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Community Shared Solar Frequently Asked Questions (FAQ)

Community Shared Solar FAQ

This Community Shared Solar Frequently Asked Questions (FAQs) document was designed to inform state policymakers, utilities, and consumers about key program design questions. The FAQs have been collected from states that are implementing shared solar policies and programs around the country, along with NREL and third-party research.

What is community shared solar?

Shared solar, also called community solar or solar gardens, is an increasingly popular option for deploying solar technology. Shared solar projects allow customers that do not have sufficient solar resource, that rent their homes, or that are otherwise unable or unwilling to install solar on their residences or commercial buildings, to buy or lease a portion of a shared solar system. The subscriber's share of the electricity generated by the project is credited to their electricity bill, as if the solar system were located at the home or business.

There are more than 90 shared solar projects around the country, with a total capacity of more than 80 MW, though not all projects are fully subscribed.1 Around the country, 25 states have shared solar opportunities, and 14 states and Washington, D.C. have shared solar-enabling legislation.2 NREL analysis has estimated that 49% of households and 48% of businesses are unable to host a PV system. Expanding the market to those customers could result in cumulative PV deployment growth of 5.5-11 GW in 2015-2020.3

Program design

1. Is a subscriber buying a panel or the generation from the panel?

Programs can be designed to offer customers the option to buy a panel (e.g. kilowatts (kW) of capacity), or alternatively, to buy the generation (e.g. kilowatt-hours (kWh) of generation) from the panel. Buying a panel (or a kW of capacity) is similar to the customer owning a solar system on their rooftop. Buying the generation is similar to a customer leasing a solar system on their rooftop from a third-party solar provider.

The option to purchase the generation from a shared solar system, often through a monthly fee, may ease the upfront cost challenges of purchasing the panels. Some shared solar programs provide financing options for customers to buy panels, thus alleviating the upfront cost barrier. Among utility-led shared solar programs, 74% offer a capacity option (kW) and 17% offer a generation option (kWh).4

2. What happens if subscribers move?

When subscribers move, typically they can retain their shared solar subscription, provided that the move is within the same utility service territory, or in some cases, within the same county. If the subscriber is not able to keep their subscription, there are typically options to sell or donate it to another eligible subscriber.

3. Will subscribers get two electricity bills? A utility bill and a solar generation statement? How does crediting for the solar generation appear on the electricity bill?

Typically, subscribers get credit on their bills for the generation produced by their shared solar subscription. However, compensation for the renewable energy certificates (RECs), which represent the environmental attributes of the generation, may be sent separately. A subscriber's share of electricity production (kWh) may be converted to a dollar value that is credited against their monthly electricity bill. In other models, subscribers are credited on a kWh basis. The kWhs produced by their share are subtracted from their monthly electricity usage; the subscriber is charged for the "net" kWh used.

4. How many people can share a single solar project?

Some state shared solar programs require a minimum number of subscribers in order to qualify as a shared solar facility. However, in some states the minimum number is only two, so you could, for example, have two neighbors sharing the output of a rooftop PV system located on one of the neighbors' homes.

Other states limit the percentage that any one subscriber can have of the project. In Colorado, subscribers must purchase a minimum of 1 KW and no single subscriber can be allocated more than 40% of the shared solar array. Subscribers are also limited to purchasing no more than 120% of their estimated annual power output (kWh).5

Among existing utility-led shared solar programs, the average number of subscribers is 281 residential, 24 commercial, and 1 industrial.6

5. How can programs be designed for low-income customer participation?

Some states require a certain percentage of shared solar facilities to be reserved for low-income subscribers. Shared solar can provide bill savings, thus providing financial benefit to the subscriber, an effort that can complement existing weatherization or rate subsidy programs.

In the case of Colorado's solar gardens legislation, 5 percent of each shared solar array is reserved for low-income subscribers.7 In other states that are considering shared solar policies, like New York and Illinois, there have been discussions of including a low-income threshold or incentive. GRID Alternatives, a non-profit solar developer, has found that engaging local partners, such as agencies operating weatherization programs, along with the local utility, can enable greater low-income participation in shared solar projects.

6. Where are shared solar facilities located? Can a business or a non-profit host a shared solar project?

Utilities, businesses, local governments, and community groups can host shared solar projects. The shared solar systems may be located on public buildings, private land, brownfield sites, or any location with suitable solar resources.

Drivers for public sector entities to offer shared solar projects include meeting local sustainability goals and supporting community members that face barriers to participating in traditional rooftop solar.

Interactions with other policies

7. Is net metering necessary in order to make a shared solar project viable?

Net metering is a mechanism for crediting the owners of distributed solar systems for the power they feed onto the electricity grid. Community shared solar project organizers should check with the utility to determine if shared solar projects are eligible for net metering. In some cases, alternative arrangements, such as group billing or joint ownership, are used to account for the value of the electricity produced by a community solar project.

8. What is virtual net metering? Is it necessary for community shared solar projects to be viable?

Virtual net metering allows for the generation from a solar system to offset an electricity load that is not at the same location, as long as it is within the same utility service territory. This means that multiple electricity customers can offset their load with the generation of a single solar system. Under virtual net metering, credits appear on each individual customer's bill the same as they would under traditional net metering, with each subscriber in a shared solar system receiving an estimated or actual kWh credit for their portion of shared project. While the specifics of virtual net metering arrangements may differ, a net arrangement that allows for multiple customers to off-set load that is not located at the site of generation is necessary for most shared solar projects to be viable.

9. Can a value of solar (VOS) tariff be used for shared solar projects?

Some states and utilities have been considering the use of a value of solar tariff (VOS) as an alternative to net metering. Currently, only Austin Energy is implementing a VOS tariff; a VOS tariff has been developed for use in Minnesota shared solar projects but has not been implemented yet. The VOS rate can be applied to the generation from shared solar projects, just like residential or commercial roof-top solar projects, but designers of VOS tariffs may want to consider whether the tariff rules are written to accommodate shared solar projects.

10. How do tax credit policies apply?

The Investment Tax Credit (ITC) for solar is specified by the Internal Revenue Code, Sections 48 (commercial) and 25D (individual). The ITC allows for owners of photovoltaic (PV) systems to take a one-time tax credit equivalent to 30% of qualified installed costs. It applies to shared solar projects differently, depending on the type of ownership structure used. Currently, individuals participating in community shared solar projects have been unable to claim the individual tax credit for their portion of a community shared project.

Community shared solar projects may be eligible to claim the commercial tax credit specified by Section 48, by structuring the project as one of several business entity types. The value of the credits can then be passed on to the individual business participants, proportionally. However, the commercial project owner must have a tax appetite, so if the owner is tax-exempt, or lacks sufficient income to warrant tax relief, the tax credits have no value. Thus a challenge may be organizing the business so it can fully utilize available the tax benefits, while at the same time maintaining the project’s community identity. The commercial tax credit is reduced to 10% as of January 1st, 2017.

In addition to the ITC, federal tax policy allows businesses (but not individuals) to depreciate their investments in solar projects on an accelerated basis. For projects taking the ITC, the depreciable basis must be reduced by half the value of the ITC. For example, if the ITC equals 30% of project costs, then the depreciable basis is reduced by 15%.

11. Which entity or level of government is responsible for enacting policies that enable shared solar (state governments, municipalities, utilities?)

Every level of government, as well as utilities, can facilitate shared solar projects through policy action. State governments can take legislative action to encourage the development of shared solar projects, or require utilities to offer these types of projects to their customers. States can also facilitate shared solar by providing a neutral source of information for potential investors and subscribers to explain project structures, risks and benefits. They can encourage the development of shared solar targeted to low-income housing, small business, or other customer classes. Local governments may host projects of their own, offer the use of public lands for project development, fast-track planning processes, or remove zoning restrictions to facilitate project development. Utilities can develop shared solar projects for their customers, facilitate interconnection procedures or identify locations where shared solar developments receive preference through special incentives.

12. Can shared solar projects be used to meet state Renewable Portfolio Standard (RPS) requirements?

Yes, the generation from shared solar projects can be used by utilities to meet state RPS requirements. If a utility uses the generation to meet RPS requirements, however, the subscribers in the project cannot claim the environmental benefits of the project.

13. Who gets to claim the environmental benefits of a shared solar project?

The environmental components of renewable energy generation are represented by RECs, which can be likened to receipts that are issued for each MWh of generation produced by a solar project. The generation from the project can be sold together with the RECs, or separately. Whoever retains the RECs associated with the generation is able to claim the environmental benefits from the project. Subscribers in utility-sponsored shared solar projects often want to claim the environmental benefits of using solar energy, but they can only make such a claim if they receive the RECs or if the utility retires the RECs (takes them off of the market) on their behalf. If the utility keeps the RECs for any reason, including for Renewable Portfolio Standard compliance, then only the utility can make environmental claims related to the solar system. Organizers of utility-sponsored shared solar projects should consider and make explicit how RECs from the project will be allocated.

14. Can shared solar projects be developed in a way to benefit to the electricity grid?

Just like any solar project, developers could locate projects where they would provide the greatest grid benefits, and avoid locations where a solar development may necessitate major distribution system upgrades. Utilities may choose to identify such locations and provide incentives for developers to target solar projects on locations of the grid that may benefit from additional distributed generation resources.

15. Can electricity storage technology be incorporated into shared solar projects?

Technically, storage can be incorporated into shared solar projects. However there is currently limited experience with how to apportion the added value that storage may bring to the individual subscribers in the project. As more projects that incorporate storage come online, different business models are likely to emerge.

16. Can shared solar help the local economy?

Shared solar projects do support jobs, particularly during their planning and construction, and also to a lessor extent for operations and maintenance, throughout the lifetime of the project. Project organizers may choose to use local installers during construction and local companies for operations and maintenance of the project.

17. Where can I go to find more information?

Title Topic Author Abstract
Colorado's Department of Regulatory Agencies Community Solar Garden Securities Opinion Securities and Tax Issues Colorado Department of Regulatory Agencies Department of Regulatory Agencies' response to request for an interpretative opinion regarding community solar.
Community Shared Solar: Implementation Guidelines for Massachusetts Communities (includes sample contract documents) Guides Massachusetts Department of Energy Resources This report introduces two business models for Community Shared Solar, which is designed to help Massachusetts's private citizens and public entities consider, plan, and implement CSS projects in their community. It also details the advantages and challenges unique to each business model.
Community Shared Solar: Review and Recommendations for Massachusetts Models Case Study Massachusetts Department of Energy Resources This report develops two distinct Community Shared Solar business models suitable for near-term use in Massachusetts—the Public Lease model and the Participant Ownership model. It also discusses the defining features, potential risks, and anticipated costs and benefits of these models. These two guides (and the one above) are intended as a resource for project organizers seeking to implement Community Shared Solar projects in their community.
Community Solar Policy Map Market Information Shared Renewables Map of shared solar policies and links to other shared solar resources.
Community Solar Programs in Iowa: Issues and Options Case Study National Renewable Energy Laboratory This report introduces the background of Iowa's solar development. It identifies issues and options for encouraging the development of community solar programs in Iowa.
Creating a Municipal Utility Community Solar Program: Opportunities and Challenges for Columbia Water & Light Guides/Case Study National Renewable Energy Laboratory This presentation to the Columbia, Missouri Water and Light Utility Board reviewed the basics of community solar programs.
DOE Fact Sheet: Increasing Community Access to Solar: Designing and Developing a Shared Solar Guides National Renewable Energy Laboratory This document introduces the Energy Department's new Guide to Community Shared Solar: Utility, Private, and Nonprofit Project Development. The guide is designed to help those who want to develop community shared solar projects - from community organizers and advocates to utility managers and government officials - navigate the process of developing shared systems, from early planning to implementation.
Expanding Solar Access Through Utility-Led Community Solar Exec. Summary Guides/ Market Information Solar Electric Power Association This report provides a background summary and market information on community solar. The full report is available to SEPA members.
Community-shared Solar: Diverse Approaches for a Common Goal (Case Studies) Case Study Interstate Renewable Energy Council This report includes three case studies that are intended to offer a glimpse at three different utilities' approaches to offering community solar to their customers. The authors look at an investor-owned utility, a municipal utility and a cooperative utility to get a sense of the variety of ways to provide energy consumers the chance to participate in solar generation.
Model Rules for Community Renewables Programs Guide Interstate Renewable Energy Council This report discusses opportunities, guiding principles, model rules for shared renewable energy programs. It also identifies five core components to consider for shared RE programs. It aims to assist stakeholders in developing shared renewable energy programs to broaden renewable energy access to more consumers.
Community Shared Solar: Policy and Regulatory Considerations Guide National Renewable Energy Laboratory This paper explores the ways in which the shared solar business model interacts with existing policy and regulations, including net metering, tax credits, and securities regulation. It presents some of the barriers that shared solar projects may face, and provides options for creating a supportive policy environment.
A Guide to Community Shared Solar: Utility, Private, and Nonprofit Project Development Guide National Renewable Energy Laboratory This guide is organized around three sponsorship models: utility-sponsored projects, projects sponsored by special purpose entities - businesses formed for the purpose of producing community solar power, and non-profit sponsored projects. The guide addresses issues common to all project models, as well as issues unique to each model.
Utility-led Community Solar Handbook Guide Solar Electric Power Association This handbook provides the utility's perspective on utility managed community solar program development. It describes the major design elements the utility needs to address during program development and provides suggestions for how to constructively engage with the utility and support program implementation.
SEPA/IREC Community Solar Program Catalog Guide Solar Electric Power Association This is a summary of community solar programs information, including project types, program names, participation mechanism, costumers benefits, and supply sizes. The guide is titled "Community Solar Program Comparison Chart" and was updated on 9-16-2014.
The Law of Solar Energy - 3rd edition Securities and Tax Issues Stoel Rives This report focuses on the following issues: establishing the scope of rights and property under a site lease, easement, or government right-of-way; addressing critical title problems; and addressing water rights, statutory solar easement requirements, and other real property matters
University of Oregon Community Solar Tool Tools University of Oregon This tool (Community Solar Tool) will help to identify key issues to consider; refine project structure; assess administrative and legal needs; estimate overall project costs; and locate essential templates, forms and documents.
Vermont's securities registration exemption for solar Securities and Tax Issues Vermont Department of Financial Regulation This Order provides a self-executing registration exemption, known as the Vermont Solar I Utility No-Action Exemption (the "SUN Exemption") for certain community solar projects (''CSPs").It provides information on Vermont Securities Law, Investment Contracts, and SUN Exemption Overview.
Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation Market Information/Securities and Tax Issues DOE/National Renewable Energy Laboratory This report provides an overview of the current U.S. shared solar landscape and the impact that a given shared solar program's structure has on requiring federal securities oversight, as well as an estimate of market potential for U.S. shared solar deployment.
Status and Trends in the U.S. Voluntary Green Power Market (2013 Data) Market Information National Renewable Energy Laboratory This report surveys utilities, competitive suppliers, renewable energy certificate (REC) marketers, and the community choice aggregation market. This report presents data and analysis on voluntary market sales and customer participation, products and premiums, green pricing marketing, and administrative expenses. The report also details trends in REC tracking systems, REC pricing in voluntary and compliance markets, community and crowd-funded solar and interest in renewable energy by the information and communication technologies sector.
Announcements about new community solar programs Market Information National Renewable Energy Laboratory The Green Power Network provides information on new community solar programs in addition to information on green power providers, product offerings, consumer protection, and policies affecting green power markets.
Department of Energy Community and Shared Solar Page Resources U.S. Department of Energy Department of Energy's community and shared solar page is an educational website on background, business models, market information, and research papers about community shared solar. Under the SunShot Initiative, it also posts cooperative awards focusing on shared and community solar.
Community Solar Scenario Tool (CSST) Tools National Renewable Energy Laboratory The Community Solar Scenario Tool (CSST) provides a "first cut" analysis of different community or shared solar program options. This model allows users to see how various inputs, such as system size, location, and project costs, impact the economics of a project from both a potential customer's perspective as well as the sponsoring utility.

Footnotes

1 SEIA/GTM (2015). U.S. Solar Market Insight Report: Q1 2015. Average subscription rates for utility-led shared solar programs are around 70% (Campbell et al. 2014).

2 http://energy.gov/eere/articles/nrel-report-shows-big-potential-future-shared-solar

3 http://www.nrel.gov/docs/fy15osti/63892.pdf

4 Campbell, B.; Chung, D.; Venegas, R. (2014). Expanding Solar Access Through Utility-led Community Solar: Participation and Design Trends from Leading U.S. Programs. Washington, DC: Solar Electric Power Association.

5 http://www.xcelenergy.com/staticfiles/xe/Marketing/Managed%20Documents/co-sr-communities-faqs.pdf

6 Campbell, B.; Chung, D.; Venegas, R. (2014). Expanding Solar Access Through Utility-led Community Solar: Participation and Design Trends from Leading U.S. Programs. Washington, DC: Solar Electric Power Association.

7 http://www.xcelenergy.com/staticfiles/xe/Marketing/Managed%20Documents/co-sr-communities-faqs.pdf

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