Unlocking the Value of Community Solar
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Unlocking the value of community solar Utilities find opportunity in the inevitable growth of distributed energy resources Brochure / report title goes here | Section title goes here Executive summary 03 What is community solar? 04 What’s in it for the customer? 04 What’s in it for the utility? 05 What’s in it for the developer? 06 State policies enable and drive community solar growth 06 Growth trends vary significantly by utility type 08 Conclusion 10 Endnotes 11 Contact us 12 02 Unlocking the value of community solar | Utilities find opportunity in the inevitable growth of distributed energy resources Unlocking the value of community solar | Utilities find opportunity in the inevitable growth of distributed energy resources What is community solar? As interest in solar trends upward, utility the total cost of the system by offsetting Executive summary posed to each utility type: co-ops, In 2010, only two shared solar projects Community solar presents an opportunity customers seek cost effective options their electricity bill is a key consideration, US electric utilities of all types, from municipal, and investor-owned utilities existed. Today 77 utilities administer 111 for residential or commercial utility to buy electricity from solar resources. especially for those customers who are investor-owned to municipal to (IOU). For co-ops, their member-owners’ projects across 26 states, accounting customers to invest in a solar array or Installing rooftop solar is a popular way eligible for “no money down” financing, cooperatives (co-ops), are defining their interest in community solar has enabled for a combined capacity of about 106 receive credits on their electricity bill for for consumers to reach this goal. However, which often has a payback period of own paths forward to bring solar to their them to develop more programs than megawatts (MW).1 As innovation takes its solar power not located at their home or owning or leasing a home PV system may 10 years or more. Because customers’ customers. Community, or “shared,” solar any other utility type. Municipal utilities course, shared solar business models are business. Program models are constantly only be realistic for people who own their compensation for solar production is programs are an increasingly popular have creatively leveraged state and local continuing to evolve, and the opportunity is evolving to fit the needs of both customers home, have a creditworthy FICO score highly dependent upon retail electricity option. These programs allow customers government incentives to bring shared becoming more evident. Utilities are finding and utilities. Identifying an optimal program (typically over 680), and live in a state with prices and net metering policies–which who do not own their homes, possess solar projects to fruition. And IOUs, largely that shared solar allows them to grow their design is not without its challenges; net energy metering policies. According to vary across the US–the payback period strong credit scores, or have adequate in response to state-level legislative solar generation portfolios, developers are models vary significantly based on market Greentech Media’s US Community Solar for rooftop vs. community solar is difficult roof space to buy solar power, or in some directives, are partnering with experienced seizing the opportunity to expand their and utility type. However, electric power Market Outlook 2015 – 2020 report, 77 to compare. cases, to invest in solar assets. While industry players to implement new types of business offerings, and more customers industry players are quickly innovating percent of US residential households are community solar is often discussed in the program models. have the chance to buy solar power. By to overcome barriers and utilities likely ineligible for rooftop installations Another factor affecting the upfront context of program design and customer unlocking value in each segment of the are increasingly seizing the business according to these parameters, and cost of these investment options is the demand, this report will analyze the market Shared solar has gained a foothold in supply chain, community solar is evolving opportunity that shared solar represents. are thereby potential candidates for availability of the federal solar investment from a different angle by unpacking the the US market during the past five years into a growth engine for distributed community solar program participation.3 tax credit (ITC). The federal solar ITC for unique opportunities and challenges and its growth shows no signs of slowing. solar resources. What’s in it for the customer? residential property has long been claimed Shared solar programs offer a convenient For those customers who are deciding by individual taxpayers with rooftop solar, and cost-effective option to utility between installing rooftop solar and but its availability for owners of shared customers who want to buy electricity from participating in a shared solar program, solar programs is less clear. A private letter a low-carbon, renewable resource. both the upfront cost of the system and ruling released by the Internal Revenue the approximate payback period typically Service in September 2015 held that an The rapid growth of the rooftop solar PV weigh into their decision. Since 2010, individual that purchased PV panels and industry has demonstrated that where the upfront cost of community solar a joint interest in related property (e.g., there’s a will to “go solar,” there’s a way. participation has declined 43 percent from inverter, racking equipment) for installation Of the more than 1,500 household utility an average of $5.13 per watt to $2.92 per in a ground-mounted off-site array with decision makers surveyed in the annual watt in 2015.”4 GTM Research estimates panels owned by other individuals qualified Deloitte Resources 2015 Study, 64 percent that the average price of a residential for the ITC with respect to the cost of the ranked “increasing the use of solar power” rooftop solar installation in 2015 was equipment and installation services.6 The among the top three energy-related issues $3.53 per watt.5 Based on upfront cost power generated was delivered to the local most important to them, up from 58 alone, community solar would seem to public utility that served the taxpayer’s percent in 2014 and 50 percent in 2013.2 be the leading option. However, the time residence under the terms of a net it takes for the customer to make back metering arrangement. Figure 1: US Consumers want more solar power Percentage of consumers who rank "increasing the use of solar power" among the top three most important energy-related issues 50% 58% 64% 2013 2014 2015 Source: Deloitte Resources 2015 Study 03 04 Unlocking the value of community solar | Utilities find opportunity in the inevitable growth of distributed energy resources Unlocking the value of community solar | Utilities find opportunity in the inevitable growth of distributed energy resources to as solar “peak shaving,” can reduce costs significant barriers for developers looking of VNM policies that vary by technology, What’s in it for the utility? What’s in it for the developer? by avoiding deploying expensive “peaker” to enter the community solar market. As utility type, and customer classification.13 The opportunity that shared solar Arguably the first community solar As community solar adoption gains plants designed to meet high demand. All more firms innovate to offer these types Eleven of these jurisdictions are clustered represents to investorowned, municipal, array in the US came online in momentum amongst utilities and consumers benefit from this approach, of services, previously unreachable solar in the Northeast and Mid-Atlantic regions. and co-op utilities is less straightforward, 2006 as a result of advocacy by customers alike, several US developers not only those who have invested in the demand could create an opportunity for However, despite the availability of VNM, but increasingly significant. While primarily the Ellensburg, WA City Council. It have begun to build projects. Large array. Utilities may also choose to install more large-scale developers to grow their only 11 of the 111 active community solar developed to address customers’ interest is administered by Ellensburg’s developers see an opportunity to unlock tracking systems so that they can move municipal utility. The total cost shared solar businesses. projects are located in those states.14 in “going solar,” these programs can also previously unreachable solar demand while the panels to align generation output amounted to more than $1 million be leveraged to bundle other products and small developers are beginning to offer with supply and demand. Additionally, for a 109 kilowatt system–a price State policies enable and drive So why hasn’t more shared solar come services. Grid optimization and Renewable niche, à la carte services that align with strategically placed shared solar arrays tag much higher than what the community solar growth online in these regions? Lack of solar Portfolio Standard (RPS) compliance are utilities’ needs. might help utilities defer or avoid the cost same size solar array would be To overly simplify a very complex matter: resources may play a role in the Northeast. two other ways that utilities can benefit. built for today.8 As a result, of upgrading transmission and distribution there are two overarching factors that However, ownership regulations, net subscribers who originally joined SunEdison, Inc. launched its first program assets by reducing their use and prolonging typically shape utility community solar metering caps (which limit the amount Community solar programs not only the program paid a retail rate in National Grid’s Massachusetts territory their useful life. adoption: 1) regulation and market drivers of capacity brought online under a net allow utilities to offer their customers a seven times what they previously in September of 201510 and NRG Energy, affecting the utilities’ territory, and 2) metering tariff), and concerns around fair venue for buying solar directly, they can paid for the incumbent resource: Inc.