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Community solar tipping point: Flexibility + access = market growth

By K Kaufmann, Nick Esch and Dan Chwastyk

Community solar has hit a tipping point. It has become a major focus of the renewable energy sector and the subject of multiple reports and conferences where it is emerging as a highly flexible and customizable way to bring solar to a broad range of utilities and customers. Estimates of the potential community solar market by 2020 range from a GTM Research projection of 1.8 gigawatts (GW) to a top figure of 11 GW from the National Renewable Energy Laboratory (NREL).

The number and variety of programs already underway supports a core finding of the community solar research that the Solar Electric Power Association (SEPA) has pursued over the past year. Funded by the Department of Energy’s SunShot Initiative, the research was originally aimed at finding a handful of replicable models for community solar development, but instead has concluded that such an approach could not capture the range of variables involved in any one project.

A case in point, no less than three new reports on community solar were recently rolled out in one week, along with a couple new websites, each with different perspectives, but all aimed at preparing local markets for increased growth and competition.

Find out about SEPA’s upcoming community solar workshop April 11 in Denver, here.

Available in print and online, the new “Low-Income Solar Policy Guide” quickly zeros in on one of the major reasons for the quick expansion of community solar — access and equality. Community or shared solar is increasingly seen as a promising way for utilities and developers to bridge the gap between middle- and upper-income customers who can put panels on their roofs and lower-income households that face a number of barriers to adoption.

The obstacles range from lack of financing options to cover the upfront costs of solar — plus the higher credit scores required to qualify for some financing plans — to the lack of ownership or leasing options for families in rentals or other multifamily buildings.

Grid Community Solar
Volunteers at GRID Alternatives install of Grand Valley Power’s community solar project for low-income customers. (Photo courtesy of GRID Alternatives)

Co-authored by nonprofit installer GRID Alternatives, which administers a number of low-income solar programs; Vote Solar; and the Center for Social Inclusion, the guide underscores the flexibility of community solar projects with a virtual tool kit of financing and incentive options. The guide also showcases state policies aimed at increasing low-income access to solar — such as California’s rebate programs for low-income homeowners and multifamily buildings –and some of the projects already developed.

The subtext here is that the right mix of policies and financing options can draw more developers into the low-income community solar market.

Take part in a GRID install April 11 at SEPA’s Utility Solar Conference. Find out more here.

The Interstate Renewable Energy Council (IREC) takes a deeper dive into policies, program models and market opportunities for shared solar aimed at underserved communities in its new publication, “Shared Renewable Energy for Low- to Moderate-Income Consumers.” This report is a more technical, but very nuts-and-bolts document, beginning with how low- and moderate-income (LMI) communities should be defined — not only by income levels, but incorporating location-based, environmental and demographic criteria.

Designing successful programs for these communities means very specific approaches to financing and outreach, the guide says. For example, a successful LMI project may need both “anchor participants,” such as a few larger commercial or institutional customers, as well as extra incentives and financing options to draw lower-income subscribers. Having such larger anchor participants does not automatically lower costs for LMI customers, but rather allows projects to be built bigger, while increasing financial stability and decreasing risk for developers.

The guide also has specific recommendations for LMI customer outreach and marketing efforts. Outreach campaigns over traditional and social media should be culturally inclusive and cover any energy efficiency programs also available to LMI customers, as well as clear, easy-to-understand information on financing options and consumer protections.

Can smaller utility-scale solar be “community-scale”?

While the access and equality issues provide compelling drivers for community solar, the Rocky Mountain Institute’s new white paper on “community-scale solar” goes for a more traditional, economic argument — growth in the sector could “unlock cost reductions of up to 40 percent.” With such cost cuts, the institute believes, community-scale projects — defined as distributed generation sized from .5 to 5 megawatts (MW) — could go well beyond the GTM or NREL estimates to add as much as 30 GW of solar to the grid by 2020.

The caveat here is the institute’s definition of “community-scale” solar, which includes not only shared solar projects but what are essentially small utility-scale plants of 1-5 MW. About 50 percent of its projected 30 GW of new community-scale solar would fall into this small utility-scale category.

These smaller projects have already provided substantial market growth across the country because, as the report notes, they are easier to site, permit and finance. They are also right-sized for rural electric cooperatives and smaller municipal utilities looking to add solar to their generation portfolios. Similarly, solar development on the East Coast has tended to be at the lower end of utility scale due to lack of available land for megascale projects of 100 MW and up, as well as the trend toward siting solar on former brownfield sites or other infill locations.

The institute’s argument is that its broader definition will expand the sweet spot — between distributed rooftop and larger utility-scale — for these projects and further drive down costs, making community-scale solar truly competitive with wholesale power prices. Another plus — since these projects would be tied to distribution grids, they could circumvent net-metering and rate reform debates. The institute also says that contracts with third-party developers could be structured to take advantage of the 30-percent federal income tax credit to net additional cost reductions.

Read the SEPA-Black & Veatch report on how utilities are planning for the distributed energy future here.

Whether combining small utility-scale and shared solar into one community-scale category can benefit both — and make shared solar even more cost-effective for utilities and their customers — remains to be seen. Rocky Mountain Institute is piloting the concept through its own Shine Initiative, working with municipal and electric cooperative utilities.

New York may be the next case study on which factors can most effectively drive competition, market growth and cost reductions in the community solar space. With its deregulated energy market and progressive policies, the state has spent the last five months piloting new community solar regulations that required projects to ensure at least 20 percent participation by low-income subscribers and to be sited to provide grid benefits.

Come May 1, the state moves into the second phase of its community solar program, which will allow the projects now in development to connect to the grid. At a recent educational forum in Syracuse, the buzz from developers was all about projects they are planning or programs that are fully subscribed and ready to go. Solarize Central New York, a popular program providing solar bulk-buying options for residents in five upstate counties, is also rolling out Solarize CNY Communities, a new program aimed at bringing the same economies of scale to promote community solar in the region.

A new website, CoshareNYS.org, was launched at the forum to serve as a platform for community solar developers, nonprofits and communities to share project information and best practices, further spurring growth and innovation. One of the projects already listed on the site is a 1.5-2 MW community solar installation under development by the upstate town of Canton.

Flexibility — the way forward to community solar growth

SEPA’s community solar research both complements and provides additional, critical perspectives to these different initiatives.

Our report, “Community Solar: Program Design Models,” provides an overview of the project development process and lays out a four-step strategy aimed at ensuring projects reflect and meet customer interests and local market conditions. The approach is also designed to take into account utilities’ varying levels of experience and comfort with solar technology and community solar business models.

SEPA’s initiative has also, uniquely, focused on market research, to gauge public perceptions about community solar and the specific drivers influencing decisions to subscribe to a program. For example, a market survey detailed in a second report, “Accelerating Adoption of Community Solar,” found that, predictably, upfront costs for buying into a project were a top concern for a significant number of consumers — 28 percent. But longer-term savings, five years out, rather than immediate reductions in energy bills, was another important motivator, indicating some consumers may think about community solar as a long-term investment.

These and other findings from the research suggest that the way forward for community solar may include project designs that offer all stakeholders — customers, utilities, and developers — a range of flexible options for helping this key market to grow.

SEPA’s Community Solar Workshop and GRID Alternatives install are part of the 2016 Utility Solar Conference, April 11-14 in Denver. For more information, visit the conference website, here.

K Kaufmann is SEPA’s communications manager and can be reached at kkaufmann@solarelectricpower.org. Nick Esch is a research associate and can be reached at nesch@solarelectricpower.org. Dan Chwastyk is utility strategy manager and can be reached at dchwastyk@solarelectricpower.org.

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