There are 2,600 megawatts of solar power capacity installed in the U.S. today that can be considered community solar, according to the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL). That is a little less than 5% of all solar capacity in the country, and it is also not very widespread—only three states, Minnesota, Florida and Massachusetts, account for over half of that community solar capacity.
New legislation has just been proposed in Michigan (House Bills 4715 and 4716) that could overcome the hurdles facing community solar, and, potentially, help demonstrate how other states can do the same.
It is a shame that community solar is so limited because the concept addresses a real problem: it gives people who would not be able to install solar panels themselves on their own residences access to solar energy. Your roof is too small, you rent and do not own, you do not have disposable cash for a down payment on a solar array—the reasons are many, but community solar helps solve these problems. In concept, community solar allows people who otherwise can’t use solar power to access the benefits of solar panels: having a source of clean energy that also cuts down your electric bills. The concept works, so why is it not more widespread?
A number of states lack a policy framework that makes community solar broadly feasible, especially for customers of investor-owned utilities. Michigan is one of those states where, by NREL’s account, community solar adds up to less than 6% of the total solar capacity.
The Makings of a Good Community Solar Program
Many customers in Michigan, including those of utilities like DTE and Consumers Energy, don’t have access to locally driven, locally sited community solar projects. That’s why the Michigan Energy Innovation Business Council is supporting the recently introduced legislation that will allow community solar to flourish. The legislation will do that by sticking to the principles that, in our view, define what community solar should be, can work all over the country, and put the emphasis on the “community” in “community solar:”
Bill credits and virtual metering: The customers invested in the community solar project receive credits from their local utility for the electricity generated by the solar panels, decreasing their electricity bills.
Third-party ownership: A party other than the utility can build a solar array and sell the power to community solar participants or lease shares in the project to participants. Different providers can compete to offer community solar, which makes it more affordable for customers to join and allows for more offerings catered to specific customer needs, like the length of a contract or size of subscription.
Third-party ownership also is important to make solar power accessible to all, including low-income households. As Jackson Koeppel, executive director of the Highland Park, MI-based Soulardarity wrote in recent testimony before the Michigan Public Service Commission, if a community solar project has an “anchor tenant” like a non-profit, hospital or other third-party organization, that tenant can subscribe to a substantial portion of the solar project and thus serve as a “fiduciary failsafe,” boosting the creditworthiness of the project.
Solar that serves the local community: While the panels are not located directly at participants’ homes, community solar arrays are located somewhere in the surrounding community and the development is usually done at the prerogative of the local community. That’s a differentiator from many utility-owned or utility-planned projects.
Example of a Successful Project
Projects that meet at least some of these criteria have worked in Michigan, but it has been in isolated cases. For example, the East Lansing Community Solar Park opened in December 2018 with 1,000 solar panels, developed by Michigan EIBC member Michigan Energy Options in partnership with the Lansing Board of Water and Light (Lansing BWL), the City of East Lansing, and Michigan EIBC member Pivot Energy.
One reason the project works is that the Lansing BWL agreed to give participants an annual credit for the solar energy produced of $26 per panel, or $650 over 25 years. Since that credit is worth more than the $400 per panel fee participants pay as a lease, participants earn a return.
Why the New Legislation Makes Sense
In other parts of the state where the utility has not agreed to a structure like that, there is no way for a customer to receive credits from solar energy unless they have installed solar panels on their home or business themselves. Even if billing credits are provided, few utilities have agreed to also guarantee community leadership, the option of third-party ownership and local siting.
As seen by the lack of community solar in Michigan and other states, laws that require utilities to establish virtual metering for community solar project customers are not widespread, and utilities do not frequently offer virtual metering voluntarily, as BWL did. That reluctance can be partially explained by a tendency to view utilities and community solar as in tension and competition with each other.
But viewing community solar as a competitor to the investor-owned utility is self-defeating. Community solar means making more solar possible than what would otherwise be available. Having more distributed energy ultimately helps the utility, too. More community solar means more sources of energy and increased reliability across the grid, which saves the utility from having to make as many infrastructure investments as it would in a world without distributed energy. These savings created by distributed energy outweigh any costs, as many studies, most recently this one from Michigan Technological University, have confirmed.
Michigan lawmakers need to pass legislation that will allow the creation of community solar projects that live up to the principles listed above. There is no reason solar power should be restricted to people who have the roof space and upfront cash to build an array at their home. Rather, community solar arrangements allow many more people to invest in solar power and reap the benefits. Removing artificial policy barriers will enable solar power and community solar to become even more widespread.