What is Community Solar?

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Photo Credit: MDVSEIA

Although renters or homeowners with shaded roofs may be ineligible to “go solar” themselves, they can subscribe to a share of a community solar project so that a portion of their electric bill still comes from clean, solar energy.

In the last several years, community solar programs have popped up in 10 states, including the District of Columbia. According to Shared Renewables HQ, a project of Vote Solar, there are currently 55 shared solar projects across the United States. Colorado, which was signed community solar legislation into law in 2010, leads the way, and we expect for Minnesota to be the next “hot” community solar market with the introduction of Xcel’s community solar garden program. Is Maryland next?

Community Solar in Maryland

On Monday, March 23, HB 1087 (Entitled: Electricity – Community Solar Energy Generating System Program) passed in the Maryland House of Representatives; the final vote was 109-31. Now, the bill moves on to the Senate committee, where a hearing will be held on April 2.

As it stands, HB 1087 would create a three-year pilot community solar program in Maryland. Unique to this program is a provision to allow renters and low to moderate income retail electric customers to subscribe to a community solar energy system, whose output would be credited to their electricity bill.

While this represents major progress over past years, little time remains in the Maryland legislature before the traditionally dramatic “sine die” end of session.

The Devil’s in the Details

Program Design

Despite this trend toward the passage of community solar programs, some have yet to be implemented. The design of these projects is complicated, and in program design, the devil is often in the details.

For example, after the D.C. Council voted unanimously to pass community solar legislation in 2013, and counter to law, the D.C. Public Service Commission still has yet to release finalize its implementation. Somewhat similarly, Connecticut passed virtual net metering legislation in 2013 with several fatal flaws in its implementation. Solar advocates hoped to fix this with a shared solar bill, but it failed to pass after the solar industry and utilities failed to agree on program design. As a result, some developers who bid into the Connecticut ZREC program last year (with the assumption that they could use virtual net metering) had to downsize their projects.

According to Colin Murchie, Director of Project Finance at Sol Systems, one of the biggest challenges with Maryland’s program will be “the establishment of the appropriate credited value for the community solar subscriptions; while several organizations (most notably Vote Solar) have developed significant expertise in this area, it is nevertheless a complex, expert proceeding requiring extensive expert testimony – effectively a litigated outcome that the industry should not expect to emerge much before the current deadline of April Fool’s Day 2016.”

Subscribing Customers

Another potential hurdle with community solar is with acquiring enough subscribers to meet the electricity load. If finding a host site wasn’t enough, community solar developers must then find customers in the same utility territory who will subscribe to the project via virtually net metering. This can be challenging for community solar developers, many of whom have commercial solar or land development experience but not as much experience with acquiring customers as residential players.

Let’s look at Maryland legislation [as proposed] as an example. Individual system sizes are capped at 2MW, and 200kW subscriptions cannot constitute more than 60% of its subscriptions. So, best case scenario, for a 2MW system, a developer would have to find 6 subscribers at 200kW each, and then another 800kW of comprised of smaller subscribers, best case another 5 subscribers if most are 199kW, but more likely, many more residential subscribers – and then integrate all into one financial package.  This structure will tend to strongly favor those national players with integrated commercial and residential financing. The 60% requirement may also complicate the credit picture.

Our advice to community solar developers? If you don’t have the customer relationships, team up with a residential provider and ask for their disqualified lead lists. One man’s trash can be another man’s treasure, and who knows, maybe you’ll find a bunch of customers who were gung-ho about going solar, but had shaded roofs. They’d be perfect candidates for a community solar subscription.

Alternatively, developers may (and several have) simply create a community solar system through remote contract. Such systems pencil financially in the state, and we’ve seen one or two go through.

The Maryland Solar Market

Even without an active community solar program, Sol Systems views Maryland as one of the most underrated solar markets. Solar renewable energy credits (SREC) are currently trading at $155 on the open market, there is a small but helpful production tax credit (PTC), and labor costs are relatively low.

To learn more about financing for your Maryland solar project, contact finance@solsystems.com.

*4/14/15 Note: Since press time, the bill has passed in the Maryland legislature and awaits Governor Hogan’s signature.

ABOUT SOL SYSTEMS

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 180MW of distributed generation solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. For more information, please visit www.solsystems.com.