Enter community shared solar, an emerging model that expands participation in the solar energy market.  Here’s how it works: Residents and businesses sign up to contribute to a local solar project in exchange for a credit on their utility bill or other compensation. Participants may own, lease, finance, or subscribe to their “interest” in the project.  They get the bill saving and environmental benefits of going solar without the requirement that it be physically located on their own property. A community shared solar system might be as small as 200-kW on the roof of a local grocery store or as large as a 20-MW system on an old brownfield.  

The appeal of the community shared solar model is multi-fold:

• It’s inclusive. It gives essentially all energy customers the opportunity to invest in solar energy at an affordable level. This makes for more equitable access to clean energy. It also means solar developers can access enormous untapped consumer spending.  
• It’s efficient. Projects can be located so as to maximize energy production and minimize costs to participants. Developers are not restricted to a particular rooftop that may not have the sunniest conditions, or faced with the hassle of siting transmission over hundreds of miles.
• It’s local. Although they’re not serving a single energy customer, shared solar projects can still be built within that customer’s community — which means the jobs, environmental and public health benefits also stay local. Not to mention you can drive by and look at the solar system you helped build, maybe even bring your kid’s 3rd grade class to visit it.

It all sounds like a no-brainer for expanding the solar market, but the devil is of course in the details of policy and program design. While shared solar programs can technically be set up without new legislation, the pioneers who have attempted projects have gone through years of legal fees and complex financial structuring to make it work.  Solar rules and regulations have largely been designed to support on-site generation. Rethinking that relationship between the solar energy system and its “owner” requires rethinking those rules of the road. 

Several states have passed laws designed to make it easy for consumers to participate in shared solar and lower transaction costs for all involved. To date, shared solar program designs have come in many flavors, some more scaleable than others. The frameworks in Colorado and Delaware are generally viewed as having the most MW potential.  California, Massachusetts, Maine, Rhode Island, Vermont, and Washington also have existing programs but have restrictions in system size cap, number or type of participants or financial structure that limit potential. There is promising new legislation in the works in California (SB 843), Maryland (SB 595), and the District of Columbia.

The Interstate Renewable Energy Council’s Community Renewables Model Rules lay out key features states should incorporate in their rules to help take community shared solar mainstream:

• Allocate the benefits of the solar project to participants via virtual net metering, a billing arrangement in which a credit based on the energy produced by a solar system can be applied to multiple retail electric accounts. This is a simple way for participants to receive project benefits that is linked to their current energy consumption and avoids income tax issues that would arise if project developer were to just cut a check to a participant. 
• Have a utility handle the billing. Utilities have the experience and systems required to manage complex customer billing. This doesn’t mean the utility has to own the solar system or manage subscribers; in many cases it makes sense for the owner/program manager to be a third party developer.
• Rather than compensating participants by directly offsetting kWh on their electricity bill, assign a monetary value to the kWh and give participants a bill credit. This is important to simplify billing, although choosing a method for calculating the bill credit has been one of the biggest challenges for those designing shared solar programs.  IREC’s model rules recommend a credit at full retail rate.  Some utilities argue that offsite shared solar projects use distribution lines to deliver solar energy to participants, and therefore some distribution costs should be deducted from the bill credit. The states with existing shared solar laws have handled this issue in different ways. Bill credit calculation is a complex issue, and careful analysis is needed to inform conversation at the legislative and PUC levels.

With a flurry of action at legislatures and utility commissions across the U.S. this year is likely to be a tipping point in terms of awareness of the shared solar concept. That new attention will no doubt spur innovation and interest that further evolves this still-nascent approach to solar. Three things to keep in mind as shared solar gains momentum:

Utility ownership: Utilities are increasingly interested in shared solar as a way to satisfy their customers’ desire for solar energy. Many credit Sacramento Municipal Utilities District with developing the first shared solar program, known as SolarShares.  Now major investor-owned utilities like SDG&E are introducing their own shared solar programs. This is a positive sign, as long as shared solar programs are not used as justification for ending programs that support on-site solar installations. Shared solar is not a replacement for residential rooftop solar. Nor should utility involvement preclude third-party ownership of shared solar systems. A robust marketplace that harnesses the competitive forces of multiple participants can help deliver cost efficiencies for all.

Schools and churches: I’m not sure that this is where the trend is headed, but I’d suggest it should be. Schools and places of worship make ideal shared solar hosts for numerous reasons. They are likely to have suitable sites for solar generation, and come with built-in pools of potential subscribers in students' parents and parishioners. They also represent an educational opportunity to introduce people who might not otherwise be interested to the benefits of solar energy. If the solar industry can tap into these broad demographics it will have enormous positive ripple effects throughout the country.  

Unbridled innovation: Consider what might be possible if the shared solar concept were expanded to include non-local projects, or if a new way of distributing shared solar benefits to customers for could replace traditional utility billing. Giving consumers the ability to contribute whatever they can to a solar project and receive whatever form of compensation best suits them, with the lowest possible transaction costs — it’s a powerful idea.

By hitting a sweet spot of affordability for consumers and economies of scale for developers, community shared solar represents a path toward truly bringing solar energy into the mainstream. 

By Hannah Masterjohn, Vote Solar
April 13, 2012