When I discuss solar energy with colleagues in Europe, they often offer advice about how to do things better in the US. However, the tides have turned and solar growth rates are now much higher in America. I believe recent activity in the US can provide powerful success stories for solar innovation that can help re-energize European solar development.
Currently, my favorite US success story is community solar. Community solar consists of a solar plant, owned by a utility where individual modules are sold or leased to utility customers. The utility operates the system, receives the solar energy and then passes the energy credits to the participating customers as compensation for their investment. In this way, the plant is shared by the community.
Benefits of Community Solar for Utilities and Their Customers
Increased Customer Satisfaction
The value proposition for a utility embracing the community solar model is unquestionably compelling. It allows customers a broader range of energy programs from which to choose. Plus, because this program approach is not limited to customers who own homes and who have specific roof orientations – community solar can truly be made available to nearly all utility customers, including lower income families, those who rent, and event those in multi-family buildings.
For the utilities, community solar offers the ability to satisfy customers’ demand for solar energy while increasing customer satisfaction and stabilizing income streams. Community solar can also be used as a vehicle to provide additional programs to customers, for example community solar customers can be leveraged to participate in energy efficiency and demand response programs.
Easier Energy Management
The management, administration and control of solar power fed into the grid from a single utility-scale power system is obviously easier when compared to hundreds or thousands of small generation sources. Community solar programs can be placed on the electric distribution system, providing the same benefits as distributed generation resources with far fewer complications. There are more benefits on the regulatory and policy side as utilities can use these solar plants to cost effectively comply with renewable targets and demonstrate to regulators their efficient and equitable solar options for customers.
Simply put, community solar is a cost effective, efficient, and readily marketable program approach that can be used to enable utility ownership of solar assets.
Lower Monthly Electricity Bills
With community solar, an energy consumer can enjoy all the benefits of solar without the hassle of on-site construction, maintenance fees or the need for special insurance. Community solar also offers an economic advantage to utility customers since building a larger solar system costs less per watt than multiple smaller installations that equal the same output. For many consumers, saving money is often a primary driver for an interest in clean energy, even more so than their environmental motivations. In some regions community solar participants can see lower monthly energy bills while in other regions saving will accrue over time. In all effective community solar programs customers benefit from hedging against rising electricity prices.
Security of Stable Electricity
While some may argue consumers want their own solar system on their own home, I would challenge this assumption. While consumers do love the concept of energy autonomy, they also value energy security that, in many countries, is provided by the grid. Community solar offers everything: owning a solar system, benefitting from the economies of scale and having the security of a utility partner to ensure reliable, long-term operation of the solar power plant.
It’s Just the Beginning
Today’s community solar systems, which range from a few 100 kilowatts (kW) to 1-megawatt (MW), only mark the beginning. In the future, we will see bigger solar power plants serving community solar interest as utilities leverage these programs to meet the interests of their customers. This model will allow us to achieve the economies of scale to bring down both generation cost and, over time, retail power prices for the participants.
There is another positive side effect of using large-scale systems for community solar: A recent study by the Brattle Group demonstrates a 300MW photovoltaic (PV) utility-scale plant not only generates power at less than half the cost of a 5kW residential system, it also avoids 50 percent more carbon emissions than 300MW from multiple residential rooftop installations. While community solar plants may not be built at this large scale, they will leverage the best design and operational attributes of large-scale solar power plants bringing this increased benefit to all customers. In this way, community solar satisfies the need for both clean and low-cost electricity.
For me, it is absolutely clear. If designed properly, community solar is a winning model for utilities and electricity customers.
Huge Growth Potential for Community Solar
GTM Research reported in June of this year that 97 percent of all community solar systems in the US were installed in the last four years. This year, the analysts expect this market segment to grow from 66MW in 2014 to 181MW in 2015 and 465MW in 2016 – though still very small in volume, it would equal a sevenfold growth increase in only two years.
The potential is obviously much, much larger. The National Renewable Energy Laboratory (NREL) published a study in April stating that the community solar segment could increase to nearly 50 percent of the distributed PV market in the US by 2020. This could mean an additional 5.5 to 11GW of growth between 2015 and 2020. I am not aware of any recent similar studies for Europe, but with retail electricity prices generally being much higher than in the US, the community solar model is even more attractive in most European countries.
The Perfect Fit for Deregulated Energy Markets
While European customers face high retail power prices, most countries are in the process of phasing out financial incentive programs for solar or have already done away with these incentives altogether. The benefit of community solar, however, is that its design and cost structure increasingly works without subsidies.
A few key factors must exist for community solar’s optimal success. In the regulated US market, we have seen success with the opportunity to use energy credits for generation and consumption, which avoids wheeling charges. In fully deregulated markets, community solar can win with price-conscious customers with its highly competitive cost.
Successful community solar can occur anywhere – in Europe, where power markets are usually liberalized, or in Texas, where Clean Energy Collective (CEC) is implementing the first community solar project in a deregulated market with a 700kW solar plant.
You Need the Right Partner
Another factor of success is finding the right partner. While most utilities might be able manage community solar projects alone, we have seen that it can be very efficient to work with an experienced partner who prepares and runs the program, who recruits and manages enrollment, and who supports monitoring of output allocations and supports utility billing interfaces. We believe in the huge potential of community solar, which is why the company is partnering with CEC as its partner in delivering community solar to our utility partners.
Community solar is a viable and exciting model that is showing success in the US market and has the opportunity for success in the European market for the same reasons: cost-effective solar that meets the needs of both the utilities and electricity customers.