Models for Utility-Managed Rooftop Solar Programs
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MODELS FOR UTILITY-MANAGED ROOFTOP SOLAR PROGRAMS September 13, 2019 Dr. Emily A. Beagle Dr. Yael R. Glazer Dr. Joshua D. Rhodes Kelsey J. Richardson Webber Energy Group University of Texas at Austin Table of Contents Executive Summary ................................................................................................................ 3 Glossary ................................................................................................................................. 6 Introduction ............................................................................................................................ 7 Roof Rental or Lease Programs ........................................................................................................ 8 On-Bill Rent-to-Own Tariff ............................................................................................................... 8 Sleeved Power Purchase Agreement ................................................................................................ 9 Utility-Participant Shared Distributed Energy Resources .................................................................. 9 Methodology .......................................................................................................................... 9 Model and Program Evaluations ........................................................................................... 11 Roof Rental or Lease Program Model ............................................................................................. 11 CPS SolarHost .................................................................................................................................................... 11 APS Solar Partners & Solar Communities .......................................................................................................... 12 LADWP Solar Rooftops Program ....................................................................................................................... 14 TEP Solar Program ............................................................................................................................................. 16 On-Bill Rent-to-Own Tariff Model .................................................................................................. 18 Sleeved Power Purchase Agreement Model ................................................................................... 21 Utility-Participant Shared DERs MoDel ........................................................................................... 24 Green Mountain Power Resilient Home Program ............................................................................................ 24 Model Risks .......................................................................................................................... 26 Risks to Utility ................................................................................................................................ 26 Regulatory Risks ............................................................................................................................ 28 Financial Risks ................................................................................................................................ 29 Risks to Participants ....................................................................................................................... 29 Conclusion ............................................................................................................................ 29 Roof Rental or Lease Program ........................................................................................................ 29 PAYS .............................................................................................................................................. 30 Utility-Participant Shared DERs ...................................................................................................... 31 Sleeved PPA ................................................................................................................................... 31 Works Cited .......................................................................................................................... 33 2 Executive Summary This report investigates, reviews, and summarizes key findings on four utility-managed solar models and existing programs of each model. These models include: 1) Roof Rental or Lease Programs, 2) On-Bill Rent-to-Own Tariff (i.e., Pay-As-You-Save), 3) Sleeved Power Purchase Agreement Through Utility, and 4) Utility-Participant Shared Distributed Energy Resources. The models, and their associated programs, were evaluated across 16 criteria that aim to describe the potential benefits and drawbacks to their implementation and management. 1) Roof Rental or Lease Programs In general, the roof rental or lease program model is structured such that solar PV systems are installed on participants’ roofs at little or no upfront cost to the participant. The PV systems are owned and installed by the utility or a third-party developer and the participant is often compensated with a monetary credit or incentive on their electricity bill for allowing the utility to use (i.e., rent) their roof. This report describes five programs of this model-type. Key benefits associated with this model: • Increases distributed solar energy • Can be structured to target low to moderate income customers and renters • Can be designed to offer electricity bill savings to participants • Can be coupled with the utility’s research goals such as implementing smart meter technology and solar PV and storage for smart peak load shaving • Utility can select roofs that better align with higher local wholesale market prices Potential drawbacks associated with this model: • Often requires cross-subsidization by other ratepayers • Often associated with high maintenance costs and significant program overhead costs • Some utility structures (including municipal utilities) must partner with third-party developer to capture the ITC savings Key risks: • Due to significant maintenance and overhead costs, these programs should be carefully assessed prior to implementing a similar program by AE • Safety concerns with equipment at participants’ homes or elsewhere 2) On-Bill Rent-to-Own Tariff (Pay-As-You-Save) In the On-Bill Rent-to-Own Tariff model, the utility installs (or directly contracts out installation of) efficiency upgrades and/or solar PV systems at or on participants’ homes/buildings and recuperates those costs by adding a charge (via an on-bill tariff) to the participants’ monthly bill. The tariff is generally less than the savings captured from the upgrade/PV system thereby giving the participant an overall savings on their monthly utility bill while paying for the 3 upgrade/PV system. At the point the participant has finished paying off the upgrade/PV system, ownership transfers from the utility to the participant. Key benefits associated with this model: • Credit scores are not required so more customers can qualify for program • Customers with lack of funds to make the investments themselves can participate • Renters can participate • The utility is likely to recover most, if not all, of its investment • Homes that receive energy efficiency upgrades have lower energy demands and, as such, the energy load on the utility is reduced as more upgrades are made Potential drawbacks associated with this model: • Federal loans with favorable terms might be hard to obtain • Key risk: Utility takes on the burden of the loan terms and payback and all risks associated with having the loan 3) SleeveD Power Purchase Agreement (SPPA) Similar to virtual PPAs, in SPPAs the participant is contracting with an off-site renewable facility but relies on the utility to act as the broker. As the broker, the utility bears the market risk and would be on the hook to pay the difference if/when the market price falls below the PPA price. The utility can charge the participant a pass-through (or “sleeve”) fee for the contracted energy to cover the overhead costs and hedge against market risks. Finally, when market price is higher than the SPPA price, the utility has the opportunity to make a profit on the difference. Key benefits associated with this model: • Potentially fewer installations to manage and maintain compared to a rooftop lease program • Structure allows for utilization of ITC savings • Off-site utility-scale projects can realize economies of scale to reducing energy costs • AE has experience and competence in negotiating very low-cost PPAs • AE is a sophisticated electric wholesale market participant and understands market risk and can appropriately hedge against that risk Potential drawbacks associated with this model: • Complicated three-party contracts can add additional management overhead • Key Risk: AE bears the market risk of the PPA contract • It could be difficult to find smaller customers that are willing to enter into the longer, multi-year contracts that are typical with PPAs • Utilizing the SPPA construct with renewable energy projects that are smaller than utility- scale might make it difficult to develop products that are low enough cost to be attractive to customers • Applying the sleeved PPA framework to multifamily buildings (as the energy producers) could make it difficult to offer a competitive PPA rate to program participants 4 4) Utility-Participant Shared DistributeD Energy Resources (DER) In the Utility-Participant