NRRI 16-07 Community Solar

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This NRRI research paper provides an overview of community solar (CS) activities around the country. It reports on the rapid expansion of community solar projects under two different rubrics:
1. States that are implementing laws and rules that govern CS, currently underway in 15 states and the District of Columbia;* and,
2. In other states as well those above, individual utility companies are obtaining approvals from their state regulatory authorities, or for non-state-regulated utilities from their governing boards or commissions, for CS programs.

Part I introduces the concept of community solar.

Part II presents a working definition for CS, explains how certain CS program designs can lower costs by avoiding state and federal securities regulations and IRS treatment of customer benefits as taxable income. The definition used for this report is solar electricity generating projects with multiple, unrelated, utility customers who either own or lease a portion of the project and who receive economic benefits based on the amount of electricity generated, most often in the form of volumetric utility bill credits. Part II also briefly compares CS to other utility- and non-utility program options that are at least tangentially related, where interested customers might also act on their preferences for receiving additional percentages or all of their power from solar or other selected energy resources or invest in solar energy.

Part III reviews many important reasons why CS is important, from the standpoint of customers, utilities, the solar industry, and the regulatory community. It includes a brief discussion about why the idea of companion planting can be an apt analogy for community solar. In gardening or agriculture, companion planting means growing two or more different kinds of crops in close proximity to one another to produce mutual benefits such as pest control and suppression, increased productivity, and hedging against various kinds of disruptions. Similarly, this paper begins to explore ideas about how community solar can play an important role in the larger contexts facing the electric utility industry, including the ongoing efforts in many states to either enhance or replace net metering tariffs, ideas about future business models for utilities, and possible beneficial roles for all kinds of market-based solutions and distributed energy resources.

Part IV summarizes state laws and rules about CS programs, presents examples of the major similarities and differences in CS regulations, and compares how the programs address more than a dozen major program design aspects. Part IV reviews legislative and regulatory actions in the 15 states and the District of Columbia, that have already taken action to authorize community solar. A timeline is presented, showing those actions from 2006 to the present, and indicating a couple of states that have already put in place mechanisms to review and make decisions about the status of community solar in the future. State laws and rules are reviewed to identify over a dozen substantive features of the state programs, and provide a sampling of some of the many similarities and differences among the programs.

Categories included in that review include:
 program and project capacity limits;
 customer eligibility requirements, along with minimum and maximum limits for customer participation and special provisions for including low- and moderate-income participation;
 location requirements for both project siting and for participating customers;
 customer disclosures, education, and protection;
 participant bill credits;
 participant rates and terms;
 portability and transfer of participation;
 project ownership;
 program evaluations;
 renewable energy certificate (REC) treatment;
 treatment of unsubscribed energy;
 utility cost recovery; and.
 other provisions.

Part V explores some regulatory considerations and preliminary ideas about approaches that policy makers might consider for CS programs, and presents some brief ideas about future research related to CS. The regulatory considerations include:

 efforts to regulate CS as a means of simulating the performance of fully competitive markets;
 deciding about CS cost allocation and utility cost recovery;
 expanding the value of CS;
 CS as a gateway to all cost-effective distributed energy resources (DER); and,
 Evaluating CS.
The preliminary recommendations for future research include:
 Exploring non-utility-regulatory barriers to community solar, to better understand them and identify possible actions that might reduce or remove them;
 Reviewing possibilities for standardizing community solar offerings;
 Gaining a deeper understanding of how customers might be fully engaged to act as partners in the development of all kinds of distributed energy resources; and,
 Identifying strategies for all interested parties to best manage a transition to a utility sector that will deploy many more distributed energy resources.

Lastly, Part VI provides a brief summary of this paper.