The traditional model for having rooftop solar limits which customers can access the technology. Usually, a person has to own their home, which has to have adequate roof space, and which gets enough sunlight.
Then there’s the issue of cost. While some companies and local governments have offered incentives to install solar panels, the upfront cost and long-term period to actualize savings remains a barrier for those wanting to deploy the technology.
Community solar programs have been touted as an alternative option for customers who would like to have a stake in the technology but cannot otherwise install panels. However, many programs continue to be structured in ways that present barriers for customers to participate, limiting who truly has access to the programs.
In fall 2021, the Department of Energy announced a target of reaching five million homes across the U.S. with community solar by 2025 through the National Community Solar Partnership. Achieving this target would mean installing more than eight times the current community solar capacity – in just four years.
Throughout 2021, a group of seven public power utilities participated in a series of workshops with the American Public Power Association, DOE and the National Renewable Energy Laboratory to explore and discuss how to develop practical, effective, and affordable community solar projects. The Municipal Utility Collaborative, part of the National Community Solar Partnership, focused on unique challenges that public power utilities might face in deploying community solar projects, and is compiling a workbook that highlights the lessons shared throughout the year, including best practices for reaching low income and other underserved communities.
Here’s a run down of some of the key insights and best practices discussed as part of the collaborative and highlighted in the forthcoming workbook.
Properly gauging interest in any community solar project is a must, and reaching groups that have historically been underserved requires extra considerations. Before reaching out to customers, utilities can look into who is and isn’t currently served by other solar programs the utility might have, and how participation might already differ from the demographics of your service territory as a whole.
Utilities can then look at how much overlap there is between a community solar program’s goals for who to reach and who is not currently served or might have interest in participating due to specific factors. For example, channels such as DOE’s Low-Income Energy Affordability Data tool can help utilities to identify clusters of customers who might be interested in a community solar program to relieve high energy burdens.
Getting a baseline of interest should start with surveying customers and providing education on the project. Everything from the format in which you deliver a survey to the language(s) such a survey is available in can translate to how accurate and representative the results are of who will participate.
Utilities wanting to develop a community solar project should reach out to trusted community groups that can engage with targeted customers to help spread the word about the project, answer questions, and gauge any interest or concerns.
Utilities should have information such as eligibility criteria, how much participation will cost for a customer, how frequently payments are required, and expected commitments clearly spelled out along with information about projected savings and environmental benefits.
While its important for utilities to understand any unique circumstances or perspectives of customers with lower and moderate incomes, experts caution against assuming that customers fitting these criteria have different values than other members of your community. Specifically, while customers with lower incomes have reported caring about upfront cost savings, they also rank values such as accessing “clean energy” high among reasons for participating in community solar.
The workbook notes that this kind of outreach to inform possible participation can and should continue throughout the project to reassess any evolving needs or values and to support continuous improvement.
Design for Participation
Of the more than 2,600 MW of community solar across the US, less than 1% of capacity is directed toward low-income communities.
For subscription-based projects, the collaborative found that the following practices support program success.
- Do not require any upfront fees from customers
- Offer at least 5-10% savings from utility’s standard residential rate
- Do not require a credit check to participate
- Offer a consolidated billing option
- Set a minimum term for participation
While lengthy term minimums can discourage initial participation, utilities have found that having a one-year minimum participation in programs can help with attrition. Research on the topic has found that about a quarter of participants will leave after only one negative experience with the program, which puts programs that have month-to-month subscribers at increased risk of losing participants.
NREL found that having shorter terms and no upfront fees led to reduced subscriber acquisition costs for utilities.
On top of the practices listed above, programs that have few barriers to entry and that can offer participants immediate savings are more attractive for participants with lower incomes.
Another factor to consider is transferability – whether participants can easily transfer their subscription if they move within the service territory, which would be more attractive for individuals who rent and might need to move more frequently than customers who own their homes.
Providing Immediate Value
A major driver for many in wanting to add solar is cost – customers see it as a way to bring down their electric bills.
And that driver is backed up by the Sharing the Sun report, released by NREL in collaboration with NCSP in July 2021, which showed that community solar can lead to savings on electric bills ranging from 5% to 25%. The NCSP predicts that reaching the five million household goal would lead to $1 billion in energy bill savings for customers.
A review of community solar programs found that the majority have provided customers with a net positive value, but the savings to recoup upfront costs might not be realized for several years.
Many community solar programs require a full upfront payment, which makes participation in the program out of reach for some customers. Utilities looking to encourage participation from customers with low and moderate incomes have a variety of options for allowing customers to buy in without an upfront payment. Options include fixed or floating monthly rates. Fixed rates offer customers more predictable bills, where they might get a steady credit based on the solar output or their usage, whereas more dynamic monthly rates offer more potential for customers to save – and better aid the utility in cost recovery.
Utilities that choose to develop portfolio-based programs, where participants subscribe to a part of the utility’s aggregated solar capacity instead of only one location, could pass savings along to participants as the utility’s solar portfolio expands or as prices drop.
Paying for the Project
While community solar projects cost less than other types of utility-scale generation facilities, Lazard’s October 2020 levelized cost of energy analysis shows that community solar has a higher cost per watt than utility-scale solar projects, with a range of $1.30-$1.50 per watt. Utility costs include capital expenditures, from installation labor and permitting fees to land use and interconnection costs. Utilities should also factor in costs for operations and maintenance over the life of the facility.
Collaboration participants pointed to NREL’s System Advisor Model as a helpful tool to calculate potential cash flow throughout the project and balance the costs with the likely production of the solar facility. Starting with this understanding of feasibility can also bring up how various siting and design considerations will affect overall costs – for example, if a project can be installed at a location that wouldn’t involve buying or leasing land.
Financing the projects can involve multiple strategies, from purely selling subscriptions to the project to getting loans and project investors and securing state and federal grants to subsidize participation from income-qualified customers. Since public power utilities cannot currently directly benefit from tax-based incentives such as the investment tax credit, working with a third-party developer might allow for a developer to receive these credits and pass along part of the economic benefit in the form of reduced project costs.
Projects with investors and loans need to factor interest rates and expected investor returns into the overall costs.
The workbook recommends that projects include a carve out for customers with low to moderate incomes, but keeping projects open to a mix of customers. “Projects with a diversified mix of customer types are in a better position to achieve efficient project financing structures,” advises the workbook. “High concentration of low-income customers would require grants and/or public funds to reach the same level of efficiency.”
The collaborative also discussed how including such a carve out and ensuring that participating customers with low to moderate incomes can achieve cost parity might mean imposing a higher cost on other subscribers to the project.
An anchor tenant, such as a large commercial customer, can offer more financial stability for the project by agreeing to participate in a larger portion of the array. However, state laws may limit how much capacity anchor tenants can take up, and how much of the array the anchor tenant occupies can limit how representative participation can be, which might affect grant funding prospects.
The workbook will be available to public power utilities in 2022.
APPA will continue to work with NCSP for the municipal utility collaborative in 2022. Public power utilities can apply to receive free technical assistance from the NCSP, including consultation to help accelerate or enhance a program or to model potential costs and benefits of implementing a community solar program.