Trends come and go in the solar energy industry. Hot buzz words like storage, YieldCo, securitization, and community solar have dominated industry discussions in recent years. In some cases, hype becomes history; other trends are here to stay.
The last year has been abuzz with news of corporate renewables purchases. According to the Rocky Mountain Institute’s Business Renewables Center, corporates installed 3.24GW of renewable energy in 2015, a 275 percent increase from 2014, and recent analysis from the Governance & Accountability Institute showed that 80 percent of S&P 500 companies now publish sustainability reports. The top 25 corporates nearly doubled their solar capacity from 2014 to 2015, and as solar has declined in cost by 73 percent since 2006, corporate purchases of solar energy are increasing in popularity. This is a trend that is here to stay as corporate clients look for new ways to both save on their energy bills, hedge against volatile electricity prices, and meet their sustainability goals. Offsite solar is especially attractive for corporates that do not have the land or rooftop space on-site to meet their energy burden.
As solar companies begin to compete for these prestigious corporate clients, we are increasingly hearing about the potential pairing of community solar (also known as shared solar) and offsite solar. Is this a match made in heaven? Not quite.
According to the Shared Renewables HQ, 14 states and the District of Columbia have shared renewable energy policies in place. There are many more programs on the way (for example, Rhode Island and Oregon are currently undergoing rulemaking), though of these 15 markets, some programs are in states with relatively little solar “action” such as Maine, Delaware, and New Hampshire. In addition to the viability of a given solar market, minimum project sizes, subscription requirements, and low income stipulations prevent the participation of large corporate entities who want to make large, multi-megawatt purchases.
Scale is important in offsite deals, which is one reason why wind has accounted for more than three-quarters of the renewable energy capacity locked in over the past year. Solar can compete, and in our experience, corporate clients prefer offsite projects in the 20MW+ range. Community solar programs, on the contrary, often limit projects to a megawatt or two in size, and there is increasing attention to minimizing co-location of projects.
These size limits are of course dependent on the state. For example, after success with larger-scale co-located deals in its early days, Minnesota projects will now be limited to 1MW. Maryland is at 2MW. Connecticut allows for projects up to 4MW in size, but the program is capped at 6MW… for the whole state. D.C. allows projects that are 5MW in size except for one problem: where can one find 5MW of rooftop or greenfield space within the District’s borders?
Corporates’ participation in community solar is also limited by subscription requirements, which tend to favor residential subscribers. In Maryland, for example, there must be a minimum of two subscribers, but there cannot be subscriptions larger than 200kW constituting more than 60 percent of its subscriptions, which limits corporate anchoring. D.C. more blatantly favors residential subscribers by providing a less favorable rate to commercial subscribers. Low income requirements are also being introduced in many shared solar programs, which, though admirable, limit corporate anchoring. Ownership rules may also be a limiting factor. Some programs only allow utility ownership of these assets, while other states, such as Washington, require for the assets to be community-owned.
In sum, while there are 15 community solar programs and counting, a smaller number of these markets are actually viable, and few – if any at all – are ideal for corporate customers interested in offsite purchases. Instead, corporates interested in offsite purchases are better positioned to transact in markets such as Virginia and California with utility green tariff programs, or to structure a contract for differences with an offsite project that can be developed to their specific electricity requirements. Corporate entities interested in learning more can contact our team at firstname.lastname@example.org to talk through options, and which markets are most suited to fit their needs.
This is an excerpt from the September edition of SOURCE: the Sol Project Finance Journal, a monthly electronic newsletter analyzing the solar industry’s latest trends based on our unique position in the solar financing space. To view the full Journal or subscribe, please e-mail email@example.com.
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