Advantages of Community Energy Projects

“Community energy” projects are generally defined as those between one and 20 megawatts (MW). This is a sector that is often overlooked — small-scale renewables like solar photovoltaics, and large-scale renewables like wind, geothermal, and concentrating solar power, receive far more attention.

The advantage of community energy projects is that communities can develop these projects themselves, using local funding if available, and add significant amounts of renewable energy to their local grid without waiting for outside developers.

There are many ways businesses and local governments can build community energy projects.

First, most states now have “net metering,” which allows utility customers to build a renewable energy system to meet up to 100% of their electricity needs and receive credit, on an annual basis, for any excess power produced. For example, if a solar system is installed that produces too much power for the customer in the summer, but not enough power in the winter, the utility will credit the excess produced in the summer back to the customer, allowing for the system to cover up to 100% of the customer’s electricity needs on an annual basis. California’s net-metering law only allows systems up to one megawatt, however. New Jersey allows up to two megawatts.

The major problem with net metering is that a customer can’t make money be selling excess electricity to the grid, so it’s not an incentive to build large amounts of new renewables.

One solution for this problem is a “feed-in tariff,” which does allow a customer to make money for excess power produced. Under California’s just-approved AB 1969 feed-in tariff system, customers can building renewable energy systems up to 1.5 MW and can sell up to 100% of the power produced to the utilities for a set price. The utilities have to accept the power at the set price. However, the total new capacity under this feed-in tariff is capped at 478 MW state-wide.

Similarly, Washington State has a feed-in tariff for solar systems, which pays customers varying amounts, depending on whether they buy components made in Washington State. However, the system is still not up and running due to delays in the regulatory process.

The feed-in tariff is a great way for local governments and businesses to offset their own emissions by achieving up to 100% renewable energy, while paying less than other methods would cost. It’s also possible to make money by selling power to the grid in some situations under the feed-in tariff.

The 1978 federal Public Utilities Regulatory Policy Act (PURPA) has been gutted by Congress in recent years for some parts of the country. However, in California, the Public Utilities Commission is about to approve a new set of “standard offer” contracts for Qualifying Facilities, as part of California’s implementation of PURPA. These contracts will be familiar to those who were in the wind business in the 1980s, when standard offer contracts were common under an earlier incarnation of PURPA. The new contracts will allow customers to build Qualifying Facilities (QF, renewable energy or co-generation facilities) up to 10 MW and sell excess power to the utilities at a set price.

PURPA was the original feed-in tariff, which sparked the movement that is now very popular in Europe. However, in the U.S., the “avoided cost,” which is the basis for the price paid to QF owners for power produced, has been far too low over the last two decades for many new projects to come online. With natural gas and other fossil fuel prices skyrocketing yet again, the avoided costs have reached the point where many renewable energy and co-generation projects should be able to make money at the avoided cost.

Last, Community Choice Aggregation offers a much more powerful tool for local governments to seriously invest in renewable energy for themselves and their constituents. Community Choice is available in California, New Jersey, Ohio and Massachusetts. Under Community Choice, local governments can build or buy power and achieve up to 100% renewable energy, if they choose to do so. There are significant potential cost savings because Community Choice agencies have access to very low interest money, don’t need to make a profit, don’t pay taxes, and don’t need to pay exorbitant salaries to top executives. Community Choice offers a more complete solution than the other options listed above, but the road is fairly long because of the process required to become an “aggregator.”

In California, the San Joaquin Valley Power Authority, Marin County, the City and County of San Francisco, Chula Vista, and many other local governments are at various stages of implementation. Once we have a few examples of Community Choice implementation, we can expect many others to follow suit as interest in mitigating greenhouse gases and increasing energy independence grows.

Tam Hunt is the Energy Program Director and Attorney for the Community Environmental Council. More information on our programs can be found at

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