Community Solar Offers New Opportunities for Renewable Energy Generation

The number of homes in the United States with rooftop solar panels has skyrocketed in recent years as the cost of installation continues to fall. However, according to a recent report by the National Renewable Energy Laboratory, only about half of all American homes and businesses can host an adequately sized photovoltaic system on their property.

According to Kate Plourd Johnson with the Northeast Clean Energy Council, “a majority of American energy consumers simply can’t go solar through the traditional panels-on-your-roof model. Families and businesses that rent, those with low credit scores and those with shaded rooftops face barriers to participation.”

But Plourd Johnson said a community approach to solar power generation can yield similar benefits for those who aren’t able to host solar panels on their own properties. “A well-designed community solar program promises to break down those barriers and throw open the doors on that tremendous untapped solar opportunity,” she said. “That’s powerful.”

Community solar is a program where a utility or third-party provider constructs a solar array in an external location and a group of participants voluntarily pay for a share of that project. The electricity produced by the array flows to the electricity grid instead of directly to the customers’ homes, but the subscriber receives a benefit for the electricity produced by the array, usually as a credit on their utility bill. 

“Community solar has the potential to offer all of the environmental benefits of rooftop solar at a much lower cost,” said Minnesota state Rep. Pat Garofalo, co-chair of the CSG Energy and Environment Committee. Community solar subscribers reap the benefits the project provides through economies of scale and, unlike rooftop solar customers, do not have to maintain the system. Utilities also can benefit from community solar programs, which allow for greater control over distributed generation programs and foster better relationships with customers.

According to a November 2015 report by the Solar Electric Power Association, community solar programs are active in 25 states. More than half of the active community solar programs are located in the 13 states and the District of Columbia that have enacted some form of community solar legislation, as are the vast majority of planned projects. 

“As with the rest of our electricity market, policy—and especially state-level policy—plays a key role in enabling shared solar growth,” said Plourd Johnson. 

According to Garofalo, Minnesota’s experience highlights the need for regulatory certainty in establishing community solar policies. In 2013, Minnesota passed legislation that required its largest utility, Xcel Energy, to create a community solar program with projects being capped at 1 MW. Hundreds of proposals for projects were received within the first week. However, a Minnesota Public Utilities Commission, or MPUC, ruling allowed multiple community solar projects to be sited on a single piece of land, effectively providing rooftop solar subsidies to utility-scale community solar developments, Garofalo said. 

The MPUC later backtracked on its initial ruling and solar projects are now limited to 1 MW per interconnection point. The result, said Garofalo, is that “solar developers came to Minnesota and invested real money based on the MPUC’s ruling and got burned by it because the PUC changed its mind.” The commission’s retroactive changes and uncertainty surrounding the program have resulted in delays in constructing projects, said Garofalo.

But another driver of community solar development is customer demand and utilities have been developing their own community solar projects even without state mandates.

Garofalo noted that rural electric cooperatives have been particularly successful in launching community solar programs in Minnesota. Currently, about 15 community solar projects are being developed by co-ops in the state, despite the fact that these co-ops are not included in Minnesota’s solar mandates. 

“We’re now seeing community solar being done with energy co-ops in the right way,” said Garofalo. “Community solar projects are selling out without subsidies, cross-subsidies or other incentives.”

According to the National Renewable Energy Laboratory, prices for photovoltaic systems have fallen by an average of 6-8 percent per year since 1998. As more electric utilities get involved and the price of solar continues to decrease, it is expected that community solar programs will continue to grow in the future.