Community solar rides into town in new Californian gold rush

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As with previous eras of California gold-fever, solar developers might already have exhausted the mines packed with lucrative nuggets of large-scale utility projects. The numbers speak for themselves in the state's Renewable Portfolio Standard, which last year disappointed 94% of proposals from developers.

But developers are still scanning the western horizon, knowing that there is gold in them there hills. They say their solution is to bring solar home and to the masses with more than any other incentive in California to date: instead of sweating over huge nuggets deep in the balance sheets of utility companies, prospectors see a stage still spangled with gold dust.

Community solar is riding into town offering two flavours of incentive-light solar: crowd-sourcing for off-takers and crowd-sourcing for project finance.

California senator, Lois Wolk, last week introduced the community solar bill to the state assembly that will allow utility customers to purchase energy directly from renewable energy facilities for the first time.

SB 843 aims to expand access to solar for customers of the state's three investor owned utilities: Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. It was passed by the Senate last year and it's likely to become law as early as September – a move that could be welcome for the vast majority of homeowners, renters, businesses, public agencies and schools that are currently blocked from going solar.

Tom Price, the director of policy and market strategies at CleanPath, a solar project development company in San Francisco which advocated for the bill, estimates that some 90% of Californian residents and 70% of businesses either lack funds or roof space for solar.

“The overwhelming majority of residents and businesses in California cannot buy solar power, even if they want to,” said Price. “It's a massive missed opportunity.

“We have to find a way for people to be able to participate. It is not fair that the current incentives we have don't work for all Californians.”

But the community solar bill will allow California IOU customers to effectively outsource the solar energy project they would otherwise have on their roofs to a project around the corner or another town entirely – as long as it's in the utility's territory. Customers will receive a credit on their bill for their share of renewable energy delivered to the grid at a level below retail electricity rates.

“So, rent in San Francisco?” said Price. “No problem, you could subscribe to a solar array in, say, Fremont, and the credit will just show up on your PG&E bill.

“Why should you have to be a rich landowner to be able to participate? It's been a long time since those were the rules in this country.

“It will transform the California solar market and could grow the market by five times overnight.”

Projects are capped at 20MW but the most economic projects will be in excess of 1MW rather than domestic-scale rooftop, he said.

“It makes a lot of sense; building larger arrays is cheaper and makes the grid more stable. And will drive California's renewables percentage way past 33%.”

Environmental Entrepreneurs, green business advocates, estimates that the bill will generate US$6bn in economic activity from the construction of up to 2GW of community distributed solar; tax revenues will be boosted by US$500m and 48,000 jobs will be created – all at no cost to the public sector.

Although SB 843 applies to all renewables, it is anticipated that solar projects close to load on already disturbed land will dominate, e.g. near substations. And the credits generated under the legislation will be new energy generation, distinct from renewable energy credits earned by projects, which count towards utility RPS goals.

“This is very different from RECs, than just buying the credit from a wind turbine,” said Price. “This is 100% brand new energy built for that customer and the RECs are retired on behalf of that customer and they are made so that they cannot be resold and there is no double counting. The RECs do not go to the utilities so this is additive to anything built under the RPS.”

Unlike net energy metering (NEM), utilities are comfortable with this virtual, or remote, net metering of community solar because the customer will not be credited at retail rates and will still have to pay towards transmission and distribution costs.

Price said that's a fair policy for all stakeholders and expects at least one utility to support the bill.

“We've spent a lot of time with the utilities, consumer advocates and the public utilities commission, trying to craft a bill that accomplishes four goals. It has to improve access, fairly compensate utilities for the service they provide and has to not shift costs to non-participants and it has to be sufficiently robust to be financeable.

“With low costs of capital and PV and significant federal incentives for the next three years, it's possible to meet those four criteria and still deliver an enormous boost in California and the country.

“This bill allows me to build a utility scale power plant with all of the risk and debt and financial obligations than crowd-source the off-takers. It is a very different risk profile and uncharted territory.”

The other flavour of community solar is the crowd-source project finance companies such as Solar Mosaic, in Oakland, California. Solar Mosaic, launched last year, enables anyone with a few dollars to spare to participate in rooftop investments by selling “solar tiles” at US$100. Investors are not expecting to make a fast buck or large return in the first phase, which is backed by US$350,000 from more than 400 people to create five rooftop solar power plants in the San Francisco East Bay and Arizona. But the company says that steady returns are expected in later phases.

Solar Mosaic's peer-to-peer lending style might appear difficult to scale, but it has caught the imagination of heavyweight investors and solar companies such as Spring Ventures in the US and Dr Alexander Voigt, co-founder of Solon Q-Cells.

Solar Mosaic’s chief executive, Dan Rosen, said: “We’re tapping into a huge problem – this feeling that Americans fear there’s no place for them to put their money that’s safe, reliable and secure. We want to create safe, secure investments for people that also help the world and help create solar for their community. We’re seeing the beginning of that now and it’s going to keep growing.”

Other companies such as PsomasFMG finance PV projects and sell the electricity back to the school, public agencies or municipalities, which are restricted from taking on risky private sector loans.

But companies like Solar Mosaic, which helps lower the cost of capital by distributing participation in project finance more widely and those like CleanPath, which intends to develop community PV under the new legislation are at either end of the same spectrum.

“If we can crowd-source the off-taker on one end and crowd-source the financing on the other, we have dramatically increased the pool of participation on one side and lowered the cost barriers of participation on the other,” said Price.


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