Why Associated plugged in to community solar energy

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At a time when banks need to trim any cost they can, especially at branches, solar power starts to look less like a purely feel-good PR move and more like a shrewd business decision.

Associated Banc-Corp. in Green Bay, Wis., recently subscribed to five solar gardens currently in development across Minnesota and Illinois. The subscription doesn’t cost the company anything, but it is expected to slash about 20%, or $57,000, off its annual electricity bill.

The $34 billion-asset Associated also says that by signing on to the solar array projects, it is supporting jobs in its markets and ensuring other residents have access to that renewable energy.

“One of the things that we really like about this is that it’s supporting the local community where we’re doing business,” said David Knight, director of facilities real estate. “We really like the fact that not only what they’re building will be in our backyard but the people building it are in our backyard as well.”

Solar power itself isn’t new to the banking industry. Many banks have installed on-site solar panels at branches or participated in virtual power purchase agreements to help offset some of their fossil fuel consumption.

But the solar garden is a fairly new concept, and it’s distinct from either on-site solar or power-purchase agreements. A solar garden is an array of solar panels owned by its developers and connected to a utility grid. The subscribers commit to a share of the electricity produced by the solar garden and receive a credit on their electric bill. The basic idea behind the solar garden is to allow any utility customers in a particular area access to renewable energy, regardless of whether they can install a solar panel on their own home.

In order for a solar garden to get built in the first place, it has to have subscribers, said Kristin Rivera, global workplace solutions sustainability and energy manager for the commercial real estate firm CBRE, which worked with Associated.

“If you’re subscribing your electricity to these gardens as an anchor tenant, it ensures the gardens are ever even developed,” she said. “You have to have a certain number of subscriptions.”

Associated will serve as an anchor tenant at one site in Big Lake, Minn., and another in Standard City, Ill., and be a smaller tenant of three other sites in those same states. Its subscription is tied to a total electric load of 5.8 million kilowatt hours each year across the five total solar gardens it’s subscribed to. That subscription will support 39 — or about 15% — of its branches in those two states and account for about 17% of the company’s total electricity usage. Nokomis Energy and U.S. Solar will develop and maintain the sites, and local utilities will deliver the energy.

Put another way, Associated’s subscription represents enough renewable energy to offset the carbon dioxide that would be absorbed by 233 million square feet of U.S. forest, Rivera said.

Riley Adams, a financial analyst at Google and former utility industry analyst, said that community solar programs have become more popular in recent years. He attributed that partly to state and local tax credits that support those programs, plus their accessibility to consumers who want to buy into renewable energy but can’t put a solar panel on their own roof.

“You’re seeing a lot more utilities explore the possibility of offering these community solar gardens to their customers because the costs are coming down with scale, and the industry is maturing,” he said.

A solar garden Associated has subscribed to in Faribault, Minn., broke ground in June and should be operational in November. The Big Lake solar garden will begin construction next summer. Construction on the three Illinois solar gardens will begin in the fall, and they’re expected to come online in March 2021.

There are a few drawbacks to community solar garden programs. The biggest is that they usually involve a much longer contract term, typically around 20 to 25 years, Rivera said.

There can also be a “relatively small” penalty for terminating the agreement with a particular site, which could present an issue if the bank ever decides to close any of those branches, Knight said.

But the short-term cost savings were not the primary motive for subscribing to the solar gardens, he said. To be certain, the first-year cost savings of participating in the solar program represent less than 1% of the company’s total occupancy budget in 2019.

Rather, Associated sees participation in the community solar gardens as key to its broader environmental, social and governance strategy. For instance, the solar gardens will complement an LED lighting retrofit program it’s had in place since 2016. The company has so far retrofitted 166 sites under that program and estimates that it delivers an annual cost savings of about $500,000 compared with traditional electricity consumption.

Besides complementing the bank’s existing sustainability initiatives, the solar gardens also bring a renewable energy option to much smaller retail consumers in those markets.

Rivera said that having that added source of energy helps to stabilize the utility grid for smaller rural markets that often experience blackouts and brownouts. Additionally, the solar gardens are often placed on land leased out by local farmers looking to diversify their revenue or on brownfield sites that have limited development possibilities. And roughly 30 to 40 people will be employed to design and build the solar gardens.

“We collectively looked at all the financials. How would this look in five years if something changed, if a branch relocated or what have you?” she said. “And honestly, there’s very little risk in the longer term approach here.”

CORRECTION: An earlier version of this story, and the attached graphic, misstated the technicalities of how solar power subscriptions work. The details have been corrected.

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