In 1965, amidst destruction of arable land and the growing use of pesticides in food production, a group of Japanese women invented “tei kei,” a system where consumers supported local farmers on an annual basis in exchange for a share of their crop. In the 1980s and 90s, this idea spread to the United States, where consumers desiring to take control of their food choices enrolled in CSA (Community Supported Agriculture) programs, purchasing a share of a local farmer’s crop each season. Starting in cities in the Northeast where residents didn’t have access to their own gardens, thousands of CSAs have spread across the country. Like Community Supported Agriculture offers individuals a portion of a crop yield, shared solar models are sprouting up throughout the U.S., offering people opportunities to choose clean energy without owning their own solar energy system or leasing their rooftop.
Why Shared Solar Matters
The residential solar market has seen dramatic growth over the past few years due to rapidly declining module costs and innovative financing models like power purchase agreements (PPAs) and leases. Unfortunately, even these forces cannot seed solar development for millions of people who can’t install a system on their homes because they have shaded roofs, weak credit scores, or don’t own their homes. This leaves more than half of Americans without the ability to host a solar array. Businesses have also been taking advantage of the savings and predictable energy costs that come from owning or hosting a solar array, whether on-site or remote. Companies like Wal-Mart, Ikea, Apple, Amazon and Google have all been major players in cultivating the solar boom of the last five years. While it is actually relatively straightforward for them to do so in any deregulated electricity market, many businesses haven’t taken advantage of opportunities to go solar.
Enter shared solar – also known as community solar. Like a CSA for solar energy, people who may not be able to host a solar installation on their roof can buy shares of a solar installation that is installed in a field or on a rooftop in their community. Customers can either pay upfront, or sign a contract to pay for the energy for a fixed period of time. At the end of each billing cycle, people or businesses will see the fruits of their investment as they receive credits on their electricity bill for the amount of solar produced by their share of the installation. In Minnesota and Colorado, these installations are called “solar gardens.”
The Shared Solar Opportunity
While the concept of shared solar has been around for years, recent legislative wins have made it ripe for flowering. Colorado, Minnesota, Massachusetts and California have all passed legislation legalizing the shared solar model and other states are following suit. Even places like New York, D.C., and Maryland have passed legislation improving the economics and streamlining the administration of these systems, in the absence of industry uptake in a non-legislated model. The National Renewable Energy Laboratory (NREL) estimates that the extra customers that solar gardens bring in could cultivate over 10GW of solar capacity over the next five years representing half of new solar development and billions of dollars in investment opportunity. By removing the barriers to owning or hosting a solar panel on one’s rooftop, these models also potentially open direct participation in clean energy to 100% of electricity customers.
Seeing these opportunities, a number of developers are sowing the seeds for large solar gardens. In Minnesota, the utility Xcel Energy has received bids for nearly 1GW of projects (the state currently only has 22MW of installed capacity). However, Minnesota offers an important case study regarding the regulatory challenges that shared solar faces across the country. Solar gardens in MN are capped at 1MW in size, but many proposed gardens are larger installations co-located on the same site. Xcel has announced it won’t allow co-located gardens and has stalled all Minnesota community solar projects until the Public Utilities Commission reaches a decision. While shared solar models offer the promise to bring solar to millions of new customers, many implementation hurdles still prevent these programs from reaching maturity.
Sowing the Seeds for Shared Solar
Despite the many weeds that still need to be rooted out, the opportunities for shared solar models to accelerate growth are vast. Over three-quarters of Americans believe in further developing our solar resources, and community solar enables people to have direct choice in creating the clean energy future they desire. In the foreseeable future, participating in community solar may be as ubiquitous as purchasing a share in a CSA or shopping at the farmer’s market.
ABOUT SOL SYSTEMS
Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 262MW 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.