Community Solar - Inching Its Way to Pennsylvania

            There have been at least two bills recently introduced in the Pennsylvania General Assembly[1] introducing a new model for expanding the deployment of solar energy production in the Keystone State.  Community Solar is not a technology but rather a business model that allows “community solar organizations” (community-based organizations or for-profit entities), to develop “Community solar facilities” (solar installations no larger than 3 MW under most circumstances) that have “subscribers”  (individuals or businesses who pay a subscription fee to receive a specified percentage of the solar output).  The subscription is transferable and provides a credit on the local electric utility bill for their subscribed portion of the output.  Legislation is required because this arrangement is not contemplated by the current renewables law, the Alternative Energy Portfolio Standards Act (“AEPS Act”), 73 P.S. §§ 1648.1, et seq., or the Electricity Generation Customer Choice and Competition Act (“Choice Act”), 66 Pa. C.S. §§ 2801, et seq.,- creating new obligations for both electric distribution companies (“EDC”) and the Public Utility Commission (“PUC”).

[1] Senate Bill 705 sponsored by Sen. Scavello, and House Bill 531 sponsored by Rep. Kaufer.

            The concept of Community Solar is not new, it has been deployed in other states for several years, largely as a means of democratizing access to renewable energy for those who: cannot afford the investment in the technology, have no physical ability to install such equipment, or rent.  Consequently, many community organizations that advocate for, and/or provide services to low to moderate income customers, have branched into community solar as an approach to controlling the energy costs of their constituents while at the same time providing benefits to the community at large.  In fact, both bills have provisions that require the PUC to: 1) establish targets for participation in Community Solar projects; 2) protect those customers who do participate from losing other low-income-related funding; and, 3) allow such funding to be used to support community solar charges.  Despite this intention of ensuring that low- and moderate-income customers are able to participate in Community Solar, participation in Community Solar projects should not be viewed as a low-income only solution.  Rather, it provides a platform for the efficient deployment of solar technology in a way than can serve an entire community and residents from all income strata as well as businesses.  One of the many benefits of Community Solar is that it provides a means of financing solar installations while repurposing unused or derelict land, or large expanses of otherwise unused rooftops, which provides further benefits for communities, albeit for differing reasons.     

            How does Community Solar work? The mechanics of the Community Solar proposal are fairly simple -- the households and businesses that subscribe to a project have their meters read every month, the same as before, and their bill is calculated at their regular electricity rates.  The subscriber’s bill is then reduced by the bill credit provided by the Community Solar project.  The bill credit is the actual cents-per-kilowatt hour charge established by the PUC, multiplied by the number of kilowatt hours credited to that subscriber for the month.  That amount, the number of kilowatt hours credited, is the product of the total output of the facility for the month times the subscribed percentage of the output.  For example, if a customer subscribed to .10% of the output of a Community Solar project, and the project produced 100,000 kwh per month on average, that subscriber would be credited for 1000 kwh per month.  If the 1000 kwh is less than the subscriber’s total consumption, the credit is simply netted against the bill and they are responsible for the remaining usage.  If, however, the 1000 kwh is in excess of the subscriber’s usage, they would receive a credit on their bill.  If at the end of the year, the subscriber has a positive balance in their account, the utility would cut them a check.  This example is demonstrative of a few points. First, even a relatively small solar installation can, over time, produce a significant amount of energy[2].  Second, a relatively small share of such a project can provide a substantial portion of the energy consumed by an ordinary household.[3] In this example the 1/10 of 1 percent share would produce more energy than an average household would use in a month, which could provide a modest amount of additional income that could be used to offset the initial cost of the subscription.  Finally, Community Solar projects provide an opportunity for real people to invest in energy production close to home that provides actual financial benefits to them.

            The primary external threat to Community Solar is the electric utility industry.  Such projects will require the utilities to do extra work that they do not do now, and even though the current versions of the bill allow for full cost recovery, utilities are never happy about taking on new responsibilities that do not allow them the opportunity to earn a regulated rate of return – cost recovery is not the same thing.  Second, utilities will not like the additional burden of adding new, larger scale, solar generation onto their distribution systems.  Without storage, these types of projects can cause system operators the headache of having to supply power to support the households when the sun does not shine, which, ironically, is when the price of energy is typically at its lowest, meaning the fossil generating plants are not normally incentivized to generate.  The anomalies that can be caused by adding large amounts of solar energy to a particular electric grid are well documented but can be addressed if the players are willing to adapt. Solutions include such diverse approaches as incentivizing larger customers to shift consumption to the peak production hours (the middle of the day), or coupling a solar project with battery storage that can level out the flow of energy into the grid and allow a facility to potentially earn additional revenue if it is able to provide additional services.  Finally, utilities are always looking for capital projects to add to their rate base, and renewable generation has been a popular target as of late.  If utilities want to build and own utility scale renewables projects, it cannot be on the customer’s dime, they must be separate affiliates that compete on a fair basis with all other market participants.

            The bottom line is that there are no “problems” with community solar that have not been solved or cannot be solved.  The concept is an excellent example of a clear win/win and should be promoted and passed through the General Assembly post haste.

 

[1] Senate Bill 705 sponsored by Sen. Scavello, and House Bill 531 sponsored by Rep. Kaufer.

[2] A facility that produced 100,000 kwh of energy per month would have a nameplate capacity of just over half a megawatt which cover about 1.5 acres.

[3] The average monthly electricity consumption across the US is about 900 kwh.

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