Community solar to this point has been more of a riddle than a segment. Generally referring to shared solar development that accepts capital from and provides output credit to subscribers and other investors, the potential of the community solar segment is massive. Removing roof and space constraints from the equation, the Smart Electric Power Alliance (SEPA) puts the potential market for community solar from a floor of around 3 million households to more than 12 million, depending on program design and marketing.
Ah, program design. Here comes the riddle. How do you design a solution that taps into that potential when often no single stakeholder sees enough benefit to drive project development? Barriers surrounding cost, access and demand continue to drag on the community solar sector’s overall growth when simpler, proven PV models are already established.
More and more answers to the riddle are emerging though, and community solar is moving on a steeper upward trajectory. In 2017, a year in which both utility-scale and residential segments decreased, for the first time since 2010, community solar boomed.
“Minnesota headlined a banner year for community solar, with more megawatts installed in that state than total U.S. community solar installations in all of 2016,” said Austin Perea, GTM Research solar analyst and co-author of the U.S. Solar Market Insights Report for 2017. “We expect community solar to diversify geographically in 2018, with Maryland and New York to be key growth markets for the sub-segment beginning this year.”
Zooming out to the broader community-scale solar (CSS) segment, defined as 0.5- to 10-MW projects that include co-op, municipal and IOU rate-based projects along with large C&I and shared solar gardens, reveals even more potential. In fact, we might be on the verge of an Occam’s razor model for CSS that has a five-year roadmap to 50 cents per watt total installed cost — a cost level that could drive the potential for community solar and other mid-sized solar installations to 30 GW installed by 2020.
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What the what?
This concept starts with the Rocky Mountain Institute (RMI), a renewable energy think tank located in Boulder, Colo. RMI believes CSS sits in a sweet spot in the market and represents an economic opportunity of as much as $30 billion. CSS systems are large enough to access low costs through economies of scale and small enough to efficiently interconnect into distribution systems. The potential is in projects between 500 kW and 10 MW in size.
“We believe the medium-size market is poised to accelerate very rapidly,” says Jules Kortenhorst, CEO of RMI. “It has significant advantages in that it can be placed close to electricity load, doesn’t need as much space, can go on top of parking lots or be more in the middle of communities. So, therefore the opportunity is very significant.”
In a new report, The Progress and Potential for Community-Scale Solar, RMI offers new approaches to help drive additional development and buyer adoption of this locally sourced resource. The report relays data and insights from RMI’s work supporting co-op solar procurement in Colorado, New Mexico and Texas, and focuses particularly on the CSS opportunity for rural electric cooperatives. The eyebrow raiser inside the report is RMI’s research that shows a path to reduce CSS costs by 40 percent and enable a 30-GW CSS market — the equivalent of about 50 average-sized coal plants — by 2020.
It’s not all theory, either. In November 2017, RMI gathered 35 diverse stakeholders from across the solar industry to devise a collaborative concept that would realize this vision.
“In demonstrating the ability today to already deliver clean energy at or below 5 cents per kWh on the distribution grid, CSS can be the killer app for cooperatives, supplying a cost-competitive, locally sourced, clean energy resource that also provides resilience benefits to their members,” says Thomas Koch Blank, a principal at RMI. “Seizing on the additional cost-reduction pathways that we identify will help ensure buyers have access to the best CSS offerings.”
The outcome of that November summit was a clear understanding and identification of one path to reduce CSS costs. In full, the plan involves working with manufacturers, communities, utilities and solar developers to build a more transparent, standardized approach that expands market access for CSS installations — functioning, in a sense, as its own community. Here’s how it will happen.
Supply side streamline
The plan starts with the rollout of one or more regionalized assembly plants of modular mounting systems. The goal here would be standardization and factory-assembled units that can be delivered and installed quickly.
“What we really needed to get people to rethink is how solar currently gets solar installed in the field, where all of the components from a diverse set of sources arrive on the site and then everything gets assembled, often at height, which makes it difficult to assemble,” Kortenhorst says. “We needed to get people to think of completely different ways of doing this — a whole system design effort to industrialize the process of assembly, and the big idea that came out is creating a standardized unit that fits on the bed of a flat-bed truck and is easily transported into the field.”
Taken together, RMI estimates a reduction of 20 cents per watt from these regionalized factories. RMI issued a request for information (RFI) to get one or more of them built, and while they are in motion and close to announcing, as of presstime, no specifics were official. Kortenhorst is 100 percent confident one will be in place and deployable by the end of 2018.
“Our concern is to make sure that this solution becomes commercially available at scale and cost effective as quickly as possible,” he says.
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Demand side driver
While the supply side is crucial, many of these system cost reductions might have happened organically from the manufacturer side, and those innovations aren’t quite as impactful without the second piece of the puzzle: a reduction in soft costs. Easier said than done, especially with complex community solar deals.
To achieve this, RMI is collaborating with co-ops, municipal utilities and buyer aggregations to build more buyer-side efficiencies.
“The biggest opportunity, in our view, is to help co-ops and municipal utilities realize if you put an RFP out and bring together the site, interconnection, the permitting, the financing and then you go to tender, you are likely to get a much more competitive offer from the developer because you have significantly reduced the risk,” Kortenhorst says.
Putting it that way makes it sound so simple, and it’s not a stretch to expect a municipality to do such legwork at the outset. The more traditional way is kind of silly, really, with the RFP process requiring the developer to take responsibility for permitting and land acquisition pieces that the municipality is in a better position to organize.
“As a municipality, you may know of the appropriate site, you may be able to work with the utility to get a clear commitment on the interconnect, you may be able to deliver the permits upfront and thereby reduce the time and risk for the developer,” Kortenhorst says. “As a collective, as a co-op, you can drive the price down very aggressively.”
These organizations are also best suited for driving awareness and buy-in. Based on market research involving 2,001 residential utility customers and 252 small business customers across the country, a SEPA initiative funded by the U.S. Department of Energy found that while 59 percent of customers were interested in solar in general, only 20 percent were familiar with community solar. In some states, policy dictates that community solar is for the most part a non-utility offer, but in most states, utilities play a leadership role in acquiring the solar resource and offering it as a customer program. According to SEPA, some 170 utilities nationwide currently offer or are planning to offer community solar.
RMI estimates that municipal partners following this blueprint will drive another 30 cents per watt installed out of the cost. Add that to the supply side and voila, a 50 percent per watt install cost reduction.
Lastly, the concept needs champions at the development, EPC level. Seeds are already being planted.
“We’ve invested roughly $1.5 billion in solar in the last 18 months. If there are cost reduction opportunities that come up, we are willing and able to be there as an interested customer,” says Jenya Meydbray, VP of solar technology, Cypress Creek. “Whatever gets us the lowest cost trajectory while maintaining reliability is the way to go. The product can be pulled through very quickly if the value proposition is compelling enough and the validation is there.”
RMI has been working on this for more than a year, but the timing looks fortuitous in the wake of the #TrumpTariffs news. At worst, just one piece of that two-step cost reduction would more than counter the artificial inflation in module prices.
“This administration has put tariffs on solar panels that amount to 12 cents per watt installed in the first year, and this therefore elegantly aims to overcome that step back in cost effectiveness of community solar,” Kortenhorst says.
A new 3-MW solar project in New Mexico will soon be selling its output below 4.5 cents per kilowatt-hour, a price RMI believes is the lowest reported contract for distributed PV in the United States. RMI provided project analysis and supported the competitive procurement process for Otero County Electric Cooperative Inc.
“This is a solar size that does not exist at competitive rates currently and could really be a breakthrough for all types of energy buyers, for grid resilience and for the opportunity to explore different ownership models at a scale that has real impact,” says Kassie Rohrbach, associate director, Ready for 100 Campaign, Sierra Club. “The applicability of being able to find a small acreage area in any urban or rural place, the siting possibilities, open up the opportunity to bring solar to scale in places we haven’t been able to before.”
— Solar Builder magazine