Community solar niche poised for growth02 / 2013, Markets & Trends | By: Charles W. Thurston
USA: Community solar projects are poised for expansion as a new market niche, now that virtual net metering is becoming more standard. A host of developers, technology providers and utilities are already on the bandwagon.
A growing group of PV developers, technology providers and legislative advocates suggest that community solar, or solar garden PV installations, can rapidly expand and eventually outstrip the residential rooftop market. “The potential is greater than the installed residential rooftop market today,” reckons Joy Hughes, the founder of community solar advocacy Solar Gardens Institute, based in Westminster, Colorado.
Some developers agree. “There is a lot of interest in community solar now,” says Tom Sweeney, the chief operating officer of Clean Energy Collective (CEC), a Carbondale, Colorado-based solar developer. “We are currently operating community solar projects in Colorado and New Mexico, have a pilot project just about ready in Minnesota, and are in discussions with an enormous number of utilities spread over 20 states,” he said.
“Community solar is going to be the biggest U.S. market next to the large-scale utility segment,” predicts Kent James, the chief strategy officer for Martifer Solar, in Los Angeles.
Technology suppliers are also on board. “With community solar we can expand our offering significantly on the residential to that 80% of the population that can’t put solar on their rooftops. It’s an extra tool in the bag for offering solar,” says Andy Noel, director of utility business development for REC Solar Inc, in Portland. “Over the last three years there has been a pickup in residential solar leasing, which enabled the market to expand significantly after direct sales slowed, but now we are at a third stage of expansion in the market, in which consumers will buy modules that are not installed on their homes,” he said.
Developer and supplier partnerships will also boost community solar. CEC and REC, for example, partnered earlier this year on a national scale to roll out community solar. “To put a percentage on the potential for community solar to add to the residential market, I’d say there could be an additional 50%. There is still plenty of low-hanging fruit out there. A big project somewhere like New York City could be very exciting, and the financing means are there,” said REC’s Noel.
Early utility adopters
Among utilities, Xcel Energy Inc. is a leader in the community solar boom. “We have 10 projects in community solar thus far,” says Mark Stutz, a spokesperson for the utility in Denver. “Our solar rewards community standard offer in August was first come, first served for 4.5 MW. It went very quickly, in 30 minutes, and was oversubscribed three times in an hour,” he said. “Next year, we’ll be up to 18 MW of community solar power.” Utilities may see community solar as advantageous from a rate point of view. “Community solar is good for utilities because most of them have multiple rate tiers for usage, so while rooftop residential solar skims off the cream of the rate tier, the fixed rate for community solar credit permits the utility to maintain its rate tiers,” said Sweeney. Martifer’s James said: “We’re talking about installing for four different utilities, in addition to those we are doing with Xcel. We also are in deep discussion in several other states in the southwest and on the east coast.” Discussions with the Consolidated Edison Company of New York, are well advanced, he added.
Perhaps the first utility to develop community solar was the Sacramento Municipal Utility District (SMUD), which in 2008 began a 1 MW project with a 20-year PPA with the former enXco Inc (now EDF Renewable Energy Inc) that built, owns and operates the system. Predating the SMUD project, the first recorded U.S. community solar installation was the Ellensburg Solar Community Project, developed in 2003 by the City of Ellensburg, Washington State University Energy Extension, and the Bonneville Environmental Foundation.
Community solar schemes are built on the notion that while consumed energy will be locally distributed, the centralized location of the PV system can be independent of the locations of the various investors’ meters. This extends the potential reach of PV ownership to the very large number of individuals without a suitable rooftop installation location.
A 2008 study by the U.S. National Renewable Energy Laboratory (NREL) found that only 22%-27% of residential buildings would be suitable for hosting an on-site PV system. Other studies reduce the percentage by subtracting renters, residents with low credit ratings, and other factors (see the diagram on p.40). James reckons that the U.S. rooftop market may be limited to as few as 7% of all residents.
The financing for a community solar system can be approached from a variety of models, but typically is based on individual investor ownership of at least one module, which can be financed either through local credit unions, the developer, or the EPC partner. One of the latter two is likely to finance the early development and construction of the system, and once it is built, the individual owners buy out the system capacity. Prices for entry-level investment vary by project, but CEC has sold, or is selling, module-shares at prices ranging from US$2 to $3.15 per watt in recent projects, says Sweeney.
“It was difficult at first to get the loan programs established, but I just came back from a meeting with the largest credit union in Colorado, and they want to offer community gardens to all their members across the state,” said Sweeney.
“Now we have six community solar projects installed and eight going in, which together represent about 6 MW of capacity; half a megawatt is typically the size we build,” he said. “We probably have four or five more under contract but not yet scheduled nor built, or not scheduled yet,” he added.
CEC’s portfolio began with the Mid Valley Solar Array in the Roaring Fork Valley, Colorado, and includes the 858 kW Garfield County Airport solar array, which has 3,575 solar panels and covers five acres.
Virtual net metering prerequisite
Key to the spread of community solar is the state legislative prerequisite that permits virtual net metering, which allows the system operator to interface with an investor-owned utility in providing credit for electricity generated by the system. Legislative bills are afloat in a variety of states, and one in California was defeated earlier this year due primarily to cumbersome language. Exceptions to this requirement would be municipally-owned utilities or rural co-operatives, for which the decision to adopt community solar presumably would be an easier political decision to reach. States that have legislated some form of rules specifically related to community solar include: California; Colorado; Delaware; Maine; Massachusetts; New Jersey; New York; Rhode Island; Vermont; and Washington, according to various sources. Some states limit virtual net metering to agricultural operations, like New York. Some, like New Jersey, limit it to public projects or municipal buildings. Colorado, though, is wide open to residential community solar, and future legislation is expected to reflect this approach.
Interface & siting challenges
Another key element of a community solar project is the billing software and management that enables a utility to credit project participants. CEC utilizes proprietary software, called RemoteMeter, to perform the functions, interfacing with the utility in such a way that the burden of accounting for the utility is minimized. Other such software systems are in the market, according to James. “The hardest part of developing community solar is getting the utility on board, because the system has to interface with their billing system – that’s the most difficult challenge,” he adds.
Siting a project is also a central consideration, but one that does not seem particularly difficult. “Generally when I build a solar garden, I look for free city land, or a buffer zone of a government asset, like an airport, or landfills,” says James. The development time for a community solar project can be as short as a year, although the projects with Xcel Energy in Colorado took two years, Sweeney noted. To help promote the advance of community solar, utilities can take clear steps, according to senior researcher John Farrell at the Institute for Local Self Reliance, who directs the Energy Self-Reliant States and Communities program, in Washington. Among these steps is “conducting and publishing a study of the solar rooftop potential in their service territory on all public and private buildings, as has been done in San Francisco, Seattle, New York, and other cities,” he suggests.
Similarly, the utilities should “publish an interactive, publicly accessible map of available capacity on the distribution system to help guide local distributed generation into locations most beneficial to the grid, as has been done by all three major investor-owned utilities in California,” he adds.
Champions of community solar
Among organizations that champion community solar are the Solar Electric Power Association (SEPA) of Washington, the Solar Gardens Institute, based in Denver, and the Interstate Renewable Energy Council, based in Latham, New York. SEPA has a utility working group focused on community solar projects, and in conjunction with the Electric Power Research Institute (EPRI), it released a study in February entitled: Community Solar Program Design: Working Within the Utility. The Solar Gardens Institute tracks state-by-state developments in community solar.
And IREC in 2010 released its Community Renewable Power Proposal, which incorporates best practices in facilitating co-investment in local renewable power facilities.