Community solar power has the promise of making solar more affordable, bringing sun-powered electricity to renters or people with shady roofs, and dispersing the economics benefits of renewable energy generation. But while a few pioneering projects have broken through the barriers to community solar power, the rules, incentives, and policies for solar PV restrict the potential of community solar. Next week, ILSR will release its report on community solar.
In this report, we provide an analysis of 9 community solar projects across the United States and we evaluate their ability to reduce costs, increase participation and ownership, and be replicated by more interested citizens. We also analyze the two prominent community solar policies, in Colorado and Washington. Finally, we discuss the many issues remaining for community solar, and the policy changes that will be needed to make it possible to expand community solar power beyond a few pioneer projects.
Read below for a sample or download the report here.
Analysis of Existing Community Solar Projects
Community solar has no clear, uniform business model. Rather, each featured [community solar] project has found a way to cobble together private capital with federal, state, or other incentives in order create a solar project. And while the existing community solar projects have in common that they overcame the barriers to community solar, many of the other goals for community solar remained unmet.
Every community solar project is faced with the challenges of raising capital and accessing federal and state incentives for solar. Two-thirds of the community solar projects missed out on federal tax credits and accelerated depreciation. In their place, two projects used federally subsidized clean energy bonds(Solar Pioneer and Simple Solar) and another (SunSmart) used no one-time money but was designed to let customers take a state tax credit. Three projects (Ellensburg, Solar for Sakai, and Sol Partners) found public or private grants. While this represents impressive work on the part of the utilities and individuals who developed the projects, it means that most of these projects will be hard to duplicate.
In most cases, investors in community solar projects are not treated as owners, but rather as power purchasers via a subscription, lease or license. In general, the upfront investment of a subscriber buys them a right to the electricity for a fixed time (e.g. 20 years) but the project developer (usually a utility) maintains ownership rights. The limited access to the electricity generation had significant implications for project economics. The term limits for SolPartners, SunSmart, and Solar Pioneers are shorter than the payback period, leaving community solar investors in those towns in the red. The exceptions to the limited terms were the three ownership-based projects: University Park, Clean Energy Collective, and Greenhouse Solar, which all used an LLC model.
Overall, the ownership issue is complex. Individual or collective ownership has risks, from equipment failure (inverters are almost guaranteed to need replacement within 20 years) to ongoing maintenance (minimal). From the standpoint of risk, many people may prefer not to be responsible for their solar array. This is reflected in the popularity of residential third-party solar ownership programs such as SunRun, SolarCity, and others. Community solar may be similar, where participants prefer to have limited responsibility, although the Clean Energy Collective is pioneering the use of a maintenance escrow to minimize these concerns.
The danger of third-party ownership structures (whether for individual or community solar) is that they risk commoditizing solar electricity and making it feel no different than buying traditional electricity from the utility. Ownership provides a tangible sense of investment in energy production, shifting the owner’s mindset from energy consumption to the balance between consumption and production. It also builds a constituency for distributed renewable energy in a way that buying solar-derived electricity as a commodity may not.
Community Solar Policy
Community solar policy should remove barriers and/or create incentives for the development of community solar and there’s much that could be done. Two states have created a fairly comprehensive definition for community solar as well as a system for its expansion. Other states have made more modest, piecemeal steps to encourage community solar.
The two flagship community solar policies are in Colorado and Washington. In Colorado, a 2010 law creates “community solar gardens” that must be owned by ten or more individuals and smaller than 2 MW. In Washington, a community solar project must be smaller than 75 kW, placed on local government property, and owners must meet several qualifications. So far, there are only two projects qualified for the policy and one predates the adoption of the legislation, the other relied on charitable contributions. In both states, community solar gardens or projects get special treatment under their policy.
Return to newrules.org next week for the full community solar report!