It’s no longer breaking news that on-site solar has grown sharply over the past few years, both in the number of programs and participants. Today, 43 states and Washington, D.C. have adopted net metering policies, which let individuals and businesses offset their electricity bills with self-generated energy. Participation more than doubled each of the last two years. In California alone, residents had installed over 1,426 MW of on-site solar generation by the end of 2012.
This is all great news.
But many homes and businesses cannot participate in net metering and other on-site solar programs. In fact, government studies show that only about one-quarter of U.S. households are able to install solar on their roofs. They may be renters, or live in multi-tenant buildings. Or they might not have adequate or appropriate roof space. Others may simply not want to install solar on site.
Community-shared solar programs allow these people to participate and receive benefits as if they had installed panels on their own properties. Likewise, developers have the opportunity to tap a potentially large market that is currently underserved. For example, if just five percent of U.S. households were to invest in a 3-kW share of a community solar system—the size of a typical rooftop solar installation—it would result in over 17,000 MW of additional solar capacity. More good news: installation of community systems are typically less expensive due to economies of scale.
Despite challenges, community-shared solar programs are popping up around the country. According to IREC’s research, roughly half are run by electric cooperatives, the other half split between municipal utilities and investor-owned utilities.
To provide a glimpse of what these programs look like, IREC developed brief case studies of three programs: Simple Solar, Florida Keyes Electric Cooperative (FKEC); Springs Utilities’ Community Solar Gardens Program, Colorado Springs; and Bright Tucson Community Solar, Tucson Electric Power (TEP).
While community-shared solar programs tend to be developed in a way that responds to the particular needs and interests of their administrators and participants, each must address certain critical issues, i.e., ownership of the system and how to distribute benefits to participants.
Ownership: In some cases, the utility administering the program owns the community generation system. FKEC, for instance, owns the two solar arrays that provide power to its Simple Solar program participants. In other cases, a third-party developer or multiple developers own the generation, as in the Colorado model. In that case, two developers lease panels to participants. The Bright Tucson program provides for both utility-owned and third-party owned generation. Generally speaking, IREC recommends flexibility with respect to egneration ownership to allow for innovative financing approaches that can result in the lowest cost and most benefit to participants.
Distributing Benefits: Often, the familiar on-site solar model is used to distribute benefits of a community system, via bill credits on participants’ electricity bills. According to IREC’s research, about 80 percent of community-shared solar programs function this way, and we typically recommend such an approach. The trickiest part tends to be determining the appropriate value for the bill credit. Most programs establish value based on the utility’s retail rate, similar to net metering. They generally provide either a full retail rate credit or a modified retail rate-based credit that compensates the utility for such things as the use of its distribution grid and administration of the program. Recently, however, more utilities are considering bill credits based on the “valuation of solar.”
While bill credits are typical for community-shared solar programs, they do not work for all programs, and some programs opt to distribute benefits via a check. In some instances, this can raise problematic tax and securities issues.
Of course, there are other important considerations for community-shared solar programs. IREC’s Community Renewables Model Program Rules provide a good starting point for understanding issues relevant to community-shared solar. In addition, the U.S. Department of Energy has a useful Guide to Community Shared Solar. IREC also welcomes direct inquiries from individuals and organizations interested in community renewables.
Finally, there are a number of community-based programs out there as well, which IREC distinguishes from community-shared programs described above. Community-based solar programs cover a wider range of models. For example, Mosaic connects individual investors to community solar projects, relying on a crowd-funding model to finance community systems in which investors earn back their investment when the project is operational.
Ultimately, both types of community solar programs will expand access to renewable energy for more people. So someday soon, we may see solar for everyone, even if not on every home.
Lead image: Community puzzle via Shutterstock
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