Community solar and the large corporate user quandary
Community solar, a model where customers purchase a portion of the energy produced by a solar array system, has been gaining traction across the United States. Just within the last two months, the Obama administration announced plans to provide financial and educational support for community solar in low- and medium-income neighborhoods.
SolarCity, the nation’s largest installer of residential solar panels, announced its first community solar project. Twenty-four U.S. states have at least one community solar project online, and Green Tech Media research predicted a seven-fold increase in community solar installations over the next two years alone.
Until now, community solar largely has benefited residential and small non-residential customers in a specific community. Yet other stakeholders also want to get into the shared renewable space — large corporate buyers.
When being big is not helpful
A community solar garden (CSG) or shared renewables program offers an affordable, convenient way of providing renewable energy to customers who do not have access to rooftop space or who are unable to afford the upfront costs of installing rooftop solar panels.
Customers subscribe to a certain percentage of the renewable energy supplied by a “garden,” or collection of solar panels concentrated in a single site, which can encompass anywhere from 10 kilowatts (kW) to 20 megawatts (MW) of solar capacity, depending largely on state regulations and utility program caps. Subscribers usually then receive a credit on their utility bills for the amount of energy produced from their share of the CSG.
For those 13 states and the District of Columbia with shared renewables policies in place, there are clear restrictions on how big a system can be in order to qualify as a CSG.
Colorado legislation limits the size of a solar garden to 2 MW or less; legislation in California caps generating capacity for participating facilities in the state’s Green Tariff Shared Renewables (GTSR) Program at 20MW. The GTSR program entitles California customers to receive between 50 to 100 percent of their electricity demand from solar.
And that’s where the limitations for large, commercial buyers come in. Many of these companies have electricity demand needs that far exceed these size limits, so for the increasing number of corporate companies that have renewable energy goals, meeting their electricity needs from a community solar project is not currently a viable option.
Recently, an intense debate over size restrictions on CSGs came to a head in Minnesota between Xcel Energy, an investor-owned utility, and solar developers over Xcel’s proposed Solar*Rewards Community program.
Minnesota legislation restricts the size of solar gardens to 1 MW, but does not explicitly state any limitations on the number of solar gardens that can exist in the state. Therefore, solar developers felt they were within the bounds of the law to submit applications for 1 MW solar gardens that were co-located next to each other, some with an aggregate capacity of up to 100 MW.
This raised concerns for Xcel Energy and regulators, who felt that larger industrial customers may use the program to offset their electricity bills even though the cost of overseeing the solar program would be shared by all customers, not just the ones buying the solar.
Xcel Energy and a handful of developers were able to reach a settlement agreement imposing a limitation of 5 MW on an aggregated or co-located basis that the Minnesota Commissioners approved June 25, and addresses the cost sharing concern.
Maybe a community solar-like program for business?
This case highlights the growing demand from both residential and commercial customers to access affordable renewable energy. Many large corporate energy buyers have set strong renewable and GHG reduction targets, and are actively looking for ways to meet those targets at cost-competitive prices. Models similar to current community solar programs could be one way of hitting targets at more cost-effective prices.
A few emerging utility models are starting to mirror the structure of a community solar program. California’s green tariff shared renewables program functions like a community solar program.
This program has both an “enhanced community renewables” program component, with customers subscribing to systems ranging from 500 kW to 3 MW, and a “green tariff” component, with projects that can range from 500 kW to 20 MW, which customers pay a premium for. Under this program, a certain capacity must be allocated to areas identified as the most disadvantaged.
Similarly, Rocky Mountain Power (RMP), a utility in Utah, recently has proposed a solar subscriber program to the Utah Public Service Commission. Under this program, customers would buy electricity from solar PV resources owned or contracted by RMP in blocks at a fixed price called the Solar Block Generation Charge. Customers can opt to purchase these blocks for two-, five-, seven- or 10-year terms.
With a fixed price, large customers have the potential to save money in the summer months when electric prices are higher on the traditional grid. RMP is proposing building a 15 MW pilot program for residential, small non-residential, and larger commercial and industrial customers.
If the program is approved and there is a strong appetite from large energy buyers, there will be an opportunity to build additional solar resources.
Not only does a shared renewables’ model have the potential to meet all the needs laid out in the Corporate Renewable Energy Buyers’ Principles, which outlines the challenges many companies face when trying to buy renewable energy, it also can be designed to protect other customers.
Cost-shifting between customers is a common concern of regulators and utilities. Cost-shifting occurs when a poorly designed program or service results in non-participating customers paying, in-part, for that service without receiving any benefits. Shared renewable programs can avoid this pitfall by including provisions that ensure participating customers pay their fair share of distribution and transmission costs as well as the full cost of the program.
As companies continue to demand more renewable energy from their service providers, utilities will have an opportunity to respond with more innovative offerings at cost-competitive prices. The community solar garden approach could be a viable solution to meeting increased demand from a range of customer types and ramp up renewable energy use throughout the country.