community solar and net metering

By Emily Hois, originally published by Clean Energy Collective.

Community solar is gaining momentum across the United States, making solar energy available to more people than ever before. One of the keys to facilitating shared solar is policy. “An interesting facet of policy is what it enables people to do within a given state,” Anna Brockway, SunShot Fellow at the US Department of Energy, said in a panel discussion. “If a state has some sort of virtual benefit legislation—like virtual net metering—that enables different types of shared models than wouldn’t be possible otherwise.”

Virtual net metering allows multiple homeowners to participate in the same metering system and share the output from a single facility that is not physically connected to their property (or their meter).  This scheme goes a step beyond net metering, which allows individuals to sell excess energy produced by their on-site solar system back to the utility grid and receive credits on their electric bill.

New Legislation in Minnesota and Washington DC

In 2012, nine states had enacted some form of virtual net metering policy (CA, CO, CT, IL, ME, MD, MA, RI and VT). During 2013, Minnesota and the District of Columbia were added to the list, passing legislation to help both reach their individual Renewable Portfolio Standard (RPS) requirements. This fall, the Washington DC City Council unanimously passed the Community Renewables Act of 2013, legalizing net metering for solar gardens up to 5 megawatts. “Virtual net-metering is great for a city like DC where there are large populations of renters, who would typically not be potential solar customers,” reports MDV-SEIA, the Solar Energy Industries Association serving Maryland, the District of Columbia and Virginia. “This will also help DC meet its renewable portfolio, which states that they must build 250 megawatts of renewable power systems by 2021.” As of October, the District had eight megawatts installed.

In May, the Minnesota legislature passed a law requiring investor-owned utilities (including Xcel Energy, the state’s largest) to obtain 1.5 percent of their energy from solar power by 2020. This is in addition to Minnesota’s existing RPS requirement of 25 percent by 2025. To achieve the new 1.5 percent carve out, investor-owned utilities must increase their solar generation more than 30 times to reach 450 megawatts in the next seven years. With new clean energy legislation that includes a community solar program, Minnesota has already begun utilizing shared solar as a way to expand its renewable portfolio.

No One-Size-Fits-All Approach

Solar advocates and policymakers alike are realizing that there’s no one-size-fits-all approach to community solar legislation. “The space is so quickly emerging and developing that there’s a lot to understand [about] how different programs work and what makes the most sense for a given region, for a given company, for a given set of stakeholders,” Brockway says.

For example, the geographic requirements to participate in virtual net metering vary by state. Massachusetts requires community solar customers to live in the same neighborhood as the solar array. In Colorado, subscribers must only live in the same county or utility service territory.

Another varying requirement is the type of customers who may participate in virtual net metering. In Maryland, only local governments, agricultural customers and nonprofits such as churches and schools are permitted to participate in virtual (they call it ‘aggregated’) net metering.

The Future of Virtual Net Metering

Will virtual net metering be a necessity to the widespread adoption of community solar? That seems to be the million dollar question. As virtual net metering becomes more “standard,” as PV Magazine reports, community solar is “poised for expansion”— pending state legislative prerequisites that allow group net metering.

However, the Massachusetts Department of Energy Resources (DOER) released a report in March that claims community shared solar models that rely on virtual net metering services “may only be viable for a few years, or less, in some utility service territories.” While the findings were specific to Massachusetts, DOER revealed the development of larger distributed generation projects that relied on net metering were predicted to stall as state-mandated caps on net metering were reached.

Alternatives to Virtual Net Metering

Virtual net metering is not necessarily “an intrinsic part of solar community gardens,” reports Ecopolitology, an organization that investigates the politics of energy. “Independent companies or the utility could install, operate, and manage ‘subscribers,’ making solar gardens simpler and even more attractive for the average Joe.”

As an alternative to virtual net metering, DOER recommends a community solar model where participants receive a return on their investment instead of a reduction on their utility bill. Customers would then generate revenue through two sources: the sale of SRECs that the solar system produced, and the sale of clean energy to the site owner through a power purchase agreement (PPA).

Clean Energy Collective has adopted this type of model—one that supersedes the constraints of net metering laws through partnerships with utilities and billing software that doesn’t require legislation to distribute on-bill credits to customers. “Outside of a solar gardens program or virtual net metering—some kind of policy—we need the utility’s permission. So the utility is actually the gatekeeper with us,” says Paul Spencer, founder and CEO of Clean Energy Collective.

Mosaic’s community model focuses on connecting investors with solar projects that need financing, and pays investors back with interest as the project earns revenue. With this “crowdsourced” approach, Mosaic becomes a lender to solar developers—and a solar loan feels like a typical loan, explains Chief Investment Officer Greg Rosen. “It’s an early stage in community solar and [Mosaic is] trying to figure out which of these business models are going to be suitably acceptable to a broad enough group of stakeholders.”

As the solar industry continues to mature, it will be interesting to see how the different community solar models fare, says Spencer. “I don’t think there’s one good solution out there.”

Learn more:

Photo Credit: Community Solar and Virtual Net Metering/shutterstock