Community Solar: Overview of an Emerging Growth Market
Community solar is a rapidly emerging model that combines the value of direct customer “ownership” of rooftop solar with the flexibility and economic advantages of utility-scale solar. Successfully implementing a community solar program is not simple and requires a coordinated approach to successfully enter the market. ScottMadden has assisted clients directly with the development and evaluation of community and rooftop solar programs. Our deep understanding of utility businesses has helped us assist in implementing new technologies for utilities from rooftop solar to electric vehicles. Download the report below to learn more about the community solar market and our capabilities to help.
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Community Solar: Overview of an Emerging Growth Market
- August 2015
Introduction Why Community Solar?
- Rooftop Solar Offers Customers a Choice Rooftop solar provides residential customers an option to use locally sited renewable technology as an alternative to grid-supplied electricity Customers pursuing rooftop solar value the environmental benefits of the technology and the financial value of directly offsetting their electricity use However, residential solar can be an expensive proposition as the price per watt is roughly twice the cost of a utility system In addition, more than 80 million of the over 100 million households in the United States are unable to install rooftop solar because of limitations ranging from home ownership (e.g., rental) to an unsuitable rooftop (e.g., orientation or shading) Utility Solar Provides Economies of Scale In contrast to rooftop solar, utility solar can be sited and designed for optimal performance with connections to the transmission or distribution system Improved output, coupled with economies of scale, provide utility solar a significant cost advantage over residential rooftop solar However, utility solar is typically built to service all customers and lacks the personal connection found with rooftop system Community Solar: The Best of Both Worlds Community solar is a rapidly emerging model that combines the value of direct customer ownership of rooftop solar with the flexibility and economic advantages of utility-scale solar
- Total U.S. Households
- Homeownership Status
- Unfavorable Net-Metering Policies
- Unsuitable Rooftop
- Rooftop Solar Market
- Residential Solar Rooftop Limitations and Market
- Sources: GTM Research, Vox
- Sources: GTM Research, Vox, ScottMadden
Defining the Scope and Scale
- What exactly is community solar? While there is no standard industry definition, a community solar project is often characterized by: Multiple end users or subscribers purchase a portion of the capacity (MW) or output (MWh) produced from a solar PV facility and receive the benefit on their electric bill The solar project is typically located near the end customer or within the energy providers jurisdiction The term generally does not apply to group purchases or off-bill payments in return for an investment in the project Community solar is a rapidly growing market segment GTM Research forecasts cumulative community solar installations will increase from 67 MW-dc in 2014 to more than1,800 MW-dc in 2020 A key growth driver is community solar’s ability to vastly increase the addressable market of solar customers Customers facing rooftop limitations can often participate in community solar projects In addition, community solar can offer a unique value proposition to a variety of stakeholders Electric utilities provide distributed solar options while avoiding direct competition with rooftop solar providers Customers receive simplified access to solar generation and benefit from the economies of scale of larger projects Developers benefit from an increase in demand for commercial and small utility-scale projects
- Community Solar Installations, 20102020
- Sources: GTM Research, ScottMadden
- Source: GTM Research
How It Works Community Solar Models and Design Elements
- The community solar market currently lacks a representative program design. Instead, state policy and/or specific utility objectives drive key program design elements. Within this context, community solar programs are often based on an up-front payment or ongoing payment model. Key program design elements for each model are described below.
Where Is Community Solar Happening?
- Twenty-four U.S. states have at least one community solar project on-line. Meanwhile, 20 states have or are in the process of enacting community solar legislation (see map) Despite this widespread geographic activity, GTM Research anticipates 80% of installations over the next two years will come from four states: Colorado, California, Minnesota, and Massachusetts Public policy is a critical driver of community solar growth in each of these markets: Colorado Legislation passed in 2010 allows the creation of community solar gardens up to 2 MW in the service territory of investor owned utilities (IOUs). In addition, IOUs are required to purchase power from community solar gardens as part of compliance with the states renewable portfolio standard California Legislation passed in 2013 authorized The Green Tariff Shared Renewable Program which allows customers to receive 50% to 100% of consumption from solar. Statewide enrollment is capped at 600 MW. PG&E, SCE, and SDG&E are expected to offer programs to their customers by 2016 Minnesota Legislation passed in 2013 allows subscribers to purchase or lease interests of a solar garden system developed by a garden operator. Xcel Energy must credit subscribers for generation at retail rates. Potential projects and regulations are still being reviewed by Xcel Energy and regulators Massachusetts Shared renewable policy allows participating net-metered systems to allocate monthly excess generation to one or more customers within a distribution companys service territory. In addition, community solar projects also receive SREC credit under Massachusettss SREC-II program
- Sources: Greentech Media, GTM Research, California PUC, Vox, Shared Renewables HQ, DSIRE
- Status of Community Solar in the United States
- Sources: GTM Research, Vox
Community Solar Case Studies
- The community solar case studies outlined below highlight the diversity and customization found within community solar programs design.
Implementation Issues: ScottMadden Has Capabilities to Help
- Successfully implementing a community solar program is not simple and requires a coordinated approach to successfully enter the market. There are some critical issues that must be addressed: Program design What policy drivers exist to support or hinder community solar? Who should be the administrator of a community solar program? What are the impact and implications of securities regulations? Who owns the rights to renewable energy certificates? Where must community solar facilities be located relative to participating customers? Customer motivations What motivates customers to participate in a community solar project? What are customers willing to pay in administrative fees and premiums over regular retail rates? Are customers willing to make long-term commitments to a project? How much consumptions are customers interested in offsetting? Financial implications How cost competitive is solar PV in my region? What are the long-term cost trends for solar PV? How does community solar impact the rooftop solar market? How does the rate structure support or hinder adoption?
- ScottMadden has assisted clients directly with the development and evaluation of community and rooftop solar programs Business Case for Community Solar ScottMadden worked with an IOU to develop a financial model to examine the business case for community solar in deregulated markets Community Solar Program Design ScottMadden partnered with the Solar Electric Power Association (SEPA) to assist an IOU with focus groups and customer surveys crafted to inform community solar program design Solar Rate Design ScottMadden worked with a large municipal utility to refine the strategy and rate structures for customer-owned rooftop solar generation Solar Program Implementation ScottMadden worked with an IOU to prepare for the launch of their residential rooftop solar program for their customers. ScottMadden helped develop the high-level plan and the detailed processes to launch and maintain the program into the future
- Our deep understanding of utility businesses has helped us assist in implementing new technologies for utilities from rooftop solar to electric vehicles.