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Sizing the Community Solar Market: Getting to 31 GW and beyond

By Dan Chwastyk

I was in Virginia’s Shenandoah Valley earlier this week to attend the official opening of a new community solar project developed by the BARC Electric Cooperative, and the buzz at the event was palpable even before Gov. Terry McAuliffe flipped the switch.

Gov. Terry McAuliffe speaks at the opening of BARC Electric Cooperative’s community solar project in Shenandoah Valley, Virginia.

BARC serves co-op members across a three-county area in the region, and the 550-kilowatt project, the first community solar plant in Virginia, is already fully subscribed, providing 212 customers with up to one-quarter of their electricity. The project also includes a solar energy learning center in a renovated school house.

The BARC project is one more example of the growing popularity of community shared solar; in fact, barely a week passes that I don’t hear about a new program in development or coming online. As of August, the Smart Electric Power Alliance (SEPA) was tracking 103 active programs with a total of 135 megawatts (MW) now online, and dozens more, with at least another 350 MW, expected to come online in the coming months.

But this momentum — and the media buzz it is generating — begs a bigger, more essential question: how big is the potential community shared solar market?

Read a free SEPA report, “Acclerating the Adoption of Community Solar,” here.

SEPA, in partnership with the Shelton Group, recently conducted a market research study to help answer this question, as well as determine the community solar program design elements that were most likely to interest potential subscribers. The work was funded by a U.S. Department of Energy SunShot Initiative grant, which SEPA received as part of a two-year effort to help develop program models and marketing strategies to accelerate the spread of community solar.

Our recently published free report, What the Community Solar Customer Wants, summarizes the findings of this market research, based on a national survey of 2,001 homeowners and renters and 250 small business owners.

One of the more revealing findings of the research, conducted by the Shelton Group, is that — despite the popularity of community shared solar — going into the survey, only 7 percent of participants were even familiar with the term. However, after they had received a basic description of community solar, 47 percent of residential survey participants and 52 percent of commercial participants said that they would be interested in subscribing to a project.

Getting from customer interest to program subscriptions

Applying those numbers to the U.S. population at large would seem to suggest that the only limit to the size of the community solar market is the speed with which projects can be constructed. The caveat here is that interest does not always translate into subscriptions — a lesson learned from the green power programs (GPPs) some utilities launched in the early 2000s.

Often rolled out with great fanfare, GPPs allowed customers to support renewable energy — through utility purchases of renewable energy certificates from solar or wind projects — at a modest additional cost on their electricity bills. They “seemingly had unlimited potential,” recalled Adam Capage, Vice President of Community Solar at 3Degrees Inc., a renewable energy services company.

“Utilities would conduct willingness-to-pay studies and consistently find that 60 percent to 80 percent of their rate base would willingly pay at least $5 more on their monthly utility bill to support renewable energy,” Capage said.

But the actual experience of these programs, he said, was that “the lowest don’t even get to 1-percent participation, and there are a lot of those. Median participation these days is about 3 percent. The top programs are above 10 percent, but there are only a couple of those.”

These numbers suggest that for every 20 to 26 people expressing interest in a GPP only one will sign up.

That 20 to 1 ratio between interest and subscription is likely a bit too conservative for community shared solar for several reasons. Community solar offers potential subscribers a different — and most would say more attractive — value proposition than GPPs. First, community shared solar can provide subscribers with a financial benefit, and second, it also allows them to own one or more solar panels or at least the electricity the panels generate.

Southern states headed for a counterintuitive community solar boom

Based on these facts and the experiences of existing community shared programs, SEPA anticipates that the disconnect between those expressing interest in subscribing and those actually subscribing to a program will be less extreme. Drawing on the survey responses and other data on subscription levels for existing programs, SEPA developed several estimates of the total potential community shared solar market, divided by geographic regions, as shown in Figure 1.

Dans MapFigure 1.

Our calculations suggest a total market potential for community solar ranging from 11 gigawatts (GW) to 51 GW, averaging out at 31 gigawatts (GW), split roughly down the middle between residential and small business subscribers. By comparison, SEPA’s annual solar market survey — based on figures from hundreds of utilities across the country — sized total installed solar capacity in the U.S. at 22.5 GW as of the end of 2015.

Obviously, the range of potential growth for community solar indicates a lot of uncertainty, but what is certain is that the market will continue to grow, most likely at an accelerating pace.

Get the big picture on U.S. solar with SEPA’s 2015 Utility Solar Market Snapshot here.

While robust growth is expected across the country — Northeast, Midwest and West — one of the more surprising findings here is that the South, with a potential market of 13 GW, could be looking at community solar explosion. This prospect may seem counterintuitive since the South currently has the fewest community solar projects actually installed, and retail electricity prices across the region are quite low, making solar in general less competitive.

But declining solar costs could change that equation. The region has a less well-developed residential rooftop solar market, which means a relatively large base of residential and commercial customers — and less competition — for community solar.

Realizing this potential will be no small task. Our survey found that how a program is designed — the upfront costs, financing options, length of contract obligation, and subscribers’ ability to track output from their panels — can all influence customers’ decisions. Program design and marketing that appeal to specific customer concerns and interests can be critical.

The bigger challenge ahead is to ensure that community solar can also bridge the socio-economic gap in the solar market. While community shared solar holds enormous potential to allow low-income and other underserved communities to access and benefit from clean energy, our survey found that the “ideal” customers for these projects currently are suburban, middle-class households.

Growing the community shared solar market will mean reaching out beyond these core customer segments — as the BARC project appears to have done. Co-op members pay $1 more per month than their normal rates for a block of electricity from the project, and the price is locked in for 20 years. In addition, a portion of project revenues will go into an expansion fund, which already has 25 co-op members on a waiting list.

Dan Chwastyk, SEPA’s Utility Strategy Manager, will moderate a session entitled “Community Solar Evolved,” 11 a.m.-noon, Tuesday, Sept. 13, at Solar Power International. He can be reached at [email protected].