Community solar insight: This industry brief cuts through the collective confusion

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The U.S. Community solar is on a steep, upward trajectory and does not show any signs of slowing down. Community or shared solar offers an opportunity for customers also referred to as subscribers, who either cannot or simply do not want to install solar at their homes or businesses, to receive credits on their clean energy bill. These type of programs enable customers to either purchase solar energy or invest in solar assets who otherwise would not be able to due to inadequate roof space, lack of a strong credit score, not owning a home, etc.

Whether you are a developer, an owner of community solar projects, or even just a participant, there are a lot of benefits to engaging in such projects. Community solar enables access to solar for all. Businesses and homeowners can have equal access to the environmental and economic benefits of solar energy in a trouble-free manner, particularly for low-to-moderate income customers, which form a large portion of the US households.

Community solar business models continue to evolve to cater to the needs of both customers subscribers, utilities, etc. Identifying the optimal model and what it takes to succeed in this budding market can be challenging and at times confusing. This industry brief aims to cut through some of this confusion by providing a bird’s-eye view over the main existing models, drivers of success, as well as considerations for investors and asset owners.

Join the pre-eminent Solar Asset Management North America 2019 conference, taking place in the high-powered and ambitious city of San Francisco on March 26-27, to get all the insights to help you navigate through the complexities associated with community solar.

— Solar Builder magazine

This nearly 100-MW California solar PPA enabled by energy service provider Direct Energy Business

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Sunpin Solar, a California-based solar developer, and Direct Energy Business, part of Direct Energy, one of North America’s largest energy and energy-related services providers, and a subsidiary of Centrica PLC, announced a renewable energy power purchase agreement (PPA) for the full output of the recently completed ColGreen North Shore Power Plant. The renewable energy PPA covers the full 96.75 MW DC / 74.8 MW AC capacity of the solar project and will serve Direct Energy Business’ retail energy customers in California. This agreement is one of the first instances an energy service provider (ESP) has enabled a project of this size in California.

“California is a very competitive market for utility-scale solar developers, and I am proud of the Sunpin Solar team for the successful implementation of this new innovative Structured PPA with Direct Energy Business. This agreement sets the stage for our plans to build at least another 200 MW of solar in California,” said Tom Li, President of Sunpin Solar.

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Situated on 485 acres of land in the city of Mecca, CA, near the Salton Sea, the project has been operational since January 2019. The ColGreen North Shore Solar Power Plant is interconnected to the Imperial Irrigation District (IID) Utility grid and has delivery capability into the California Independent System Operator (CAISO) territory. The single-axis tracking system has an expected annual production of over 210,000 MWh, which would be enough solar energy to power 22,300 homes per year according to the U.S. Environmental Protection Agency’s Greenhouse Gas Equivalencies Calculator.

“Energy Service Providers like Direct Energy Business can enable investments in renewables to help California reach its energy policy goals,” said David Brast, Senior Vice President, North America Power and Gas, Direct Energy Business. “As California continues to evolve into a competitive energy market, we will work with suppliers like Sunpin Solar to deliver more energy choices for our Direct Access (DA) and Community Choice Aggregation (CCA) customers. This renewable energy PPA with Sunpin Solar is an important milestone in this journey and aligns with Centrica’s commitment to provide products and services that lead to a lower carbon future.”

The ColGreen North Shore Solar Power Plant displaces the CO2 equivalent of over 100,000 acres of trees and will offset greenhouse gas (GHG) emissions of over 32,000 vehicles driven each year, per the U.S. Environmental Protection Agency’s Green-house Gas Equivalencies Calculator. The project created 425 local jobs at the peak of construction in an area classified as disproportionately burdened by pollution and with population characteristics more sensitive to pollution by the CalEPA. The completion of the project was celebrated with a ribbon-cutting ceremony on February 15th.

— Solar Builder magazine

Solect Energy renews partnership with New England’s largest energy buying group

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Solect Energy, a full-service commercial-scale solar developer and installer in Massachusetts and PowerOptions, the largest energy-buying group in New England, renewed their multi-year partnership this week. Solect will continue to lead PowerOption’s Small Systems Solar program, which provides savings and certainty for local communities, state owned buildings and not for profits. The completed projects to date are estimated to save $20 million for PowerOptions members.

The Small Systems Solar program provides competitively priced and pre-negotiated contract terms for solar systems less than 300 kilowatts (kW), and reflects the benefits of leveraging the potential for multiple projects across the consortium made up of more than 400 nonprofit and public entities. The program will provide savings for members and a hedge against future cost increases over the life of the 20-year solar power purchase agreements (PPA).

“Solect has a proven track record, and our members continue to provide positive feedback,” said Cynthia A. Arcate, President and CEO of PowerOptions. “Being a local company who has worked with hundreds of commercial and institutional customers, Solect understands our members’ needs and are adept at maximizing the potential for each project.”

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The partnership is well timed to help public and non-profit organizations across Massachusetts as the Commonwealth rolls out its new solar energy incentive program (named SMART) with specific “adders” that significantly lower electric costs for the end customer, and it includes additional incentives for public entities. In addition, these organizations can take advantage of state grant opportunities like the Massachusetts Department of Energy Resources Leading by Example (LBE) grant program which delivers further incentive and direct savings for state entities that commit to clean energy initiatives. Solect is also a certified prime contractor for energy management for the Massachusetts Division of Capital Asset Management and Maintenance (DCAMM).

Example: Salem State University

In a first of its kind project, Salem State University recently leveraged their PowerOptions membership by contracting with Solect for three solar energy systems (totaling 387 kW). As recently announced by the state, Solect also helped the University apply for the Leading By Example grant program. Salem State received the first grant from the 2018 LBE Solar Program which reduces the price of their PPA by $.03/kWh. In total, the solar energy systems will save as much as $1 million over the 20-year life of the projects. As a DCAMM Certified contractor, Solect manages all aspects of the projects from design engineering through installation and commissioning.

“We are proud to partner with Solect and PowerOptions in bringing more solar power to the university,” said Tara Gallagher, Sustainability Coordinator at Salem State University. “We are grateful that, as a Massachusetts state agency, we were able to take advantage of a seamless and streamlined process through collaborating with Solect and PowerOptions.”

— Solar Builder magazine

7X Energy sells late-stage 100-MW solar project in Texas to Duke Energy

7X Energy, a leader in solar development in the U.S., announced the sale of the 100-megawatt (MW) Lapetus Solar Energy Project in Andrews County, Texas, to Duke Energy Renewables. 7X, the original owner and developer, will transition the last stages of development of the solar project to Duke Energy, which also will manage construction and serve as the long-term owner and operator of the project. CohnReznick Capital, a leading investment bank serving the renewable energy industry, acted as financial advisor to 7X Energy on the sale.

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Lapetus will be located on an approximately 800-acre site, and construction is expected to begin before the end of March. The project will be the first large scale solar project in Andrews County. During peak construction, the solar facility will bring approximately 150 jobs to the county and generate over $20 million in local property tax revenue. Lapetus is scheduled to begin by the end of the year.

Once operational, the solar energy from Lapetus will be sold in SolarBlocks under a power purchase agreement (PPA) negotiated by 7X and Duke Energy Renewables and will deliver electricity to ERCOT (Electric Reliability Council of Texas). Brazos Electric Power Cooperative, Inc. will purchase the energy on behalf of CoServ Electric and seven other distribution cooperative members.

— Solar Builder magazine

Institutional investors to double renewable energy allocations globally over next five years, but hurdles remain

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Institutional investors plan to almost double portfolio allocations to renewable energy over the next five years. An estimated $210 billion from investors surveyed for a new report launched by Octopus today, is expected to flow into the asset class over the period.

The report, The green investor: why institutional investing holds the key to a renewable energy future, is based on a survey of global institutional investors with a collective $6.8 trillion of assets under management*. It reveals that allocations to renewables will increase from 4.4% to 7.1% over the next five years. Of those institutions currently invested in renewables, more than two-fifths (42%) expect to increase allocations by as much as 10%.

What is driving investment?

Current market volatility and the perceived end of the market bull run is driving increased allocations to renewable infrastructure. Two-thirds (66%) of renewable energy investors surveyed cite diversification as the main driver prompting them to invest in the sector. This is closely followed by the pursuit of Environmental, Social and Governance (ESG) credentials, with more than half (58%) of institutions invested in the sector choosing renewables primarily to fulfill ESG criteria. Almost half (48%) cite predictable cash flows as a primary driver into renewable infrastructure.

Yet despite increasing investor appetite for renewables, the report reveals a number of challenges to overcome, to open up additional investment in the sector:

• Energy price uncertainty: over half of respondents (56%) identify energy price uncertainty as a challenge for them when pursuing investment in renewables.
• Liquidity issues: two fifths (41%) cite liquidity issues as a challenge.
• Operating, implementation and execution costs: more than a third (34%) find costs to be a challenge.
• Lack of scale: a third (34%) find they do not have the size and scale to pursue renewables.
• Government and regulatory barriers: a third (33%) cite government and regulatory barriers as a challenge to investing. Of those surveyed, the biggest factor that would cause them to increase investment in renewables would be better support and policies from government (52%).

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The International Renewable Energy Agency estimates $1.7 trillion of investment is needed between 2015 and 2030 to meet global renewable energy targets to combat climate change. According to Octopus, investment from institutions in renewables will need to increase to deliver this required investment. To drive additional investment these challenges must be addressed.

Commenting on the report’s findings, Matt Setchell, Co-head of Energy Investments at Octopus, said: “Institutional investors are waking up to the investment opportunity that comes with securing a renewable future. There is much to celebrate in the report. However, while institutional investors’ contributions are on the increase there remains a long way to go to plug the funding gap. We cannot afford to view increased allocations as ‘job done’. More needs to be done to unblock investment to help tackle climate change. Acting now is not an option; it is a necessity.

“Our report identifies the key barriers that need to be overcome to enable institutional capital to support a renewables future. Clarity on policy from government; flexible investment opportunities to suit investor needs and skilled managers who are able to identify and offset risks will be crucial to unlocking further institutional investment into the sector.”

To address the funding gap, Octopus has set out a three-point plan for unblocking the institutional investment needed to deliver a renewable future:

1. Educate investors on underlying risks, particularly energy price uncertainty so that they understand how market fluctuations may impact their returns.

2. Mitigate risk through a team of specialists that reduce both operational and commercial (energy price) risks alongside using existing scale to benefit investors.

3. Create more choice by tailoring investments into renewable energy assets to combine assets across technologies, jurisdictions and energy price exposure to fit different risk-return appetite from investors.

— Solar Builder magazine