Even Utilities Are Starting To Get Behind Community Solar
Solar energy is rapidly becoming one of the top choices for new electricity capacity as costs continue to decline and generous public policies accelerate tremendous growth for the sector.
Last year was a record year for the solar industry and the momentum is set to continue. In 2016, the EIA expects the U.S. electricity market to see 26 gigawatts of new capacity installed. Utility-scale solar is expected to capture 9.5 GW of that total, or more than one-third. If that comes to pass, it would be triple the rate of installations of utility-scale solar compared to 2015, and would also equate to more than the combined total of installations from 2013 to 2015.
That could be a conservative estimate. The Solar Energy Industries Association, a trade group, expects the solar industry to add 16 GW of new solar capacity, with about three-quarters of that coming from the utility-scale segment.
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A much smaller segment of the solar industry could begin to take off, however. With the bulk of solar installations made up of large-scale utility-size projects, plus some commercial and residential projects proliferating at a healthy rate, the tiny but rapidly growing “community solar” sector could begin to capture a lot more attention.
The growth of solar has been held back by the large upfront costs. That problem is already being overcome with the leasing model, which requires no upfront investment.
But another problem with solar is that not everyone can participate – some people live in apartment buildings, or do not own their own home, or do not have a suitable rooftop to host PV panels. According to Greentech Media, around 77 percent of U.S. households are ineligible for solar panel installations for one reason or another.
“Community solar” solves this problem by allowing people to buy or lease a slice of a shared solar project that is somewhere off site, maybe in a nearby town or on a tract of open land. One could live in an apartment building and still buy into a community solar project, receiving credits on their utility bill.
The community solar model is becoming more common, opening up a vast new market for the solar industry. Community solar grew five-fold last year. New customers can still access a leasing model that has no upfront costs, and with community solar they do not even need to have their own rooftop to do so.
Better yet, community solar projects are increasingly competitive, offering ratepayers a clean source of power without added cost. There is a lot of room for improvement as well. As of now, the issues and design specifications can vary from project to project, but as the sector grows, developers will find ways to standardize projects, reduce development times, and scale-up a small-scale model.
No longer able to ignore the coming explosion in the solar market, utilities have been fighting to tweak public policy to block the threat of solar. But some utilities, in a recognition of reality, are trying to get in on the community solar game so as not to be left behind.
Deloitte cites the case of a Minnesota utility that allows ratepayers to buy in to a community solar project at a discounted rate if they also purchase a new electric water heater. The idea is that the household will heat their water with the extra electricity it produces at midday, avoiding the need to use electricity in the later afternoon and early evening when demand is at a peak. The customer benefits, and the utility benefits by shaving off peak demand.
State policies have also helped. In particular, Colorado and Minnesota have passed laws that require their utilities to setup community solar programs for their ratepayers. Two dozen more have voluntary programs.
Solar is popular too. Deloitte surveyed 1,500 households to find out what they thought were the most pressing energy-related issues, and 64 percent of them said “increasing the use of solar power” was a top three issue for them. As more customers discover community solar, they will increasingly demand their utility offer community solar programs to allow them access.
To be sure, community solar is still small. There are just 111 projects across the U.S., though that is sharply up from only two in 2010, according to Deloitte. Most projects are smaller than 1 megawatt, and the largest is only 20 megawatts. Most projects serve between 40 and 600 customers, according to a report from The Rocky Mountain Institute.
Nevertheless, the solar industry is growing rapidly, and community solar could be the fastest growing segment. The Rocky Mountain Institute argues that 15 GW of community solar could come online by the end of the decade.
For years, utilities have seen solar power as a threat, but that could be changing. As Deloitte puts it, the “evolution of community solar is a classic case of business model innovation turning a challenge into an opportunity. Foreseeing the inevitable growth of distributed energy resources, utilities are deploying these programs to get ahead of the game and to capture the benefits that distributed resources provide to the grid.”
By Nick Cunningham of Oilprice.com