Focusing the Sun: State Considerations for Designing Community Solar Policy

April 14, 2018 by Jeffrey J. Cook

Community solar programs are available across 35 states and the District of Columbia, and these programs supported approximately 275 megawatts (MW) of solar deployment through 2016. Community solar is gaining market attention in part because it provides a solar purchasing option for customers who are otherwise precluded from the rooftop solar photovoltaic (PV) market, including renters, who often lack the authority to install rooftop solar, and property owners with insufficient roof space or conditions to support rooftop PV applications. At the same time, community solar programs can offer participants competitive electricity rates as compared to retail rates.

Most community solar capacity is centralized in the 18 states that require certain utilities to offer community solar programs, though there is still significant variation in deployment across these states resulting from a host of factors, including differences in solar potential and program timelines. Policy design decisions also play a role. A recent NREL report summarizes community solar policies and examines how policy decisions may influence deployment. The report offers state policymakers a list of key questions to help guide their decision-making process when developing new community solar programs or modifying existing ones.

The report identifies six critical design elements that impact community solar markets, defined as follows:

Program cap is the overall capacity limit established for a statewide community solar program.
Project size cap is the limitation on individual project size.
Subscriber location requirements identify which subscribers can participate in a community solar project based on where customers are located.
Subscriber eligibility requirements clarify the quantity of subscribers required and how much capacity individual customers can purchase.
Low- and moderate-income (LMI) stipulations establish certain thresholds for lower income customer participation in community solar projects.
Subscriber compensation determines the value that customers are paid for the generation from their subscription in a project.

Table 1 summarizes the policy variation across the states. Though all six elements can influence deployment, we focus on two here: program caps and subscriber compensation structures. Four states—Maine, Minnesota, New York, and Oregon—have adopted uncapped programs. In these states, customer demand will determine the size of the market. Twelve states have imposed a program cap that, unless adjusted, serves as the market ceiling.[i] Subscriber compensation structures are another important factor in understanding deployment potential. A survey of community solar subscribers shows that the top reason for participating in community solar projects is competitive electricity rates. As a result, less attractive compensation structures, such as those based on the avoided cost of generation rather than the full retail electricity rate, may influence whether developers can attract enough consumer demand to reach program caps.

Table 1. State Community Solar Policy Variation by Component as of December 2017

State	Program Cap	Project Size Cap	Subscriber Location^a	Subscriber Eligibility	LMI Stipulations	Subscriber Compensation
California	600 MW	20 MW	Yes	Yes	Yes	Avoided cost of generation
Colorado	Varies by utility	2 MW	Yes	Yes	Yes	Retail rate
Connecticut	6 MW	≤4 MW	No	Yes	Yes	In development
Delaware	Net metering cap applies	2 MW	No	Yes	No	Retail rate
Hawaii	In development	In development	No	In development	No	In development
Illinois	In development	In development	No	In development	Yes	Value-of-solar-energy
Maine	Uncapped	≤660 kW	No	Yes	No	Retail rate
Maryland	200 MW	2 MW	No	Yes	Yes	Retail rate
Massachusetts	1,280 MW^b	5 MW	Yes	Yes	Yes	Limited retail rate
Minnesota	Uncapped	1 MW	Yes	Yes	No	Value-of-solar-energy
New Hampshire	Net metering cap applies	1 MW	No	No	No	Avoided cost of generation rate (projects <100 kW)
New York	Uncapped	2 MW	No	Yes	No	Value-of-solar-energy
North Carolina	40 MW	5 MW	Yes	Yes	No	Avoided cost of generation
Oregon	Uncapped	3 MW^c	No	Yes	Yes	Value-of-solar-energy
Rhode Island	30 MW	10 MW	No	Yes	Yes	Retail rate
Vermont	Net metering cap applies	500 kW	No	No	No	Retail rate
Virginia	40 MW	2 MW^d	No	No	No	In development
Washington	Incentive cap applies	1 MW	No	No	No	In development

_{^aGeographic limits listed in the table refer to any additional restrictions outside
the requirement that a customer be located within the same electric service territory as
the project.}

_{^bThis cap applies to the Solar Massachusetts Renewable Target (SMART) Program overall,
excluding the minimum carve-out for small (<25-kW) PV systems of 320 MW. Community
solar projects must compete with a variety of other distributed projects under this
cap.}

_{^c Oregon allows colocation of projects up to 3 MW in certain to-be-determined urban
areas.}

_{^dFor certain utilities, projects can be larger than 2 MW, provided the excess capacity
is not dedicated to the pilot program.}

The report illustrates that policy variation results in part from differing perspectives on the intended scope of deployment, definition of “community solar,” and other factors like how community solar projects should be structured, what type of subscribers should participate, and where projects and subscribers should be located. The report summarizes a set of key questions that policymakers might consider across the six design elements (see Table 2). Ultimately, how policymakers address these questions will help shape a state’s community solar market.

Table 2. Community Solar Policy Considerations for Policymakers by Component

Policy Design Component	Key Questions and Considerations
Program Cap	·Should the program be designed to allow the market to determine future deployment or should deployment be capped? ·If the program is capped, should legislators or regulators have the authority to set the cap? ·If the program is capped, should a process be in place to adjust that cap and inform developers of how much capacity under the cap is available at a given time?
Project Size Cap	·What size project warrants the definition community solar? ·How does this definition effect the potential for economies of scale and benefits to participants?
Subscriber Location Requirement	·Should geographic distribution of projects be a policy goal? ·If so, what geographic and/or locational considerations should be incorporated?
Subscriber Eligibility Requirement	·How many and what type of subscribers are necessary to consider a project community solar? ·Should an individual customer’s subscribed generation be limited, or should there be a minimum subscription size? ·If individual customer’s subscriptions are limited, how might these limits influence the viability of including anchor tenants?
LMI Stipulations	·Should community solar programs require project developers to increase LMI customer participation? ·If so, how should these requirements be implemented?
Subscriber Compensation	·How should generation be compensated? ·If a resource valuation method is used, what costs and benefits should be included in the compensation method and how should analysis be carried out? ·How should renewable energy certificates be treated?

How policymakers consider these questions can serve as an important foundation for establishing the next generation of community solar programs nationwide. The full report can be accessed at https://www.nrel.gov/docs/fy18osti/70663.pdf.

[i] The two remaining states —Hawaii and Illinois— programs are still in development and may include program caps.

Topics

Community Success Stories