Utilities across the US are embracing community solar, viewing it as an opportunity to retain customers and compete against the burgeoning self-generation rooftop solar PV market by providing a utility-operated 100 percent solar option. As of July 2016, 16 states and Washington, DC have enacted community solar legislation. Additionally, more than 25 states have at least one community solar project online, totaling just over 100 MW of installed capacity. Navigant forecasts that community solar will see a compound annual growth rate (CAGR) of 75 percent between 2016 and 2020, with the cumulative market reaching 1.5 GW by 2020.
Navigant advises utilities interested in developing a community solar program and developers/financiers considering entering the market. Based on conversations with utilities, developers and program designers with experience developing community solar projects, Navigant has developed the following list of tips for utilities considering community solar.
1. Know What Your Customers Want
It’s important that utilities understand what’s driving interest in community solar in their territories (e.g., savings, bill certainty over time, environmental benefits, etc.). Designing a program that meets customer needs and drives satisfaction should remain a priority throughout the program design. Keeping the program simple and promoting it in a manner that is easily understood is key to engaging customers up front. Utilities should consider running a customer focus group or conducting a customer survey to capture the opinions of their constituents.
2. Learn from Other Utility Programs
Utilities are developing community solar programs across the country. Talk to them about their experiences, and review case studies. Learn what works, what doesn’t, and the lessons learned. Navigant has been a collaborator on the U.S. Department of Energy’s SunShot-funded Community Solar Value Project (CSVP) and has developed a number of case studies and a comparative pricing matrix that highlights successful programs. Don’t expect to get everything right the first time; be flexible, and expect to amend your program once it’s launched.
3. Define Program Goals
What are the objectives of the program, and what are you trying to accomplish? Who are your target subscribers, and who is the program intended to benefit? Some common objectives include:
- Developing the largest community solar program possible
- Providing an alternative to rooftop solar for customer retention
- Earning a rate of return on the project
- Saving customers money on their utility bill
- Providing solar access to a broader customer base (i.e., renters)
- Meeting utility Renewable Portfolio Standards (RPS)
4. Set “Successful Program” Metrics Up Front
For many utilities, current community solar programs are the first of their kind. It is important to set up-front success metrics so that these programs can be measured and improved upon in the future. For example, one utility may oversize its program to prevent a waitlist, while another may attribute success to whether the program is sold out before project completion.
5. Establish Internal Buy-In and a Cross-Functional Utility Team
Community solar programs typically require coordination across many utility departments, including marketing, procurement, IT, billing, and customer service. Utilities should strive to establish internal buy-in and a cross-functional team to ensure a smooth program rollout and implementation.
6. Determine Site Location and Seek Quality Equipment
Choosing a site that minimises grid integration costs and reduces distribution congestion is key for utilities, especially as community solar projects increase in size. Understanding local environmental requirements and laws is important when selecting a site. Being able to see their shared solar panels in the local community is a major appeal for customers—but not if it results in a huge premium.
Considering site location prior to the procurement process is crucial to avoid project delays. Local schools, churches, and brownfields are highly visible sites to consider. Additionally, developers stress the importance of specifying Tier One panels and quality balance of system equipment. Specifying system requirements is particularly important if customers own shares of the system or if the utility is interested in purchasing the system from the developer in the future.
7. Define Program Components
Clearly defining community solar program components is necessary to implement a successful program. Some key components include:
- Participant requirements
- Subscriber payment structure (up front [$/kW] or ongoing [$/kWh])
- Developing a community solar rate ($/kWh) for solar production
- Determining how renewable energy credits (RECs) will be handled, ensuring clear communication to subscribers; REC ownership is very important to certain customers
8. Know Your Strengths
Launching a community solar program can be time consuming and take a large toll on the internal departments within a utility. Determining project support from marketing, program design, and customer acquisition through project development, financing, bill integration, and ongoing program support remain key. Finding a balance between utilising strengths and the need for retaining outside expertise is one of the most important aspects for utilities in developing a successful program. Make sure to understand your internal skills before hiring external parties.
9. Consider Hiring a Third Party
One of the biggest questions surrounding utility-involved community solar programs is whether or not to hire a third party. A utility can either handle all aspects of the community solar program internally, hire a third party for certain aspects of the value chain, or outsource the entire project. Many utilities seek guidance on program design best practices, customer acquisition, marketing, education, software, and billing integration, as it may not be efficient for the utility to develop these capabilities in-house. In addition, outsourcing project development and ownership to a third party enables municipalities and cooperatives to take advantage of federal tax incentives.
10. Leverage Procurement Strategies to Foster Innovation
One thing to avoid when releasing a request for proposal (RFP) is including too many bidder and project design specifications, which prevents smaller local companies from responding and limits the creative solutions respondents can propose. Consider writing an RFP that encourages optimal siting, as well as the incorporation of demand response, energy efficiency, and storage to encourage added project value.
11. Develop an RFP for Outsourced Project Components
An RFP notifies community solar providers that your utility is looking for assistance in some component of the community solar value chain. The RFP allows a utility to outline the bidding process and contract terms as well as to communicate project specifications to the solar providers that submit proposals. Include the utility’s contract as part of the RFP or ask bidders to submit their terms and conditions so that they can be considered in the evaluation process.
12. Budget for Ongoing Program Support
After a community solar program is launched, either the utility or the third-party provider will need to be on point for ongoing support during the implementation phase, including, if applicable, ongoing enrollment, education, marketing, billing, and all other aspects of implementation. If the program is not fully outsourced in a turnkey manner, the utility should plan to budget for these ongoing services.
An article from Karin Corfee (Managing Director) and Andrea Romano (Managing Consultant) – both work in Navigant’s Energy Practice in the US.