Will Utilities Price Community Solar Subscriptions Fairly?

Utility-sponsored community solar gardens offer real benefits to the grid, especially when the utility has a say in where to site the project, because they can be sited where they are most needed, even closer to load on the grid than polluting natural gas plants.

Utilities are ideally positioned to expand community solar. Because of their regulated and guaranteed rate of return, the market sees that they are less risky investments. So they can generally borrow at lower rates than solar developers. And solar prices are becoming competitive with fossil energy at wholesale.

Sidestepping the conflict with utilities over net energy metering, Arizona-based First Solar is partnering with developer Clean Energy Collective (CEC), and working with several utilities in supplying modules for community-solar projects in Colorado and Texas.

"One of the reasons that we got into this market is that we saw the opportunity to serve the growing interest in community generation, but do it in a way that aligns with how we operate, which has always been about forming utility partnerships,” Rebecca Campbell, community solar market development manager at First Solar, said. "We see an opportunity to partner with utilities that we have already formed relationships with, and do it in a way that's not in conflict with their business model."

Built By a Survivor of Solar Wars

As the solar developer that leads the 100+ MW utility-scale solar space in the U.S., First Solar is almost the only thin-film firm left standing. The sector had been left for dead on the brutal solar battlefield that ruthlessly killed off solar companies during the Solyndra era, but First Solar has shown its CdTe thin film technology can be cheaper and more efficient than standard silicone-based solar.

First Solar is vertically integrated. They manufacture the modules and the balance of system (BOS) themselves, and develop and construct their own projects.

In general however, smaller projects are not as cost-effective to build as utility-scale ones at 100 MW and up (though they are cheaper than rooftop solar customized for one customer at a time).

First Solar does not typically develop or construct community-solar projects itself, but instead, supplies the modules to its community-solar partner CEC, which markets and administers the subscriptions and develops and constructs the projects.

Community gardens are a way to go solar for the 50 percent who are not able to go solar themselves, whether because they rent, have unsuitable or shaded rooftops, don't meet the credit requirements of solar leasing companies or second mortgages (over 650 FICO), or because their city doesn't make PACE financing available to all homeowners.

Community Solar Protects Against Net-Metering Reversals

Although community solar gardens have always been seen as the solution for those who can't go solar; with the new threat of rollbacks in net metering, even those who can go solar themselves might take a second look. Contracts with utilities are better protected against the kind of rate rollbacks that solar homeowners experienced in Nevada.

"Where rooftop differs is that the contract is between a third party and its customer,” Campbell explained. “You could argue that the utility had nothing to do with what's in that contract. They didn't agree to pay a net-metering rate that is fixed indefinitely.”

To avoid complicated SEC rules regarding investments, community solar gardens allow subscriptions only up to 100 percent of a subscriber's average annual use. Campbell said that most programs are structured with a cap so customers in large homes with high demand don’t monopolize a project.

“The cap might be either 100 percent of your average demand, or up to 10 kW," she said.

In California, Pacific Gas & Electric (PG&E) has been permitted by regulators to build up to 272 MW of its Solar Choice solar gardens. Ratepayers can check a box on their PG&E bill to receive all of their electricity from a solar garden, either by buying into one directly that a developer builds independently, or one PG&E develops.

PG&E has little risk from possible under subscription, as any surplus capacity is counted towards their next RPS, according to PG&E program manager Molly Hoyt. PG&E is well-embarked on California's RPS, having just announced it is already now 30 percent renewable, surpassing the 2015 target of 25 percent. The 2030 target is 50 percent.

Subscribers pay a little extra per kilowatt hour to participate.

“This ensures non-subscribers aren't subsidizing a subscriber's choice to go solar,” Hoyt said.

What Is a Fair Price?

Until recently, solar was the most expensive electricity option; however, now solar prices are dropping fast.

Generally, solar costs the least when built at utility-scale (100 MW and up). First Solar broke records last year with its 100-MW solar project in Nevada at a starting PPA rate of 3.87 cents per kWh (escalating 3 percent annually).

But even for smaller projects like community solar gardens, which range up to 20 MW, prices like this are becoming a new reality. The City of Palo Alto recently signed a 26 MW solar PPA at under 4 cents per kW.

Community solar projects range from half a megawatt to about 20 MW.

"We're getting to a point where the utilities are actually saving money on these kinds of programs," Nancy LaPlaca, principal of LaPlaca Associates, said. LaPlaca is former policy advisor to a Democratic Commissioner at the Arizona Corporation Commission overseeing utilities.

"I remember in Colorado, many years ago, they had this program called Windsource, with green power pricing where you pay some premium. But even though gas is dirt cheap, wind is cheaper,” LaPlaca said. “Yet the utility still charges a premium for subscribing to that wind program.”

Xcel still offers Windsource subscriptions for an extra 2 cents per kWh — even though wind is now so cheap in Colorado that wind actually displaces gas.