Editor’s Note: A few years ago, I explored heating my home with solar, but the contractor said I would produce too much heat for just my home, so he would have to find some place to "dump" the excess. I said, "wouldn’t it be great if I could share it with my neighbors?" He laughed, but now the idea is gaining ground!
By Dana Hall, James Rose & Laurel Varnado
Have you ever been tempted by a vacation time-share? It’s cheaper than buying a vacation home, you get the benefit of relaxation just when you want it, and you don’t have to worry about maintenance or keeping up with the bills. Now imagine if you neighbor came to you with a great deal on a solar energy "time-share." Just the right amount of electricity from solar panels would power your lights and appliances, but you don’t have to worry about installing the panels on your own roof or the upfront capital to pay for it.
Solar developers will tell you this idea would be quite popular with their customers. Developers frequently turn people away who want to invest in solar but can’t because of tree shade, roof condition, building configuration or because they live in multifamily buildings. Other times, developers have to walk away because the building doesn’t have enough demand to absorb the generation output and net-metering laws cap the size of projects to serve the load onsite.
That may be about to change with the emergence of community solar ownership. Communities nationwide are developing novel approaches that allow customers to share renewable energy systems, providing opportunities for previously untapped markets.
With traditional net metering configurations, a small grid-tied PV system (under 2 MW) is built for a single customer with a single meter, and the generating customer receives credit for any excess generation at retail rates. The utility distributes the excess electrons to other nearby loads as an ordinary electricity sale. Community solar pushes traditional boundaries by allowing the excess generation to instead offset the loads of an identified group of participating customers who invest in the cost of the system.
Community solar successes to date have been systems managed by the local municipal utility. But some large utilities, state policymakers and entrepreneurs are developing strategies to enable broader adoption of community solar.
Municipal Utilities Take the Lead
Ellensburg’s Solar Community Project. In Ellensburg, Washington, three solar systems are installed on city-owned property along Interstate 90. The system became operational in November 2006 with a 36 kW installation. In February 2009, they added 21 kW more and Dept. of Energy (DOE) funding helped them install an additional 13 kW. Another 41 kW will be installed this spring and the city hopes to add concentrating solar this year.
The city owns the land and generation equipment through its Dept of Energy Services – members of the community contribute capital in exchange for a share, or right to the value of the power generated, proportional to their contributions. Customer contributions fund the PV hardware, and the city funds the interconnection, operation and maintenance.
Ellensburg contributors receive a "solar credit" in dollars on their electric bill for the power produced by the system, valued at the Bonneville Power Administration’s (BPA) wholesale rate. If someone provides 3% of the project funding, he receives a credit for 3% of the kilowatt-hours (kWh) output factored by BPA’s current rate. The total kWhs credited to any individual contributor are capped – s/he can’t receive a credit in excess of her annual total electricity consumption.
SMUD Solar Shares. The Sacramento Municipal Utility District (SMUD) operates Solar Shares. This successful program allows customers to contribute through subscriptions toward the cost of a shared utility-scale PV projects. SMUD is the nation’s 6th largest municipally-owned utility serving almost 600,000 people, 90% of which are residential. About 20% of its energy supply comes form California-eligible renewable sources.
Solar Shares customers subscribe to the program annually, with fixed payments added to their electric bills. The amount customers pay ranges from $4-$50 extra per month. Solar Shares used a third party power purchase agreement to build the 1 MW facility. Shares sold out six months after the July 2008 launch.
SUMD offers subscriptions with no obligation to renew, giving customers a chance to "kick the solar tires" without a long term commitment – an appealing choice in a down economy. SMUD also encourages energy efficiency by offering larger subsidy solar payments to frugal energy users. The utility calculates that Solar Shares participants pay, on average, 20-50% less a month for the generation they receive than if they had financed their own PV systems over 20 years.
Arizona Public Service’s Community Power Project. APS has proposed a program to develop distributed PV on the roofs of Flagstaff customers in a model it likens to an interconnected renewable power plant. The project would allow customers to go solar with no upfront cost, ownership or maintenance responsibilities. APS would install and own the solar panels and receive the energy output as utility-owned generation. A participating customer would receive a 20-year fixed Community Power credit for the solar portion of his bill, in an amount equal to the customer’s current electric rate. The company is contracting with solar companies to install and maintain 1.5 MW of capacity on the roofs of 200-300 customers.
Eligible customers must have proper roof direction and structural integrity as well as meet other requirements. The customer provides APS an easement, granting access to their roof for installation and maintenance. The program launch is pending on approval from the Arizona Corporation Commission.
States Advance Community Net Metering
Several state legislatures have begun to explore community solar by requiring regulators and utilities to offer community net-metering programs, allowing multiple customers to net meter with a single facility. Community net-metering legislation also allocates net-metering benefits among a group of participants in new ways.
Vermont, Massachusetts and Maine have enacted community net-metering laws. Vermont, the early adopter, requires utilities to offer group net metering to farmers since 2006 and has since expanded the policy to additional customer classes. To set up a group system, investors must have a point of contact and inform the utility of basic elements of the arrangement such as a dispute resolution mechanism. The utility issues a single aggregate monthly bill to the group’s contact person, who has responsibility for allocating the net-metering credits among group members.
Investor-owned utilities in Maine are required to offer net metering to customers with "shared-ownership" of a PV system. Up to 10 meters can be net metered on a single system, and all participating customers must maintain a legal ownership stake in the system. Like Vermont, the group appoints a contact to serve as the liaison for the utility.
Massachusetts allows "neighborhood net metering" for neighborhood-based facilities that are owned by, or serve the energy needs of, a group of at least 10 residential customers in a neighborhood. The system must be behind one of the participant’s meters, but only a minimal amount of load needs to be located on-site. A commercial customer may participate as long as it partners with at least 10 residential customers. The arrangement may require the utility to "wheel power," or move electricity across utility distribution lines, from the point of generation to the loads being served. To reimburse the utility for power wheeling among participants, utilities aren’t required to issue the distribution component of neighborhood net-metering credits.
Interestingly in Massachusetts, the Green Communities Act makes net-metering credits transferrable. Though regulators and utilities are working out the rules for neighborhood net metering, the concept may be moot as customer generators figure out how to simply transfer their excess net-metering credits to non-generating customers.
Virtual Net Metering
Take the concept of community net metering, remove the geographical boundaries, and you get virtual net metering. This allows a renewable energy systems owner to offset electric accounts without any proximity requirement. It can be especially useful for municipalities who want to install a larger system to offset energy use at multiple buildings around town.
Rhode Island allows cities, towns, schools, farms, non-profit affordable housing and state agencies to participate. Customers can install a renewable energy system and receive a monthly check or apply excess credits to up to 10 other accounts they own. If a nonprofit affordable housing agency chooses compensation, it’s obligated to use the money to benefit residents. California also requires investor-owned utilities to allow nonprofit affordable housing agencies to participate in virtual net metering.
Washington state is putting cash behind its efforts to encourage community solar. Under SB 6170, which went into effect last July, members of a community solar project qualify for Washington’s production incentive for renewables. The base is 30 cents per kWh up to a cap of $5000 per year per participant. Actual production incentives may be as high as $1.08 per kWh when modules and/or inverters used in the community system are manufactured in Washington, a price that some consider overly inflated.
Shared Investment Strategies Emerge
Recognizing that few states require utilities to offer community net metering, some entrepreneurs have come up with creative alternatives that allow a group to invest in renewable energy despite the lack of such policies. A community solar investment can accommodate a range of system financing options, from direct ownership by individuals and groups to third-party financing through utilities or third-party developers.
The Mount Pleasant neighborhood in Washington DC, for example, recently began installing solar panels on 48 homes, the result of years of collective bargaining, research, lobbying and planning. Various investment strategies are under development, in part to accommodate for the differences in individual state laws that govern these arrangements.
As shared investment strategies and net-metering policies are evolving, so too are financial incentives that spur investment in community-based renewable projects. Shortly after shared-system net-metering was allowed in Maine, the state Public Utilities Commission (PUC) issued a draft rule allowing community projects a choice of incentives: a long-term standard energy supplier contract for the generation or a renewable energy credit (REC) multiplier in which the value of the REC is 150% of the amount of electricity produced (Colorado also offers such a multiplier).
A REC allows the environmental value of the renewable generation to be quantified and provides the owner a commodity-like product that can be traded. PUC’s proposal sets a contract price for solar that averages $0.10 per kWh, not including the purchase of RECs.
Resolving Community Solar Complexities
Despite the promising success of utility-owned models, community and virtual net metering is burdened with administrative, legal and regulatory hurdles.
Administratively, if a utility is set up to record and bill only one meter for one account, new billing software is needed to aggregate net-metering credits across accounts, whether for a single customer generator with aggregated meters or for multiple accounts aggregated in a single net-metering arrangement.
Fortunately, this upgraded billing software could coincide with developing smart-grid and smart-metering programs. Some community net-metering arrangements impose further administrative burdens by making a single point of contact responsible for managing the billing interactions between the utility and the group of customers sharing the net-metering credits.
The geographic boundaries that define the "community" for purposes of aggregating meters and accounts can lead to concerns about if and how it’s appropriate to compensate the utility for wheeling power. To avoid this, some community solar programs are limited to physically adjacent properties, or they remove the distribution portion of the net-metering credit. But adding more intricate rules for community solar may further complicate the policymaker’s job. Utilities that have come around to traditional net metering, where one customer here or there goes virtually "off the grid" may be more reluctant to see blocks of customers buying a lot less electricity.
While the success of community solar so far has been limited to programs operated and owned by municipal utilities, the new frontier appears to be at investor-owned utilities. IOUs are seeking new ways to comply with renewable portfolio standards and to indulge customers’ appetite for solar. Regulators may favor IOU-owned models over private, third-party shared-investment arrangements, because utilities are in the business of distributing power. And utilities may more easily embrace community solar where they own the generation assets. Only time will tell if the solar time-share will become more available, but the future looks bright.
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Case Studies in Community Solar is on the agenda at Solar 2010 in Phoenix, May 17-22.
Dana Hall is energy policy coordinator at the Pace Energy & Climate Center.
James Rose is senior policy analyst for the Network for New Energy Choices.
Laurel Varnado works at the North Carolina Solar Center.
FROM Solar Today (March 2010), a SustainableBusiness.com Content Partner.
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