What’s the value of community solar?
Community solar is coming soon to customers of Portland General Electric, Pacific Power, and Idaho Power. Thanks to legislation passed in 2016, the program has undergone years of lively rulemaking at the Oregon Public Utility Commission. In its most basic form, community solar allows electricity customers to share in the costs and benefits of onsite or offsite solar projects. Community solar can unlock new opportunities to rapidly accelerate solar adoption to the majority of customers who do not own their own rooftop or have the financial means to invest in a personal array.
If developed right, and that’s a big if, community solar programs can provide numerous benefits to both participants and non-participants. It’s important to underscore that point as skeptics and some stakeholders framed this program only as benefiting those who participate in a project. Accelerating solar adoption can support local, family-wage jobs that cannot be outsourced abroad. Solar can increase property tax revenue which can support local schools and emergency services. Solar paired with storage can support critical services in the case of an emergency and if the grid goes down. Solar can save customers money on their energy bill, reducing energy burden for low-income customers and even preventing housing displacement. And of course, solar is an abundant, clean and renewable resource. It is imperative to invest in solar in order to move away from fossil fuels and toward a clean energy economy.
Was this about equity, saving money, or something else?
As decision makers in Oregon began the rule making process, it quickly became many questions had been left unanswered. Values needed to be determined. And a dance ensued that was equally practical, mathematical, and philosophical. Who should pay for community solar? Who should not pay? Who should benefit, and how do you define benefit? How do you define low-income? How can we ensure vulnerable communities are not harmed? What role should utilities play? Will customers pay to participate, or receive net savings? What monetary value should be assigned for the solar generation? Should project champions be available to nontraditional developers, such as a school or church, or initiated by large solar developers?
Valuing Solar in Dollars
As it turns out, there is no consistent value in which solar is turned into cash. Aside from community solar, each utility, each customer type, and in some cases each contract can determine a different value for which the customer is compensated. The Public Utility Commission regulates these decisions, and sought to determine one rate at which customers of the Community Solar Program will be compensated for their project’s generation. This value has been termed the “bill credit rate,” and is valued in cents per kilowatt hour. If the value is too low, projects will not pencil and will likely not be built without grant subsidy. Participants may not realize a bill reduction, and may even pay more. However, if that value is too high, non-participants may pay more.
So How Did Oregon Do?
The success of Oregon’s Community Solar Program is to be determined until the program officially launches. The expectation is that projects will be built, but many questions remain in terms of the scale and value those projects provide and to whom. Bill savings is not guaranteed except for low-income subscribers. Questions remain as to whether Oregonians will even fill project subscriptions if expected to pay more to participate. Pacific Power and Portland General Electric customers already have premium green power programs available to them if they choose to pay more for renewable resources. After years of deliberation, analysis, and engagement, solar advocates close to the process will likely tell you it’s a mixed bag.
Depending on who you ask, the bill credit rate is too low, too high, or just about right. Many solar advocates will express concern that the bill credit rate is not enough on its own to spur project development. That means grants or other funding sources may be needed in order to build projects, leading to a program that is not self-sustaining. This also places additional burden on projects initiated by small, nontraditional project developers, such as a nonprofit or county. More concerning was the PUC ruling to pilot the current bill credit rate for only the first 50% of program capacity, or 80MW. After that initial capacity is hit, it is unclear what process will be triggered to potentially determine a new rate. This creates many problems for project developers, particularly community-led projects. Developing a solar project often requires a lengthy and expensive process to obtain permits, manage construction schedules, and acquire customers. If projects do not make it within the first 50% of program capacity, they will have to choose to incur costly delays, or move forward with uncertain project economics.
One recent proposal put forward by Public Utility Commission staff would have provided an increased bill credit rate that would have positively impacted project economics, and subsequently greater bill savings to participants of all types. By staff’s own analysis, that proposal would have netted a shifting of costs to all electric customers of roughly 10 cents per month. The Public Utility Commission decided to reject those recommendations in October 2019, spurring a new wave of financial modeling and unease. This, to many, was a big blow to project economics.
A further concern among solar advocates is the exceedingly high administrative fees now associated with the program that each project will be responsible for. A 1MW project will need to pay a pre-certification application fee of $6,500, and ongoing annual fee of up to $13,000. By contrast, a community solar program in Minnesota requires a $1,200 application fee, and $300 annually for a 1MW project. This too disproportionately impacts community-initiated projects that may not have the internal efficiencies to shoulder these costs. It has been indicated these costs may be reduced, but it is not known what will trigger a reduction and how it would be determined.
What Oregon got right
All is not lost. Most, if not all, stakeholders are supportive and proud of considerations for low-income participation. Through the rulemaking process, low-income participation remains mandated to 10% of each project, with required bill savings of 20%. This ensures unintended consequences will not impact our most vulnerable populations.
There are also new resources and regulations specifically for small projects and community-led projects. A 25% carveout of program capacity is exclusively for small projects (under 360kW) and community-led projects of any size. In addition, Energy Trust of Oregon is now offering a Community Solar Development Assistance incentive available to community and public organizations. This is a wonderful opportunity crafted upon realizing a resource gap for those projects built by and for local community members. If you are thinking about pursuing a project for your community, be sure to contact them for more information.
What’s in a value?
How a community solar program is developed is widely contingent upon the values and outcomes desired, and driven by decisions around who pays and who benefits. It’s arguable that everyone in the state of Oregon will benefit from a robust Community Solar Program, whether they participate in a project or not.
Not all programs succeed, and many have needed to adjust after launching. Years of community meetings, reports, comments, and decisions have slowly forged a model that seeks to facilitate projects while minimizing undo harm or unintended consequences. The truth is it has not been an easy process. But it has brought many previously unknown partners together to form new coalitions that will hopefully continue to work together, regardless if Oregon’s community solar experiment is successful.
Each decision made throughout this rule making process, whether financial or technical, brings us back to philosophical questions regarding the values and type of program we want to create. Are there societal goods that, by benefiting many, can benefit all? Those questions, as well as the success of the community solar program, will have to wait for now.