Search
Close this search box.

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.

Sun sets on Solar Funding in Pennsylvania

Solar developers are finding that Pennsylvania funding sources for solar development are drying up with no plans of replenishing the pool.  The dearth of available solar grants could not come at a worse time.  On May 17, 2012, the U.S. Commerce Department announced stiff tariffs on Chinese-made solar panels raising costs on most future solar projects.

PENNSYLVANIA’S DEPLETED SOLAR FUNDING SOURCES

On a state level, Pennsylvania once had a myriad of solar funding sources but now only is home to a very few specialized programs.  The PA Sunshine Solar Program, administered by the Pennsylvania Department of Environmental Protection (“PA DEP”), is currently without funds and is only accepting applications for its waiting list in the unlikely event that funds would become available in the future.  The Alternative and Clean Energy Program, administered jointly by the PA DEP and the Department of Community and Economic Development (“DCED”) under the direction of the Commonwealth Financing Authority (“CFA”), is undergoing a change in guidelines and hence is temporarily not accepting applications.

On a federal level, the most well-known grant source was the 1603 grant which allowed an applicant to apply for up to 30% of the total cost of a solar project.  The 1603 federal grant program required an applicant to purchase up to 5% of the total cost of the project or to have performed a substantial amount of the project’s total construction by December 31, 2011.

Despite the expiration of these well-known programs, there are still a few specialized funding sources that should be considered when schools are planning a solar installation project.

STILL VIABLE SOLAR FUNDING FOR SCHOOLS IN PENNSYLVANIA

Although the above well-known programs are not currently viable sources of solar funding, there are a few lesser-known grant programs that may present solar funding opportunities.  The first such solar grant funding opportunity can be found at the Governor’s Green Government Council (“GGGC”) where the High Performance Green School Planning Grant allows schools to be reimbursed for expenses incurred in the planning stages of construction for a new building designed to obtain LEED certification.  The funds are not available for materials or construction costs, but are available for simulations, modeling, consultants, design fees and costs associated with obtaining LEED certification.  In addition to assisting schools with new construction, the GGGC also provides increased funding for renovations which lead to LEED certification through the Planning and Construction Workbook process.

In addition to state-government grants such as those funded by GGGC, most utilities have solar grants available.  An example of such a program is the one that the Metropolitan Edison Company (“Met Ed”) has in place.  Met Ed offers funding up to $25,000 for the installation of a solar systems.   Met Ed specifically states in its grant information that schools are eligible for solar funding.

PROGRAMS – FEDERAL

The federal 1603 grant is no longer available for entities that have not begun their projects or have not incurred at least 5% of their projects’ total costs prior to December 31, 2012.

However, depending on the location of the project, the Rural Energy for America Program (“REAP”) may still be available.  The REAP is administered by the U.S. Department of Agriculture (“USDA”).  The minimum grant amount under REAP is $2,500 and the maximum is 25% of the project or $500,000, whichever is less.  When considering which solar funding source to apply for, an applicant should bear in mind that federal grants are normally more arduous to apply for and more competitive to obtain than state funded grants.

SOLAR TARIFFS

The tariffs affect two groups of Chinese manufacturers.  The first group is comprised of 61 current exporters, which includes the well-known companies: Yingli Green Energy and Trina Solar.  This group will suffer a 31% tariff rate.

The second group includes all other Chinese manufacturing companies not currently exporting to the U.S. and applies a 250% tariff rate in order to deter the companies in the first group from circumventing the tariff by shifting production to this second group.

Although the tariffs are seen as a boosting the U.S. solar manufacturing sector, the real job generator associated with solar in the U.S. –  installation – is expected to suffer.

The ruling, if finalized by U.S. trade officials, could be finalized by the fall.

CONCLUSION

There are a few specialized sources still available for solar projects in Pennsylvania, but an applicant for such funding should carefully compare the requirements of each type of funding with the specific project specifications prior to spending the time and money involved in actually applying for any funds.

Look for a future blog on what New Jersey is doing to support solar construction in its state.