Community Solar: What North Carolina Needs to Learn

Community Solar: What North Carolina Needs to Learn

Community Solar: What North Carolina Needs to Learn

By Diane Cherry, Sr Energy Consultant, CvCC Principal, Diane Cherry Consulting

 
Background

Solar continues to grow as a viable and affordable energy source and utility consumers are increasingly presented with options for how they power their homes and businesses. Over the past years, rooftop solar has become a more popular option for powering residential areas, with nearly a million U.S. homeowners installing PV panels on their roofs. However, for many Americans, the cost of installing rooftop solar is prohibitive, with many panel systems and installation ranging upward of $20,000. Further, many Americans (nearly 37% of households) rent their homes; other home rooftops are not suitable for panels, or may be obstructed by objects that cast hours of significant shade.

 

A more affordable alternative to rooftop solar is community, or ‘shared’ solar. This allows community stakeholders to tap into a large, shared solar facility that may be sponsored by utilities, co-ops, or other community organizations; in theory, this concept should provide homeowners, renters, and businesses with equal access to the environmental and economic benefits of solar generation regardless of their ownership or physical building status. Currently, there are 40 states with at least one online community solar projects, and at least 19 states plus D.C. have encourage policy and programming to help grow and reap the benefits of these projects. Some areas allow for net energy metering—i.e., if someone’s share in community solar produces more than they use, they may receive credit on their energy bill. Community solar participants’ electricity bills are typically expected to be cheaper than those who do not subscribe.

 

Problems with North Carolina’s Community Solar Program

 

However, implementing and efficiently utilizing these projects is easier said than done, with some cities and states facing more legislative, industrial, and efficiency roadblocks than others. North Carolina has faced challenges with attempts to implement community solar at a large scale. The 2017 House Bill 589 required Duke Energy to offer 40 megawatts (MW) of community solar. Residents were then to be compensated at Duke’s avoided cost rate for energy generated by their segment of the solar facility.

Many criticized the 40 MW goal as being too limited; once Duke’s proposal for community solar was put forth to the NC Utilities Commission (NCUC) public comment criticized the program as “designed to fail,” and claimed that Duke Energy had not made good faith efforts to minimize costs or create a program with the public’s interest in mind. Duke’s initial community solar proposal would cause participating customers to lose more than 50 percent of their investment, and the program was set to take five years to implement—price gouging customers, and stifling progress in clean energy. A follow-up proposal called for a minimum subscription price of $3,900 over 20 years, with only a $1,900 return.

 

In 2019, the NCUC approved Duke’s revised community solar program plan; Duke expressed worry that consumers would not be interested, and announced that they would continue to discuss the program with potential subscribers, developers, and stakeholders to determine the best course of action. As of 2020, Duke Energy had not constructed any community solar facilities. Legislative action this session of the N.C. General Assembly must address this shortcoming.

 

Successful Models Elsewhere

 

While some community solar programs in other states have faced similar problems to North Carolina, there have also been notable successes with intense subscriber interest, successful rollouts, and fair, equitable pricing.

 

Minnesota, a vertically integrated state like North Carolina, has seen immense growth and advancements in their community solar programming. In 2013, the Minnesota legislature created a community solar garden program as part of a package of solar-positive policies; since then, community solar in the state has hit a record of 784 MW of operational capacity as of January 2021, having more projects and capacity than any other state. There is no cap on aggregate project capacity per year, and the program has tapped a broader customer base of households given credit score waivers. Where those waivers are not available, Minnesota nonprofits have stepped in to assist low-income households with accessing community solar.

 

Analyses show that all utility customers—whether they subscribe to community solar or not—have seen financial benefits from the project; the latest numbers show bill credits totaling over $2.2 million, not even including distribution capacity values or avoided costs from volatile gas prices. Though Minnesota has seen legislative opposition and a number of utility complaints from Xcel Energy, the program continues to grow—even throughout the pandemic. And in January, regulators fined Xcel Energy $1 million, given complaints over delays in connecting solar projects to the grid. This is a far cry from Duke Energy Carolinas and Duke Energy Progress’ questionable consumer interests.

 

Florida has also shown growing promise in the realm of community solar, as the state rapidly amps up its installed solar capacity (projected to soon surpass North Carolina). Florida Power & Light Company (FPL) unveiled its “Solar Together” subscription program in 2020, adding five new solar energy centers with 1.4 million panels and bolstering the nation’s largest community solar program. Another nine centers are already under construction, and the company hopes to increase its numbers to 20 plants by 2030.

This does come at a cost to consumers, however; while there are no monthly maintenance fees, customers will see initial line item cost increases that will net a little more than an added dollar per month. The company projects bill reductions and credits in three to five years, and over its lifetime, Solar Together is set to generate around $112 million in customer savings and $249 in net cost savings for participants and customers. An initial 75 percent of capacity will be set aside for industrial, state, and commercial customers, and a remaining 25 percent for residential and small business customers (about 10 percent of that number reserved for low-income households).

 

Cities in Florida are also taking a lead on community solar, with Orlando pulling to the forefront. The city’s first community solar facility went up in 2013 and was met with high demand—the program oversubscribed within days. By 2017, another array was built over top of a repurposed coal ash landfill, and also became quickly subscribed to capacity. As part of the American Cities Climate Challenge, Orlando has planned more than 250 additional MW of capacity in the next few years, is expanding its community solar subscriptions for city-owned buildings and is taking strides to reach its low-income residents. Households earning less than $40,000 per year make up less than 5 percent of solar installations in the U.S., and right now shared solar may come at a premium. In Orlando, customers pay 1.3 cents higher, though prices will level with fossil fuels by 2023; until shared solar dips to that rate, the city plans to offer reduced rate structures and innovative financing for its lower-income population, bringing cleaner and more reliable energy access to a higher standard.

 

Lastly, let’s take a look at Virginia. In 2020, Governor Ralph Northam signed the Virginia Clean Economy Act, setting the state up for bold progress on clean energy and efficiency investments. In addition, the state passed Senate Bill 629 on shared solar, requiring the State Corporation Commission (SCC) to establish a shared solar program allowing Dominion Virginia customers to purchase power through a subscription to a shared solar facility. Key in Virginia’s legislation is an explicit effort to reach customers of varied socioeconomic status, with a specific focus on low-income families (defined as any person/household making no more than 80 percent of the median income of their locality). The law requires that each entity operating or owning a shared solar facility have at least 30 percent low-income subscribers; the SCC will be working with stakeholders to help encourage these residents’ participation and encourage public-private partnerships to help drive sustainable and fair access. Virginia’s House Bill 573 also pushes for low-income community solar development, setting up a pilot program where at least 50 percent of households must earn 60 percent below average median gross income.

 

Virginia has hit a few speedbumps on the way to equitable shared solar, however. Subscribers in the program will be required to pay a minimum bill in order to account for costs of infrastructure and related services; utilities in the state claimed that otherwise, the solar customers were “unfairly exempt” from basic upkeep costs. While some say that a small charge of $8 to $10 may be reasonable, many are worried that the SCC will set the minimum at too high of a level; there are also concerns over caps to bill credits. Overall, however, Virginians are hopeful for shared solar success. Smaller projects run by co-ops have proven successful, though past regulatory programs enacted by investor-owned utilities failed. Virginia hopes to skirt this failure in the new initiative by requiring third parties to own the solar projects.

 

Where Does That Leave North Carolina

 

Despite delays and company questions about consumer interest, many North Carolina municipalities, organizations, and residents have expressed frustration with the issues around setup and the lag in program deployment. If other states can have successful initiatives, why can’t we do the same in North Carolina?

 

Let’s recap the main problems with North Carolina’s failed community solar initiative:

 

· Most in favor of the program agree that the biggest issue is the lack of good faith efforts to ensure fair pricing and return on consumer investment. The proposed program appears unnecessarily high and makes little-to-no attempt at helping low-income North Carolinians participate. North Carolina advocacy organizations have suggested third parties be allowed to provide independent funding assistance for low- and middle-income subscribers. This may be a good option in the future, and the utility does not appear to oppose this proposition.

 

· Duke Energy has stated that “it remains to be seen whether the program ‘is attractive to a sufficient number of customers’ if the program does not guarantee any savings over time.'” Given the overwhelming interest and success in other states, it stands to reason that North Carolinians would be interested as well. Other states’ programs are expected to generate cost savings over the next few years, whereas Duke’s proposed initiatives have high upfront fees and off-bill annual credits that shift risk from the utility to consumers. This definitely may depress consumers’ willingness to participate, but that seems to be more of a failing of Duke Energy’s proposal rather than an overall lack of customer interest.

 

· Lastly, as Virginia has planned, utilizing a third-party solar provider may be a better choice than waiting for the utilities to construct and deploy programming via their own solar facilities. Where previous Virginia utility-dependent initiatives failed, the new program (with third-party solar) holds promise. As of 2020, Duke Energy has made strides in agreeing to utility-scale connection partnerships with third-party solar developers; they had not yet constructed any community solar facilities of their own, and it remains to be seen if interconnections will be deployed for shared solar programing.

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