By Sarah Moon, director of community solar originations, DSD
Community solar is projected to reach a record-setting number of installations this year. With more than 70% of the nation unable to access rooftop solar, community solar is now the best option to achieve energy cost savings through renewables.
In addition to helping states make significant strides toward individual and national energy targets, community solar also presents a perfect opportunity to bring clean and renewable energy to underserved communities, where low- to moderate-income (LMI) households typically are unable to afford upfront costs of residential solar, lack the sufficient credit to lease equipment, don’t have the space to install it, etc.
For developers, community solar represents an opportunity to grow their portfolios with cost-efficient and well-incentivized projects, establish fruitful partnerships and get more projects in the ground.
Developing community solar projects to specifically serve LMI communities is less of a hassle than many think; however, these projects can sometimes involve added risk and complexity. Luckily, there are a variety of ways developers can work around that risk and complexity.
Look at states targeting increased community solar in LMI communities
A report by the Delaware Public Service Commission found that 71% of U.S. community solar operating capacity is connected to state legislative initiatives.
Policymakers are excited about community solar because it works at scale and has the potential to benefit those who need it most. As such, state policies have evolved, making community solar less complex and more viable in underserved communities.
Several states, like Massachusetts, New Jersey and New York, are leading the way with well-assembled community solar programs and incentives that are driving adoption, especially among LMI households.
An early leader in community solar, Massachusetts has long maintained a separate incentive structure for LMI communities in the state’s SMART program. The state also eased qualification requirements on subscribers, moving toward a geo-eligibility model that enables more subscribers to qualify and helps developers provide customers with savings faster.
Like Massachusetts, New Jersey also eased its burden of proof requirements for LMI subscribers and transitioned to a geo-eligibility and self-attestation enrollment model. New Jersey’s community solar program also involves competitive solicitation where vendors bid in certain attributes to earn a strong placement from the board of utilities. One of the biggest weighted attributes is the percentage of LMI customers the project will serve, which must make up 51% of subscribers for every project awarded in its first year. The structure of this competitive solicitation market also forces developers to factor in the costs of LMI customer acquisition and management into their bids.
In New York, strong policy and community solar growth are keeping the NYSERDA on track to meet its goal of 10 GW of DG solar by 2030. In August, NYSERDA released $52.5 million in funding through its Inclusive Community Solar Adder program to target 50,000 LMI households.
It’s important for developers to pay attention to evolving state policies that will lead to more opportunities to reach LMI communities.
Mitigate financial risk
While large institutional funders have become more comfortable with community solar and accept more risk, community solar in LMI communities may raise concerns of customer defaults. To address this, developers can seek strong partners in the project, such as a utility or commercial anchor, that are able to provide more stability to a portion of the project.
Developers can also look to areas where utility consolidated billing is an option. This way, subscribers only receive one bill each month, instead of one from the utility and one from the community solar provider. In some community solar programs where the utility solely handles the subscription billing, the risk of non-payment is shifted from the developer to the utility.
In addition, developers can leverage state incentives to increase the potential value of projects. One example is New York’s Inclusive Community Solar Adder incentive, which is dedicated to projects serving LMI subscribers, affordable housing, and other facilities benefiting disadvantaged communities.
Find and qualify subscribers efficiently
Identifying targeted programs and incentives is one thing, but in order to successfully obtain financing and incentives to build a community solar project, developers must first enroll enough subscribers, including a specific portion who qualify as LMI.
But finding and qualifying those LMI subscribers can be difficult and costly. To remove this burden, developers can look to partner with a customer acquisition and management provider that has a proven track record of educating customers and fully subscribing projects. A customer acquisition and management provider that is already well-connected in a local community can likely find and subscribe customers more efficiently and establish better trust and long-term relationships with customers.
Developers can also look to any of the eight states across the nation (Massachusetts, Ohio, California, Illinois, New Jersey, New York, Rhode Island, Virginia) that have enacted Community Choice Aggregation (CCA) laws, especially those that have passed rulings to enable opt-out community choice solar programs. These opt-out programs enable municipalities to automatically enroll any household within their jurisdictions into a community solar program, regardless of income level or credit. This results in projects being fully subscribed essentially overnight and reduces educational costs that typically go toward getting customers to subscribe.
With so many programs and incentives, it’s clear community solar will be a force for renewables adoption for years to come. The ability to serve more LMI households will only grow the impact and reach of community solar.
If you’re a developer that’s not working to tap into the community solar market already, you’ll be left behind, but if you’re able to effectively reach LMI households, you’ll unlock the true power of community solar with clean, renewable, and affordable energy for all.
Sarah Moon has had a career-long passion for renewable energy and the environment, starting with the study of Earth Sciences in college. Since finding her home in the solar industry solar, Sarah has specialized in community solar and serves as DSD’s in-house expert on this exciting and inclusive market. As the Director of Community Solar Originations, Sarah keeps the team informed of new advancements in community solar policy and ensures that all community solar projects have strong partners for finding and servicing their subscribers.