How to give electricity customers who can’t take advantage of rooftop solar access to the sun? Community solar—a shared resource—is a fast-growing segment of the renewable energy market, making solar photovoltaic power more accessible while offering another approach to distributed generation.
Mention “solar energy” and the image that probably comes to mind is an array of photovoltaic (PV) panels on a single-family home’s rooftop, serving some of the electricity needs of the house, saving money, and reducing pollution. That’s the conventional view.
Large, utility-scale solar arrays—central-station generators providing power to the conventional utility’s distribution grid—are also a traditional role for solar energy.
But the next big thing for sun power could be “community solar,” or what some call “solar gardens.” A broader term is “shared renewables.” Karl Rábago, executive director of the Pace Energy and Climate Center in White Plains, N.Y., and a long-time expert in renewables, told POWER, “One of the frustrations of the way solar markets are working is that putting something on your rooftop means that a whole lot of people are left out.”
Community solar is a way to overcome the problem presented by the conventional approach that is, in Rábago’s words, “disqualifying a lot of customers.” That includes renters, condo owners, buildings in locations that don’t favor solar or whose structures aren’t well aligned to take advantage of the sun. Why not site a solar array where it works best, and let customers subscribe to shares in the project? That’s the idea behind community solar.
Community Solar Growth
The Solar Energy Industries Association (SEIA) in Washington, D.C., offers this definition: “Shared renewable energy arrangements allow several energy customers to share the benefits of one local renewable energy power plant. The shared renewables project pools investments from multiple members of a community and provides power and/or financial benefits in return.”
These are generally ground-mounted solar PV arrays, smaller than utility-scale projects but considerably larger than individual rooftop installations. Unlike amorphous “green pricing” plans offered by electricity distributors, the community solar projects are tangible. Subscribers own the project, much as those customers with rooftop systems own their systems (Figure 1).
It’s a booming component of solar electricity, according to Becky Campbell, research director at the Solar Electric Power Association (SEPA). SEPA, based in Washington, D.C., focuses on utility-based community solar, including projects launched by public power systems and investor-owned utilities (IOUs). In an interview, Campbell told POWER that starting from a modest program at the Ellensburg, Wash., municipal utility in 2007, the idea of community solar has spread rapidly.
Campbell led a 2014 SEPA survey of utility-based projects. It found, “In the past 18 months alone, the number of community solar projects in the U.S. jumped 64 percent.” Campbell predicts that 2015–2016 will be a further boom period for community solar.
SEPA’s survey found that the average community solar program has 213 participants buying power from a 1-MW array “that is subscribed up to 71 percent of its capacity.” That 71% figure, Campbell said, is significant. It means that these projects are attracting customers, not leaving project sponsors with stranded investments in unused PV capacity.
Public power systems have been leading the way in community solar, according to the SEPA survey. Rural co-ops (see sidebar “Iowa Farmers’ Solar Garden”) accounted for 44% of all utility-led community solar programs, and munis accounted for 30%. IOU projects made up 26%. Campbell said that distribution is probably because rural cooperatives and municipal utilities generally face a less burdensome regulatory environment than IOUs, which need to convince often-skeptical state regulatory agencies of the value of the investments in community solar.
|Iowa Farmers’ Solar GardenFarmers Electric Cooperative in Kalona, Iowa, is one public power system supporting community solar. The tiny, 650-member cooperative is located in the southeast corner of the state, in the middle of Amish and Mennonite communities. The utility is a national leader in installed solar, with a cumulative capacity of more than 1.8 kW per co-op member. Members who want rooftop solar for self-generation can get a feed-in tariff from the utility or an up-front rebate. Those uninterested in or unable to use a roof-top installation can, the cooperative explains, “instead buy power from solar panels they own as part of a community solar ‘garden’ that has grown from an original 13.8 kW to 40 kW and is continuously oversubscribed.”
Farmers planted its first solar garden in 2012. The initial offering was 20 panels, which sold out in two days. Members pay $375 for their first panel and $475 for any additional panels up to 10. They then receive an offset on their electric bill for the power produced from their share of the garden. At 40 MW in size, the garden covers about a half-acre at the co-op, and the utility says it is expanding.
SEPA CEO Julia Hamm told the American Public Power Association last year, “We believe that public power utilities across the country would be wise to look first at community solar. It is proving to be a popular and successful way for non-profit community-based utilities in particular—public power and electric co-ops—to actively engage customers in solar.”
Among the findings in SEPA’s “Expanding Solar Access Through Utility-led Community Solar” report:
■ “State mandates have been an important driver in the initiation and spread of community solar programs to date.” SEPA found that of the 57 programs it tracks, “31 are located in states with community solar legislation.” Colorado, one of eight states with community solar laws, “leads the nation with 11 programs in service and two in the planning stage.” Investor-owned Xcel Energy, based in Minnesota, is the leading community solar developer in the Centennial State.
■ Colorado’s 2010 Community Solar Gardens Act allows a group of at least 10 “subscribers” to own shares in a solar array in the county where they live, reaping credits or refunds on their electricity bills. The Colorado legislation has been a model for legislative initiatives in Minnesota (where the state’s new community solar law applies only in Xcel’s territory) and for California’s 2013 law (SB 43).
■ About three-quarters of community solar projects “are offered by capacity—that is, customers pay up-front to buy the energy produced by a certain number of panels. Having flexible financing options for these customers, such as access to low-interest loans or on-bill plans, can be crucial for program success.”
■ “Demand for community solar continues to grow. Almost half, 47 percent, of the SEPA survey participants said they are planning program expansions.” That tracks Campbell’s prediction that this year and next are going to see major increases in community solar. (See sidebar “DOE Backs Community Solar.”)
|DOE Backs Community Solar
The federal government is taking notice of community solar. The White House in January announced awards of more than $14 million in Department of Energy (DOE) funds for “15 new projects to help communities develop multi-year solar deployment plans to install solar electricity in homes, businesses, and communities.” A DOE press release noted that the 15 projects offer “various approaches,” ranging from “expanding shared or community solar programs and local financing mechanisms to integrating solar energy generation into communities’ emergency response plans.”
According to the DOE, the grants are “aimed at cutting the non-hardware ‘soft costs’ of solar—such as permitting, financing, and connecting to the electric grid.” The awardees “include not-for-profits, utilities, industry associations, universities, and state and local jurisdictions in California, Illinois, Minnesota, New York, Utah, Virginia, Vermont, Wisconsin and Washington, D.C.”
The Solar Electric Power Association (SEPA) is among the awardees, with a $700,000 grant to standardize and test models for deploying community solar projects, to make them, according to SEPA’s research director, Becky Campbell, “as close to turnkey projects as possible.”
New Solar Providers
Community solar also has attracted new, profit-seeking entrants into the business. One of those is Clean Energy Collective (CEC), ironically based in Carbondale, Colo. The firm, founded in 2010, is a leading private sector developer of community solar projects, generally working with utilities to create projects. CEC describes itself as “pioneering the model of delivering clean power-generation through medium-scale facilities that are collectively owned by participating utility customers. CEC’s proprietary RemoteMeterTM system automatically calculates monthly credits for members and integrates with utilities’ existing billing system.”
CEC executive Bart Rupert told the Utility Dive online newsletter, “We have seen a massive shift. Eighteen months ago, most of the utilities we reached out to weren’t even aware of what community solar was. Today, most utilities are starting to see the best way to deploy solar in their territory is through community solar.” CEC’s market insight is that the vast majority of potential customers for solar PV power can’t employ the rooftop option. They are renters or condo owners, home-owners with poorly sited lots, and folks priced out of the conventional roof-top market (Figure 2).
CEC’s 31-project portfolio includes 11 with investor-owned Xcel Energy in Colorado (including the Boulder Cowdery Meadows Community Solar Array shown in the opening photo); nine with public power agencies in Colorado; three IOU projects and one public power system in Vermont; three IOU projects in Massachusetts; single public power projects in Wisconsin, Minnesota, and New Mexico; and a single IOU system in Kansas. Last December, major solar PV developer First Solar announced it will partner with CEC on community solar projects. Jim Hughes, First Solar’s CEO, said, “This deal is a natural fit that leverages CEC’s residential experience on the ground with First Solar’s expertise in utility-scale generation and panel technology. This innovative and cost-competitive approach will further establish solar, and specifically community solar, as a critical part of the global energy mix for all markets.”
Denver-based SunShare, founded in 2011 following enactment of the Colorado community solar law, has also made a business bet on shared solar. It has two projects operating in the Colorado Springs area and five in development around Colorado Springs and Denver. The company has expanded into Minnesota, partnering with Mortenson Construction, a leading wind energy engineering, procurement, and construction contractor.
In January, SunShare announced it would also team up with an NRG Energy division on the five Colorado Front Range projects under development. According to Solar Industry, an online magazine, SunShare will run customer management, subscriptions, and billing. NRG Renew will handle funding, construction, and physical management of the plants.
CEC and SunShare employ different ownership models for their projects. CEC’s business model requires an upfront payment from subscribers to own shares of a project. SunShare’s approach has customers paying nothing up front, while contracting to take a specified amount of electricity from the array and getting credits from the utility for their share of the output. Part of the bill credit goes back to SunShare.
SEIA notes, “There are various shared renewable energy models.” Among them:
■ The “utility-sponsored” model, where customers can purchase a set amount of power at a fixed rate for a long period, perhaps as long as 20 years. “The rate,” says SEIA, “while typically slightly higher than the current retail rate, may provide protection and stability against rising rates for grid electricity.”
■ “On-bill crediting,” where customers “invest in a portion of a shared renewable energy farm, and receive a credit for that portion of the energy production from the facility on their utility bill.”
■ “Special-purpose entities,” where subscribers “join in a business enterprise to develop a shared renewables project.”
■ A nonprofit “buy-a-brick” model, where donors “contribute to a shared renewables installation” owned by a nonprofit organization, such as a rural electric cooperative or a municipal utility.
Adjustments Required for Utilities
Minnesota’s experience earlier this year shows how community solar is growing. In 2013, the state legislature passed the Solar Energy Jobs Act, aimed at boosting both utility-scale and rooftop solar. The law, very similar to the Colorado legislation, included provisions for community solar projects. That portion of the Minnesota law didn’t get much attention at the time. The legislation applied only to Xcel, the largest IOU in the state. (It ignored Duluth-based Minnesota Power and Otter Tail Power Co. in Fergus Falls.)
Xcel’s long-range plan for solar was 500 MW by 2030. Surprise. When the utility last December took proposals for the community solar projects, it quickly received applications for 427 projects totaling 431 MW.
Greentech Media noted that the solar gardens portion of the Minnesota law has no cap on the size of projects. The projects also receive an incentive, based on renewable energy credit values, of 3¢/kWh for projects under 250 kW and 2¢/kWh for larger projects. Ecolab, a Fortune 500 company that sells water, food hygiene, and energy technologies, signed a deal with SunEdison to supply its Minnesota operations with 16 MW of solar electricity under the new Minnesota law.
A SunEdison official told the Minneapolis StarTribune that Ecolab will serve as the “anchor tenant” for up to 200 MW of solar gardens on 15 to 20 sites in the Twin Cities area.
Geronimo Energy has also proposed a project to supply about 90% of the St. Paul Public Housing Agency—16 high-rise buildings and 2,554 housing units—with a dedicated solar project. Those developments suggest that solar gardens may morph into solar malls.
Xcel has pushed back against the size of community solar projects, Midwest Energy News reports. The utility expected to see what occurred in Colorado, with much smaller projects lined up to supply the utility’s customers. Xcel says such large projects in Minnesota could add $50 million to all customers’ utility bills if all are approved. The utility argues that the mega-projects are counter to the intent of the legislation.
John Farrell of the Washington-based Institute for Local Self Reliance, said, “Xcel chose a way to make it look as bad as possible,” a charge he has leveled against other utilities facing increasing solar market penetration. “But I’m not surprised with Xcel having a problem with the program, because it has been a roaring success when measured against that of any other community-based solar program across the country. It’s 20 times bigger than the next biggest program, in Colorado.”
There is experience with big community solar projects aimed at varying categories of customers. Salt River Project (SRP), the large Phoenix, Ariz., public power system, has a 20-MW community solar project that allocates portions of the array to residential customers, school districts, and commercial enterprises. According to SRP, the solar farm consists of more than 66,000 panels spread across 144 acres, a utility-scale project dedicated to individual subscribers. SRP is also looking at smaller community projects in its service territory, according to sources following the utility.
Not all energy activists are all-in on community solar, particularly where IOUs and their regulators control the process. In February, the California Public Utilities Commission (CPUC) approved final rules to implement the state’s 2013 law. It applies to the state’s three IOUs (Pacific Gas and Electric, Southern California Edison, and San Diego Gas & Electric) but not to the state’s large public power systems, including the Los Angeles Department of Water and Power and the Sacramento Municipal Utility District.
Vote Solar’s Susannah Churchill, while praising much of the CPUC’s rules, criticized the “unfair and unaffordable pricing” in the regulations. Churchill said the regulators “accepted the utilities’ flawed pricing proposal, which doesn’t convey to subscribers the full, long-term value of the shared renewable generation on their bills, and also allows the bill credits and charges to fluctuate significantly year to year for a given subscriber.”
In North Carolina, where Duke Energy has been pushing solar, support of community power hasn’t reached the degree that local energy and environmental group NC WARN would like. NC WARN’s Nancy LaPlaca told Utility Dive, “Too many so-called community solar programs are not true ‘community’ solar because they are run through utilities and only a tiny amount of solar is allowed each year.” Pace’s Rábago has characterized some of the IOU programs, including Duke’s, as reflecting an “owned by us, controlled by us, rationed by us” approach.
Some vexing regulatory and jurisdictional questions arise with community solar, particularly when offered by for-profit utilities. IOUs often have to jump through regulatory hoops at the state level to justify their investments and the rate of return. SEPA’s Campbell says the regulatory obstacle course tends to slow IOU development of projects. State regulators have to grapple with issues related to how net metering will work with the projects, what rates of return on investment are appropriate, and how to apportion project costs.
Another sticky problem for shared solar, which experts in the field admit is far from resolved, is how these projects can exist in regions where utilities don’t own generation, and where independent generators bid into competitive wholesale markets run by regional transmission operators. The Federal Energy Regulatory Commission (FERC) regulates these markets, which comprise about half of the U.S. Some have suggested that treating community solar transactions as retail would let them escape FERC oversight, but figuring out how that might work could take months or years of litigation at FERC and in the federal courts.
A New Distributed Generation Model
Community solar appears to be a viable way to spread the reach of solar PV power beyond individual rooftops and utility-scale projects. It offers renters, those with ill-sited homes, multi-family dwellings, and commercial customers ways to take advantage of solar electricity.
Community solar also offers another path to the distributed generation paradigm, which policymakers, regulators, and some, but far from all, utilities see as a way to overcome some of the big problems facing the electricity industry today. Those problems include the fragile nature of the transmission and distribution grid, the value of locating generation near load to reduce distribution costs, and the movement away from fossil fuel generation.
Pace Energy Project’s Rábago says, “The time has come to complete the transformation of the electric utility sector. A deliberate and sustained effort to establish robust markets for distributed energy services is the major remaining step in that process.”
Community solar, broadening the opportunity for customers to access the power of the sun, can be a part of that transformation. It is, says Rábago, “Solar for the rest of us.” ■
— Kennedy Maize is a frequent POWER contributor.