Everyone loves a guaranteed discount: New financing approach drives community solar growth

Community solar is transforming as promises of electricity bill savings, ambitious utility build-outs and business model innovations are shifting traditional approaches and driving growth.

Florida Power and Light (FPL) is working to build the country’s largest community solar project; a new “fixed discount” business model is creating savings certainty for customers that could eliminate longstanding private sector marketing challenges; and new U.S. Department of Energy (DOE)-backed approaches are reaching underserved customers.

“We are seeing more projects that look like community solar but don’t match the traditional definition,” National Renewable Energy Laboratory (NREL) Research Scientist Jenny Heeter told Utility Dive. “And we will see more divergence in project design as costs fall and people find new ways to make larger-scale shared solar work.”

DOE awards for innovation show that the shared solar concept is still evolving. But challenges remain. Developers and utilities are building aggressively where they can, but many states lack comprehensive policies that prioritize community solar, advocates told Utility Dive. That could slow the market and keep innovations from becoming solutions.

Definitions and data

A community solar project must have “multiple subscribers” that receive monetary or kWh “on-bill benefits” that are “tied to a specific solar project,” according to 2018’s Community Solar Vision for 2030 from the Coalition for Community Solar Access (CCSA) and Vote Solar.

There was 1.34 GW of community solar online in June 2019, according to Heeter’s NREL data. About 67% of total capacity has been built by private sector developers, and the rest by utility-led projects, according to Smart Electric Power Alliance’s (SEPA) 2019 report

The potential market includes electricity customers without solar-suitable roofs, or without the financial status or inclination to contract for or own rooftop solar, according to NREL. There could be 3 GW online by 2020 and potentially 57 GW to 84 GW in 2030, adding as much as $121 billion to the economy, according to the Vision study.


The fixed discount model “in community solar allows us to pass more of the value to the end customer and to make solar accessible to everybody.”

Allan Telio

VP for Community Solar, Nexamp


Expansion of state policies is the key to growth, according to energy policywatchers.

“In states with implemented policies, growth has continued,” VP for Regulatory Policy Sara Baldwin of the Interstate Renewable Energy Council (IREC) told Utility Dive. “The challenge is getting new policies enacted and implemented.”

Only 20 states and D.C. have mandated community solar programs, but those markets have built at least 71% of community solar capacity, the Vision study reported. One legislative practice critical for getting the technology to scale is mandating low-to-moderate (LMI) income customer access.

Equal access

“The community solar model was created to make solar available and equitable for everyone,” IREC’s Baldwin said. “That requires innovative financing structures like those proposed in some of the DOE-supported projects.”

Seven of the 20 state programs have community solar policies addressing 3.5 million to 4 million LMI customers, according to SEPA’s most recent Utility Solar Market Snapshot. But there are an estimated 50 million LMI households, leaving a “massive” opportunity untapped, the Vision study reported.

A modest 3 kW per customer for all 50 million LMI customers represents 150 GW of potential new solar capacity, CCSA’s Cramer told Utility Dive.


“The main growth over the last 5 years and for the near-term future is in the five or six states that have a supportive policy. The exception is Florida.”

Jenny Heeter

Research Scientist, NREL


The perceived risk is that a community solar project dependent on LMI customers may encounter non-payment issues, but “studies show credit issues have very little correlation, if any, with incomes,” Baldwin said.

And there are “policy, financing and subscriber management solutions” to eliminate that perceived risk, according to the Vision study.

A solution now becoming available market-wide may give LMI and other customers even better access to community solar.

A fixed discount

Community solar is one of the most important innovations in clean energy because it allows solar projects to be financed “through a portfolio of subscriber-customers,” Cramer said.

And the fixed discount concept represents a new evolution, NREL’s Heeter added.

Initially, customers subscribed through a one-time upfront payment to the developer or to the utility for a kW or kWh share of a project, she said. Later, the upfront payment was eliminated in favor of a no-upfront-cost monthly payment plan. Savings from community solar have depended on the assumption that within the 20-year subscription term, the retail electricity price would rise above the cost to subscribe.

Fixed discount subscriptions eliminate that uncertainty by guaranteeing a permanent reduction from the customer’s current utility bill from day one, typically ranging from 10% to 15%, Heeter added. The guaranteed bill reduction makes subscriptions easier for developers to market and lowers customer acquisition costs.

New York, Massachusetts, Illinois and Maryland‘s programs currently use the fixed discount model, Nexamp VP for Community Solar Allan Telio told Utility Dive. “This evolution in community solar allows us to pass more of the value to the end customer and to make solar accessible to everybody.”

The arrangement is carefully constructed to avoid putting the community solar developer in the position of selling electricity. Utility customers who are Nexamp subscribers have their kWh usage zeroed out on their bills with renewable energy credits, he explained. A second discounted bill for the credits is paid to Nexamp. The utility is compensated through a fund supported by a bill charge for all electricity customers.


“There is enough experience with different utility approaches in Florida and other states to inform a discussion that could be a real gamechanger.”

Katie Ottenweller

Southeast Director, Vote Solar


This does impose a potential cost on non-participating customers of the kind that has led to controversy for rooftop solar, but there is a difference, Telio said. “Community solar developers pay for infrastructure upgrades to bring their systems online and that improves the system, reduces system costs, and makes the system more resilient for all customers.”

With the cost of customer acquisition lower, Nexamp and other developers can also offer more marketable month to month contracts, he added. They “can be canceled at any time, for any reason, without a fee.” They are also portable to another address in the same utility service territory.

More states need to enable fixed discounts, Telio said. “To create real change, a program has to scale, and well-designed policy can allow this model to serve the mass market.”

The fixed discount model may not work for regulated utilities obligated to offer uniform rates, though “a well-designed open market” could create equal opportunities for both utilities and private providers, Cramer, whose CCSA represents private sector developers, said. “There is no good example of that, but an innovative solution has been proposed in Colorado.”

Colorado regulators could “enable a competitive marketplace to thrive” if “the utility does the solicitation but the commission approves the projects to be built,” VP for Policy Tom Plant of former Colorado Governor Bill Ritter’s Center for the New Energy Economy told Utility Dive. “The utility cannot compete for projects and decide which are awarded contracts.”

FPL and other Florida utilities are demonstrating the benefits and limits of innovation in a program without competition.

Utility-led innovation in Florida

Discounts are driving community solar in places where there is a competitive market, but they are not a factor in the state with the country’s biggest community solar growth — Florida.

“The main growth over the last 5 years and for the near-term future is in the five or six states that have a supportive policy,” NREL’s Heeter said. “The exception is Florida.”

As a result of turmoil there in recent years over customer access to rooftop solar, utilities see customer demand rising, Heeter said. “Solar’s falling cost makes shared solar an attractively priced alternative to rooftop solar.” 

FPL filed plans March 13 with the Florida Public Service Commission (PSC) to bring 1.49 GW of community solar online at 20 sites throughout its territory by the end of 2021. That would more than double the 1.34 GW of community solar NREL found to be in service nationally and almost two-thirds of Florida’s 2.29 GW of total installed solar capacity

FPL subscribers to the Solar Together program would not get a guaranteed discount to their current cost of electricity, though the credit rate to customers for their subscribed portion of the project’s output would escalate annually, allowing potential future savings. Contracts can be canceled monthly and are portable.

Other Florida utilities are seizing the community solar opportunity, though, like FPL, they do not guarantee a discount. Duke Energy Florida’s Shared Solar program charges a bill premium to support solar added to its system.


“In closing gaps left by private industry, the Energy Department fulfilled a key role of government and made it possible to pilot a whole new set of tools for community solar.”

Sara Baldwin

VP for Regulatory Policy, Interstate Renewable Energy Council


Jacksonville Energy Authority (JEA), a municipal utility, intends to, like Duke, offer premium-priced subscriptions for its planned 250 MW build-out of solar at various sites. Its rate, linked to its fuel cost, is expected to eventually fall below the retail electricity rate, according to JEA VP Steve McInall.

A Tampa Electric Company (TECO) 17.5 MW Shared Solar proposal would replace the current fuel charge with a higher fixed subscription charge, allowing potential savings similar to JEA’s plan. Like FPL, TECO’s community solar contracts provide only some of the flexibility offered by other states’ private sector developers.

Until Florida enacts comprehensive community solar-enabling legislation, only utility-led community solar will be available, CCSA’s Cramer said. Without a competitive market for the pent-up demand the utilities are demonstrating, “Florida will not see the same low costs to customers and grid stabilization that has come from policy-enabled programs in other states.”

Enabling policy with competitive opportunities may now be within reach in Florida because it could address community solar’s value to “the whole system,” Vote Solar Southeast Director Katie Ottenweller recently told Utility Dive. “There is enough experience with different utility approaches in Florida and other states to inform a discussion that could be a real gamechanger.”

Other gamechangers

An array of innovations came out of the DOE Solar in Your Community Prize Challenge, according to an NREL summary study of the 178 entries from 40 states, D.C., Guam, and Puerto Rico. Five awards totaling $5 million, announced May 16, went to innovators in providing solar access for nonprofits and faith-based organizations, state and local governments, and LMI communities.

Top prizes went to innovations that expanded access to under-served groups. The $500,000 Grand Prize went to a project led by the Denver Housing Authority that developed, owned and operated solar for multifamily housing. The $200,000 Runner-Up prize went to Community Solar for Community Action in Backus, Minnesota, for finding new ways to identify and serve LMI households.

The $100,000 LMI Program prize went to the Kerrville Public Utility Board and partners for simplifying interconnection to LMI households. The $100,000 Nonprofit Project prize went to a Portland, Oregon, group led by Sustainable Northwest that leveraged cooperative funding to build solar. And the $100,000 Nonprofit Program prize went to Fellowship Energy in Burlingame, California, for community solar financing using an Episcopal Church Building Fund.

DOE also recognized other groups for creative and unique local business models, helping communities most in need, getting solar to places of worship, bringing solar to new markets, volunteer-driven efforts to build solar, and innovations in group-purchasing campaigns.

The Solar In Your Community Challenge “used competition to encourage innovation and creative thinking to identify and reach LMI and other underserved customers,” IREC’s Baldwin said. “In closing gaps left by private industry, the Energy Department fulfilled a key role of government and made it possible to pilot a whole new set of tools for community solar.”

The DOE innovations “do not meet the strict definition of community solar, but do expand solar access and that is what shared solar is supposed to do,” NREL’s Heeter said. And many small innovations like those that won DOE awards “is how marketplaces evolve,” CCSA’s Cramer added.

2019-08-15T08:55:00-05:00Solar News|

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