments available to everyone is solar energy. An investment in a community solar array that sells its power to customers can generate regular Solar Dividends.
Can Solar Dividends convert a temporary pilot program for basic incomes into a permanent program? The answer is yes, under the right conditions. Because solar energy is a local resource, those conditions are also local and must be examined on a case-by-case basis.
The Basic Formula
Annual Solar Dividend for one person =
Array Size x Solar Capacity Factor x 8760 x Sale Price x Economic Efficiency
The rated capacity of solar panels, measured in kilowatts per person.
the ratio of actual output to maximum potential output; encapsulates array exposure, latitude, average clouds, and night hours.
the number of hours in a year.
what the utility company pays for Solar Dividend electricity, in dollars per kilowatt- hour.
Economic Efficiency the percentage of the sale price that reaches the recipient after subtracting overhead such as loan repayment, maintenance, and administration.
Step 1: Determine your local solar resource
- You first enter your location, which can be a specific address or a city. That connects you to the history of solar data for your location.
- Click on “Go to system info” for the next step.
- Enter information about a typical solar array for that location. You can start with a 10 kW array, which you can then scale up proportionally as needed. You can just accept the other system values as default values until you have a specific array in mind.
- Click on “Go to PVWatts results”.
- At the bottom of the results, make a note of the “DC Capacity Factor”. Use this number in the formula for Solar Dividends.
Step 2: Determine the sale price of your electricity.
This can be the most difficult factor to determine. The pricing of electricity is highly variable, and most utility companies have complex pricing tables for different circumstances. Your goal is to maximize the price you get for the power your array produces so as to maximize the basic incomes it supports.
Then you can research the retail rate tables from your local utility. Those will show how the rates vary according to customer type (household, commercial, industrial), time of day, and tiered pricing (low for the first set of kilowatt-hours consumed, higher for consumption beyond that).
Utility companies prefer to buy electricity from producers at low wholesale rates and sell the electricity to consumers at higher retail rates. If you can only sell at wholesale rates, you will need a larger array.
The best arrangement would allow you to sell your electricity at closer to retail rates directly to consumers. That can be done through a Power Purchase Agreement, where an electricity consumer contracts to purchase their electricity from you. Here are some resources for learning more about Power Purchase Agreements:
- [list of resources goes here]
If your location has a municipal utility, then you might be able to arrange better rates than through a commercial utility.
Step 3: Determine how to manage the revenue to maximize basic incomes.
Some organizational entity needs to manage the solar array, the money it generates, and the distribution of the money for basic incomes. That entity should have these characteristics:
- Lasting. The organization needs to be permanent in order to manage permanent basic income flows.
- Trusted. The organization must be managed openly by trustworthy people to avoid fraud and theft or waste of the revenue.
- Engaged. The basic income recipients should be able to participate in the organization in order to oversee the management of revenue.
These types of organizations would be suitable:
- A nonprofit.
- A cooperative.
- A local government.
The managing organization will determine the final factor in the Solar Dividends formula: the economic efficiency of the delivery of benefits. That efficiency is measured by the percentage of solar revenue that reaches the basic income recipients. So the following costs have to be managed effectively to maximize this efficiency:
- Organizational management costs (salaries, office expenses, etc.).
- Paying off construction loans for the solar array.
- Any ongoing land lease costs.
- Solar array maintenance costs.
- Maintaining a reserve of funds to buffer bad weather that temporarily cuts solar revenue.
Your goal should be to keep these costs to 10-15% of the solar revenue, so that the economic efficiency can range from 85-90%.
Step 4: Determine the size and location of the solar array.
This step is a balancing act between these factors:
- The targeted number of basic income recipients
- The targeted monthly basic income amount.
- The available land area.
If you have a specific plot of land in mind, you can determine its area and the size of the solar array it can support. Contact a local solar installer, who can advise you on the potential array size and output. Once you have the array size, you can determine the revenue stream using the information you gathered in steps 1-3, and that will determine how many basic income recipients and their monthly payments.
Starting from the other direction, determine the number of recipients and their monthly payments, and then size a solar array to meet those targets. Once you have the array size, you can look for one or more plots of land to support the array.
The land area does not have to be solely dedicated to the solar array. Costs can be greatly reduced by employing “dual purpose” methods for solar arrays. These are some potential sites that would not require purchasing land:
- Parking lots with solar panels mounted on overhead racks.
- Agricultural land combined with solar panels in an Agrivoltaics operation.
- Highway medians.
- Airport buffer areas.
- Sealed landfill areas.
- Municipal building rooftops.
Step 5: Arrange financing
Any guaranteed income program has a basic choice to make up front:
- Use some of the solar revenue to pay off the installation costs.
- Pay for the solar array installation up front.
- Pay off the solar construction loan from taxes.
With option a), a loan would be taken out to build the solar array, and some of the revenue generated by selling electricity from the array would be used to pay off the loan over time. This has the advantage of not requiring a large sum of money up front, but it reduces the revenue for guaranteed incomes while the loan is being paid off. Only when the loan period ends can the program maximize the economic efficiency in delivering benefits to its recipients.
The size of the solar array does not affect it payback period. That’s because the revenue is proportional to the size of the array. If you double the size of the array, you double the amount of money it generates, so the payback period remains the same. Essentially each panel pays for itself.
With option b), a lump sum of money for the solar installation would be raised from donations or taxes. By paying off the installation costs up front, the guaranteed income program would not be burdened by loan payments and so could maximize the economic efficiency from the start.
With option c), a local government would take out a construction loan and pay it off over time from tax revenue rather than the solar revenue. If a government was considering using tax money to fund a permanent guaranteed income program, they would have to commit to permanent funding. Instead, they could allocate just a few years of budgeting to pay off the solar loan, and the solar array provides the guaranteed incomes, both during the loan period and long after. This option maximizes the investment of the local government, delivering a permanent guaranteed income program from just a few years of budget allocations.