Community Solar's Bend Toward Energy Justice: Challenge Accepted

In Brief

Community solar models can animate their names by providing solar power to communities where people may not own homes or live under panel-ready roofs.  

Yet they claim a smallish share of the overall solar market,  for reasons we've investigated earlier in this series. 

To wrap up the series, our author looks at the national policy context and refinements in siting and billing that can lift community solar's market share and mindshare. 

Solar panels being installed

This professional had to climb to get to this spot: community solar investors and innovators have to climb over hurdles, too. 

For those coming with fresh eyes to this series, please read the previous two articles about community solar. In the first article of the series, I explored the economic and energy equity opportunity of the community solar sector. The subsequent article investigated challenges within the market from a policy and implementation perspective. This article will address the challenges explored in the previous article and provide recommendations on how policy makers and the private sector can realize the opportunity outlined in the first article.

I hope that this final article will renew optimism about the sector that my last article may have shaken. Community solar remains a promising weapon against climate change and energy inequity, but it will require policy support, cooperation among key actors, and a creative reimagining of the future energy grid. 

Progress Begins with Consistent and Supportive Legislation 

In previous articles, I discussed how the U.S. community solar market is actually a collection of regional markets that all have their own regulations, restrictions and incentives. This fragmented network of local policies results in a steep learning curve for developers trying to enter new markets and has led to varied financial and equity outcomes. Rapid expansion of community solar will require support from the government at the federal level as well as a more unified approach across markets. 

The obvious yet politically challenging first step is to provide national guidance on community solar that permits these projects to exist within a consensus driven framework of regulation. The decentralization of governance in the energy sector is a fundamental feature of the American system and perhaps a proper one. That being said, climate goals now work at national scale. They have shifted from a patchwork of local and state government commitments to a nationwide endeavor supported by trillions in proposed funding from the federal government.

The Biden administration’s infrastructure plan, currently being debated in Congress, could include a framework for the community solar model to expand in a variety of local governments. States and local governments will always have the ability to either empower community solar through state programs and incentives or limit their market penetration through obstructive regulations that restrict the potential locations and customer bases. This means that while the federal government can begin standardizing regulations, progress will still largely depend on cooperation from states and relevant stakeholders.

Perhaps one of the most impactful actions the Biden administration has proposed would wean developers off the Investment Tax Credit with something like a long-term direct cash payment program that credits renewable energy projects for their energy produced. Direct cash payments would allow developers rather than tax investors to receive the full intended benefit. The administration has also tied the disbursement of these incentives to developers' labor practices, requiring that they provide “good-quality jobs with a free and fair choice to join a union and bargain collectively”. 

A major challenge that was touched on in the last piece was the difficulty that projects face in conforming to the existing grid. Transmission interconnection can be very expensive and in some instances, the requisite upgrade to the distribution infrastructure, borne by the project developers, makes the investment uneconomical. The Biden administration proposed solution to this issue is to commit $100 billion to replace the outdated transmission infrastructure by laying thousands of miles of new distribution networks and upgrading their voltage capacity. The effort would be coordinated under a new subdivision of the Department of Energy, the Grid Deployment Authority, which would set guidelines for transmission access and provide financial tools to “mobilizes tens of billions in private capital off the sidelines right away.”

Any government programs to encourage community solar should also prioritize access to LMI communities, as is the case for the majority of states currently allowing these projects. The latest community solar legislation out of New Mexico allows for these projects when at least 30% of each community solar facility serves LMI households. Carve outs for LMI customers are becoming standard practice, according to Kevin Betz, a project developer for Community Energy. “In recent years,” he told me, “we have seen that both new and existing markets are adding LMI program components that encourage facility owners to allocate portions of available subscriptions to LMI customers.”

A 2019 map shows incentives for energy-jusrice communities in solar planning

The above image from a 2019 study conducted by NREL shows where community solar programs have policies for inclusion of LMI customers. Since this is from 2019, it does not include plans released in 2020 or 2021, such as the one in New Mexico.

Utilities Can be Key Allies and Change Makers in This Process

Meaningful progress in legislation will require support from utilities as well. Many utilities, especially those in regions where profits margins are tied to energy production, will require assurance that the move towards distributed energy will not leave their ratepayers with the bill for maintaining the shared transmission grid. This may require either subsidies to utilities to offset this cost, which essentially distributes the cost among all taxpaying Americans, or an additional utility charge (akin to the CTC) equal to the increase in energy rates the remaining utility customers pay to maintain the grid. This mechanism already exists in some states such as California in the form of a Power Charge Indifference Adjustment (PCIA).  The charge aims to keep alternative supplies from hitting the wallets of people who don't use them. These compromises would cost the community solar subscriber, but may define the only path to opening markets in certain states. 

A consistent theme that emerged from my conversations with people in this industry was the need for more communication and coordination among stakeholders.



In some cases, particularly in the deregulated markets, utilities are proving to not only be willing partners in community solar programs, but also key allies to LMI customers by crafting programs focused on energy equity outcomes. In particular, National Grid has advanced a Community Shared Solar initiative that addresses some of the main customer acquisition concerns I raised in my previous article.

To learn more about this program, I spoke with Jayson Uppal, a manager for solar and storage product growth at National Grid, who told me that, “we landed on some common design principles that address barriers to low-income access to community solar.” The Simplified Solar Billing program aims to eliminate the credit score barrier that has prevented many LMI customers from participating in community solar by guaranteeing on-time payments to project managers. This also would eliminate one of the greatest financial risks that developers face in operating these projects and can improve overall financial viability. Another key component of the initiative is the Solar Enrollment Program ,which markets  “month-to-month subscription, no sign-up or cancellation fees, and an electricity bill discount of approximately $240 per year.” 

Importantly, this program establishes that utilities can be vital in the expansion of community solar and in setting the best practices for equity and inclusion. Right now, the scope of this initiative is fairly small (serving around 20,000 LMI customers) considering the nation’s need for energy equity, but it can serve as a pilot program that if successful, ought to be used as a model to scale across the country. Erika Niedowski, northeast director for the Coalition for Community Solar Access (CCSA), called it a “very positive step that will help the [Massachusetts] Commonwealth achieve its climate goals, including through the deployment of community solar.”

Beyond policy, norms and trust need to increase before community solar does. A consistent theme that emerged from my conversations with people in this industry was the need for more communication and coordination among stakeholders. Uppal, a manager for solar and storage product growth at National Grid, told me that while they are optimistic about their community solar program and believe in its principles, “coordination between developers, utilities, regulators, and customer advocates is key to successful implementation." 

Allie Rand, a graduate student at the Yale School of the Environment who has experience in community solar through her work at BlueWave Solar, underscored the importance of open conversations among industry players. Project developers can be cagey about sharing their solutions to problems in this sector as these trade secrets are often viewed as a competitive advantage, but keeping this knowledge in silos across groups does not benefit the sector or the individual firms. Rand told me that conferences and industry groups such as CCSA have made progress in breaking down these silos and improving the dialogue within the community solar world. “Getting multiple stakeholders together in a room and talking about ways to increase cooperation and streamline processes for everyone can go a long way.”

Land Use and Simplified Billing Solutions 

In a scenario in which America adopts supportive and consistent regulations on community solar and utility incentives are aligned to work with this new sector, there are still challenges to address in developing and managing these projects. Among them is the question of project siting and operation. 

While it is possible to create community solar gardens on large building rooftops, this is only an option for smaller scale projects and runs into many of the issues mentioned in my first article regarding residential solar. The majority of the installed capacity will require land, which can either put developers at odds with their local community or establish a mutually beneficial relationship. Instead of competing for the purchase of useful agricultural land with farmers, community solar developers can, and often do, sign land leases that extend through the length of the project. This can be a saving grace to farms that are undergoing financial strain by providing a consistent and year-round income. Additionally, farms often have to “rest” cropland after years of agricultural production in order to refresh the soil. This means that in some cases, the use of the fallow cropland for community solar is not diminishing potential production on the farm.

Jean Haggerty of the Coalition for Community Solar Access quotes Brad Mitchell, the deputy executive director of the Massachusetts Farm Bureau Federation (MFBF), as saying, “It could be a match made in heaven. Farmers often need year-round income and an infusion of cash into their business, society needs farms and open space, and communities need cheaper reliable energy.” A report done by SEIA on how community solar projects can benefit farmers provides a concrete example with the Eichtens Hidden Acres Cheese Farm. According to this report, “with the solar project located on marginal farmland, the farm owner has a guaranteed income stream of between $800 and $1,000 per acre for 25 years, nearly doubling the income that would have resulted from regular operations on the property.”

Solar arrays adding value to a dairy farm, courtesy of SEIA

The image above is of the 5 MW community solar project on Eichtens Hidden Acres Cheese Farm from the SEIA report “How Community Solar Supports Rural Communities and Farmers

Another option would be to look at brownfield sites that are otherwise economically unproductive and are not providing useful ecosystem services. These brownfields could be old mining areas, contaminated land, or old industrial sites that are no longer in use. A study conducted by the EPA in 2016 showed that there are nearly 9,500 pre-screened brownfield sites representing 8.8-12.5 GW of solar potential that are suitable for community solar projects in just the 26 states that allowed community solar at the time. This would ultimately “recycle” used land into a productive state and reduce pressure on land alternatives. It could also include large commercial or multi-family residential building roofs that are not currently utilized and have the pre-requisites for a solar array. 

Simplified billing would improve the customer experience and reduce potential errors in calculating the benefit of the project’s services. The current set up of having a split billing system in which the utility and the project are sending the customer bill and credit notifications would be streamlined if utilities became the sole manager of customer billing, netting the credit offsets from the project against the subscribers bill before sending them one consolidated notification.

This seems to already be underway as utilities become more accustomed with this project type. In an article by Will Jurith, a portfolio asset manager for Vigilant Energy Management, he predicts that, “Eventually, billing for community solar will be handled in one unified bill from the utility itself.” He also comments that, “if [utilities and project owners] focus on building strong relationships, fostering excellent communication and prepare to handle the unexpected issues that crop up in every project, then community solar billing will cease to be a mystery.”

Using Community Solar with Battery Storage to Increase Grid Resilience 

As Congress wrangles an infrastructure bill, the Biden team's approach to transmission may not prevail. Another approach to this would be to focus on building a more distributed energy grid using small to mid-size projects such as community solar alongside battery storage. A national model of this system was studied by Local Solar For All and Vibrant Clean Energy in their Local Solar Roadmap report, which analyzes different electrical grid blends and their impacts on total system costs. The models conclude that “deploying at least 247 GW of local rooftop and community solar on the grid would be the most cost-effective way to transition to a clean energy system by 2050.” This target pathway assumes that the local solar generation is coupled with 160GW of energy storage and that the installed capacity is enough to meet about 25% of national residential demand. This plan, according to their models, would save the nation $473 billion when compared to a more traditional generation build out that does not focus on distributed energy resources. The savings come from both a decreased reliance on peaking plants, which can be replaced by matching local demand needs with dispatchable and appropriately sized resources as well as avoided costs in replacing our old transmission network. 

As a distributed energy resource, community solar gardens also improve the resiliency and security of the energy grid. In the current grid network, large generation sources service regions through a network of long-distance transmission lines, so that technical issues tend to impact the entire service area. This risk is mitigated when you replace one large energy plant with 10 smaller ones that include energy storage, as one of these microgrids will not necessarily impact the performance of the others. The same logic applies to cybersecurity attacks that would be more limited in their ability to disrupt regional energy service. Finally, long distance power lines that connect communities to power generation are responsible for a significant portion of wild fires. The California Public Utilities Commission (CPUC) estimates that 10% of the fires, including the deadliest one in California history, are triggered by these power lines.

International Applications

When discussing renewable energy equity solutions, it would be provincial to only consider the possibilities within an American context. While each nation has complex challenges and regulatory frameworks, it stands to reason that a modified version of community solar could be implemented in different settings. It is important to distinguish between community solar programs as we have discussed them in this article series and the community solar term as often applied in the international context to refer to a solar project that is procured and owned by a community to directly service their energy needs. While this model has seen a lot of attention and growth in adaptation in recent years, it is outside the scope of our conversation. 

The community solar sector seems to be endemic to the U.S. at this time, but other nations are watching closely to see how it develops. Feasibility studies have started to compare how this model could be adapted to the European energy landscape and so far, the results seem promising. Countries such as Germany that already have generous solar incentives would be a welcome market opportunity for this project type. Currently, residential solar is a major part of the German solar energy market with over 20% of residential family homes owning a system. This boom in solar was urged on by strong solar incentives. Some have argued that these incentives have unjustly burdened those who cannot participate in residential solar with higher energy costs. Community solar would provide countries like Germany an opportunity to continue expanding its saturated residential solar energy market and open the doors to the people who have thus far been excluded from the renewable transition. 

In the developing world, the model still holds promise, but may be more challenging to implement in countries that have less advanced energy infrastructure. The process of tracking the amount of energy produced by the project and then awarding the subscribers credit based on their share of the project’s generation works well in the United States, but in regions that have less advanced metering and consistent issues in transmission, this may be difficult. It would seem that these projects could provide significant benefits to countries with the capabilities to accommodate them, but many other models address energy equity and development in these countries in the off grid solar market. These include small solar kits or community owned panels that utilize pay-as-you-go financing. In Kenya alone, the last decade seen a 10-fold growth in people using off-grid solar, now up to 10 million people or approximately 20% of the population.  

I won’t dive any deeper into international energy markets in this article, however, energy development abroad is an issue close to my heart. I am planning to take the summer to write a series on the financial and institutional challenges to energy access in Sub-Saharan Africa so I hope that many of you will join me on this journey as I explore this in Ethiopia, Nigeria, and Kenya. 

 

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