Clean Power Solar Panel Field

Published on March 17th, 2016 | by Rocky Mountain Institute

20

5 Reasons Why Community-Scale Solar Is A Multi-GW Market Opportunity

March 17th, 2016 by  

Originally published on RMI Outlet.
By Kevin Brehm and Joseph Goodman, Ph.D.

The U.S. solar industry has enjoyed impressive growth of late, with strong forecasts for 2016, but it’s been an at-times bumpy ride as the industry has faced unfavorable rulings and stock-market troubles.

Solar Panel FieldOver the past few months, the U.S. solar industry has soared to thrilling wins (Paris agreement, ITC extension, record installations) and stomached sinking setbacks (Nevada net metering, Supreme Court stay of the Clean Power Plan). The industry cheered last week when SEIA and GTM predicted 16 GWdc PV installations in 2016, yet the stock prices of solar giants like SunEdison and SolarCity are stuck near 12-month lows.

Besides buckling their seatbelts, what can industry stakeholders do in this still-volatile market?

One option is to cut costs and gain market share in solar’s main segments: behind-the-meter (including rooftop residential as well as commercial and industrial (C&I)) and utility-scale. But the smartest developers are cutting costs and looking for an early-mover advantage on the next gigawatt-scale solar segment opportunity.

Community-scale solar is that opportunity, and RMI shows how and why community-scale is a large and emerging opportunity in its insight brief Community-Scale Solar: Why Developers and Buyers Should Focus on This High-Potential Market Segment.

Defining Community-Scale Solar

Community-scale solar refers to mid-size (i.e., 0.5–5 MW), distribution-grid-connected solar PV. Community-scale solar includes both shared solar (i.e., subscribers to solar gardens) as well as small utility-scale systems with utility off-takers.

Shared solar comes in two flavors: 1) programs that are driven by state-mandated policies such as virtual net metering, and 2) voluntary utility-initiated programs. To date, 14 states and Washington, D.C., have enacted community solar legislation. Utilities in at least 24 additional states have voluntarily created shared solar programs.

Though shared solar systems vary in size, the vast majority of shared solar capacity is community-scale. In Colorado and New York, for example, shared solar installations are capped at 2 MW. In Minnesota, systems are now capped at 1 MW. In most instances, shared solar developers seek economies of scale by developing projects at or near these capacity limits.

Community-scale is also inclusive to small utility-scale systems with utility off-takers. Rural electric cooperatives (co-ops), municipal utilities (munis), and investor-owned-utilities (IOUs) have all invested in community-scale solar. For example, coops and munis such as Dairyland Power, a generation and transmission provider (G&T), recently announced plans to purchase 15 MW from 12 community-scale projects. In New Mexico, Kit Carson Electric Cooperative (KCEC) and Springer Electric Cooperative have both developed community-scale systems. And investor-owned utilities (IOUs) have similarly launched community-scale solar projects, such as Georgia Power, which has requested more than 50 MW of community-scale power through its Advanced Solar Initiative.

5 Reasons Community-Scale Solar is a Multi-GW Market

Community-scale solar has unique attributes that both leverage the best attributes of behind-the-meter-distributed solar and utility-scale solar, respectively, and which set community-scale solar apart from those market segments, including:

  • Access: Community-scale solar is inclusive to all, including low- and moderate-income households and others who can’t go solar via rooftop for a variety of reasons.
  • Affordability: Community-scale solar can approach utility-scale prices and compete with wholesale electricity prices.
  • Appeal: Community-scale solar leverages many of the distributed benefits of behind-the-meter solar.
  • Availability: Community-scale solar makes use of under-utilized land closer to loads, such as brownfields, carports, and large rooftops.
  • Affinity: Demand for community-scale solar is building, with interest growing across utilities, community-based organizations, and other stakeholders, and bullish forecasts for installed capacity growth.

1. Access: Community solar is inclusive to all

Nearly half of U.S. households and businesses cannot access rooftop solar. According to the National Renewable Energy Laboratory (NREL), 49% of U.S. households are unable to host rooftop solar, either because they rent their home, live in dwellings such as a multi-unit apartment buildings or high-rise condos, or have a roof unsuitable for solar. NREL also reports that 48% of commercial buildings have roofs too small to host on-site solar PV of any meaningful size (i.e., covering at least 20% of demand). Community-scale solar provides access for these customers currently unserved by rooftop solar.

Community-scale solar is also inclusive to low- and moderate-income (LMI) households. In states such as Colorado and New York, community solar laws include a carve-out or preference for LMI subscribers. Rural electric cooperatives are using community solar to serve LMI members. In Rochester, NY, the city is willing to provide sites and other support for community solar, because LMI households have access to the power produced. Even the White House and the Department of Energy are betting that community solar will address the environmental justice barrier of rooftop solar.

Altogether, the community-scale solar market potential for U.S. households and businesses that cannot access rooftop solar is more than 750 GW (see figure). Capturing just one percent per year of this market translates into a 7.5 GW market worth over $10 billion annually.

blog_2016_3_17-INFO-1

2. Affordability: Like utility-scale, community-scale solar can compete with wholesale rates

Though community-scale solar prices are currently higher than utility-scale prices (and well below behind-the-meter prices), community-scale solar can become cost-competitive with utility-scale solar and, more importantly, also compete with wholesale electricity rates.

Already, utility-scale solar is competing with wholesale rates in some parts of the country and community-scale will close the gap in the future. To close the gap, community-scale solar prices must come down 40 percent. RMI believes such cost reductions are possible through buyer-owned, shared, and seller-owned levers (see figure).

blog_2016_3_17-INFO-2

Buyers can reduce costs by supporting or leading aspects of the development process. Community-scale buyers are often co-ops, munis, or community-based organizations. These community-based buyers are in a unique position to reduce total cost by supporting siting, interconnection, and permitting and zoning. Sophisticated (or well-supported) buyers can effectively act like pre-notice-to-proceed (pre-NTP) developers.

The greatest cost-reduction opportunities are associated with levers shared by buyers and sellers. These levers include efficient contract structures, volume aggregation, solution adaption, and margin cost reduction.

  • Contract structure: Buyers and sellers can connect around contract structures that capture tax credits and capture low-cost capital available to co-ops and municipalities.
  • Volume aggregation: Costs will decline when volume is aggregated across portfolios of projects. Volume aggregation increases equipment and personnel utilization and decreases development overhead costs.
  • System design: Costs will decline as solar solutions are adapted to the community-scale segment. Those solutions will be designed to meet customer needs, remove unnecessary features, and add features that reduce LCOE.
  • Margin reduction: Buyers and sellers both play a role in reducing cost by decreasing margins to levels appropriate for a competitive and mature market, and to levels more consistent with utility-scale margins. Buyers can manage competitive and efficient procurement processes that help manage risk to the seller and result in the selection of reliably low-cost and high-quality vendors.

Developers and EPCs (sellers) can further drive down costs for community-scale solar by reducing community-scale solar’s non-module hardware and labor costs.

Community-scale solar lends itself to standardization through power blocks. In a not-too-distant future, developers will use standard-design, low-cost, community-scale power blocks for frequently-encountered siting situations, including parking lot canopies, landfills, and ground-mount greenfield sites.

Sellers are already findings ways to decrease costs through standardized power blocks, and they are exploring further cost-reduction opportunities through integrative whole-systems design. Power blocks along with business-as-usual cost reductions will allow unsubsidized community-scale solar to compete with wholesale rates.

3. Appeal: Community-scale solar provides distributed energy benefits

Community-scale solar is at a sweet spot between utility-scale and behind-the-meter solar. It is neither too big nor too small; it is just the right size to capture community and distributed energy benefits on one hand and utility-scale solar’s economies of scale on the other.

Distributed energy resources provide multiple benefits compared to centralized generation. In RMI’s 2013 report, A Review of Solar PV Benefit and Cost Studies, RMI identified 18 potential benefits from distributed solar. These benefits include including reduced energy losses, grid support services, increased system reliability and resilience, and the potential to defer system upgrades. In addition to being low-cost community-scale solar, therefore, is also high value to the system.

4. Availability: Community-scale solar can be sited in the community to drive higher adoption

Community-scale solar can also be flexibly sited near loads, opening up sites for development, and avoiding siting and transmission constraints that may impede long-term utility-scale growth. Community-scale solar can be flexibly sited on under-utilized land near loads. For example, EPA’s RE-Powering America’s Land program helps communities and utilities site projects on contaminated land.

Large parking lots can now cost-competitively host community solar, too. According to industry contacts, costs for canopy systems have decreased more than 40 percent since 2014, and parking lot canopies now cost only an additional $0.35/W compared to similarly-sized ground-mount systems.

Local siting can also drive demand for shared systems. Shared solar subscribers appreciate the local aspect of community solar, so demand is often highest for projects that are sited in or near the community. “We find that customer demand for community solar is highest for projects that are sited in or near the participant’s community,” explains Steph Speirs, co-founder of Solstice Initiative. “Community solar customers do not have the constant visual reminder of panels on their own roof, so subscribers appreciate the local aspect of shared solar. They feel more engaged when they can interact with their solar share elsewhere in their community,”

5. Affinity: Momentum is building

Though community-scale solar is still a small portion of today’s market, momentum is building for sustained rapid growth.

Rocky Mountain Institute is helping to increase that momentum through its Shine initiative. RMI is working with public utilities (i.e., coops and munis), community-based organizations, and developers to unlock this market. RMI is helping coops, munis, and community-based organizations by supporting procurement and business model development. RMI is helping developers and EPCs understand the community-scale opportunity and adapt their designs and business models to best access the market.

Reprinted with permission.

 
 
Drive an electric car? Complete one of our short surveys for our next electric car report.
 
Keep up to date with all the hottest cleantech news by subscribing to our (free) cleantech newsletter, or keep an eye on sector-specific news by getting our (also free) solar energy newsletter, electric vehicle newsletter, or wind energy newsletter.
 


About the Author

Since 1982, Rocky Mountain Institute has advanced market-based solutions that transform global energy use to create a clean, prosperous and secure future. An independent, nonprofit think-and-do tank, RMI engages with businesses, communities and institutions to accelerate and scale replicable solutions that drive the cost-effective shift from fossil fuels to efficiency and renewables. Please visit http://www.rmi.org for more information.



  • Epicurus

    I love the idea of community solar for all the reasons Roger lists below, but how does one go about getting land for these projects? Rent large parking lots or roofs? How easy is that?

    Aside from superfund sites, it would be prohibitively expensive to buy land for community solar, wouldn’t it?

    • vensonata .

      Actually land adds very little per watt installed..,depending on price of land it could add about 4% for low cost acreage near towns. 2.8 acres per 1 GWh per year. according to NREL (Fixed Tilt arrays)

      • Bob_Wallace

        What I’m seeing is that most utility scale solar is incorporating tracking. It would be interesting to see land use per GW of tracked solar.
        The last half of 2015 (all that’s reported) show utility PV solar with a 25.9% CF. To get that high I’d think a lot of tracking is in play. Five solar hours would get the number to only 21%.
        http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_6_07_b

        • vensonata

          Apparently fixed solar requires less land than trackers, because of spacing issues. Dual axis trackers could in certain areas of Arizona in Summer hit into 33% or more capacity factor.

        • John Ihle

          I went to the site and I see it’s actually 28.6% for 2015 unless I’m misreading, with all the numbers reporting. With wind 2015 cf’s at 32.4%. Regardless, solar pv cf is an incredible number. It would be interesting to know where those reporting projects are located with how many MW’s reporting.
          The wind cf number includes projects going back to the 1980’s with much less efficient turbines. Cf’s for wind are much higher now with the larger rotors, etc, in the 40’s for low to moderate wind sites.

          • Bob_Wallace

            The “2015” in my comment was a mistake. It should have been 2014.

            Since I copied the numbers from the EIA page numbers for 2015 have been added and it is 28.6% for 2015.

            “… today’s GE turbines are operating at close to 98% availability (97.6%), …with the introduction of the 1.6-100, we’ve also improved the capacity factor (a measure of energy efficiency) from 35% ten years ago to over 50% today.”

            http://cleantechnica.com/2013/07/01/ges-brilliant-wind-turbine-wind-power-cheaper-than-coal-or-natural-gas-part-3/

          • John Ihle

            … it’s why wind power is inexpensive and some regions (or a region) dispatches it via day ahead markets contrary to what many think. GE turbines are the bomb.

      • Epicurus

        I assumed community solar was mostly located within towns and cities where land use values are usually dictated by residential and commercial development potential. And I assume there would be zoning issues.

        Wholesale electricity prices aren’t very good. To whom would one sell the electricity in a deregulated market? In a regulated market, would the local monopoly be forced to buy it?

        Lastly, do these installations have to be guarded to avoid theft and vandalism?

        • Ronald Brakels

          Generally in an electricity market utility scale solar, along with wind power, will be a price taker. This means it won’t bid in an electricity price, it will instead be paid what ever price is set by generators that do bid. The electricity provided by price takers is used first. Then the lowest bidder’s electricity, then the next lowest bidder’s and so on. And then everybody gets paid the amount as the highest bidder whose electricity was actually used. Utility scale doesn’t have to be a price taker but as its marginal cost is basically zero it is not possible to save money by withholding output and so currently no advantage is gained by not being a price taker.

          • vensonata

            Now here is a question for Ronald, if he feels up to it. We have these discussions about rooftop PV feeding the grid and vice versa. The discussion is usually based on a very small percent of houses feeding into a giant grid and so reducing the fossil fuel provided by the utility and providing houses without solar some clean energy. But in Australia you have areas at 25% rooftop penetration. I expect that mid day the utility is completely shut down and solar is abundant enough to supply all houses on the grid. Now what happens? Do we require storage or does the extra just go unused?

          • Ronald Brakels

            Here in south Australia over 25% of privately own houses have rooftop solar. So not 25% of roofs. Also the solar systems are on average quite small on account of how the subsidy used to be higher for smaller systems, so many of them are only 1 or 1.5 kilowatts.

            But we still have enough rooftop solar to provide about 7.5% or more of the state’s total electricity consumption. But because electricity use during the day is higher than at night, and we don’t have that much PV installed most solar generally provides at around midday is one third of consumption. At the moment at 2:10 on a day with a lot of cloud rooftop solar is providing about 20% of electricity consumption. But within a decade rooftop solar alone is expected to meet all of demand at times.

            Currently there are periods when wind and rooftop solar, or more often just wind by itself in the early hours of the morning, will produce more electricity than the state consumes. But the state’s one remaining coal generator doesn’t shut down at these times. The coal power station is designed to run continuously each time it is turned off and started again effectively involves a lot of wear and tear. So they don’t shut down, they just export electricity to the neighboring state of Victoria instead. Depending on the price of electricity in Victoria, they may lower their output down to 60%, which is as low as they can realistically go without shutting down.

            Sometimes, the state will produce more electricity from all sources than the state uses or can export. In these cases the price of electricity goes negative. The price goes negative for two reasons. Firstly it encourages large users of electricity to increase their consumption of electricity by paying them to do so. And second it encourages generators to shut down so they won’t have to pay negative rates. But what always happens is the coal plant just toughs it out since they don’t like to shut down and they find it less expensive to pay the negative price.

            The coal plant was going to be shut this month, but they still have coal left and apparently it will now be run until may. Once it shuts, since our gas generating capacity is much more flexible, that will pretty much end our periods of negative electricity prices. (We had a brief one this morning when electricity prices went down to -1.1 US cents a kilowatt-hour.)

            The state has no energy storage or pumped hydro or normal hydro. So there is really no option to store energy at the moment. Although exported electricity can result in less hydro use in the next state and so store energy in the form of unused dam water. But currently it is far cheaper to curtail generation than to build on grid energy storage. Home and business energy storage doesn’t pay for itself at the moment since the Tesla Powerwall costs around about $6160 US here, but home energy storage may pay for itself in a few years. And road transport may start to be electrified before long, providing a convenient source of storage capacity.

          • Edwin Franks

            Surely South Australia will increase its desalination capacity and thereby gain significant dispatchable demand. Moreover, when South Australia re-industrialises utilising the combination of wind and solar power even more dispatchable demand will be created.

          • Ronald Brakels

            The amount of potable water produced by the desalination plant depends entirely on how much water is left in the Murray river by the time it gets here. There is no plan to increase the plant’s capacity, merely utilize it more than currently the next time the river stops flowing. Or should I say oozing. (Years ago there was so much water in the Murry River it actually flowed into the sea. We all went down to have a look so we could tell our grandchildren about it. It was very boring.)

            As for South Australia reindustrializing, that doesn’t seem terribly likely. If you think cheap electricity will do it, large users already pay very little in Australia and that hasn’t stopped industry from shriveling up into mostly just producing things that are bulky to import. And now that China has passed peak manufacturing employment, the total number of people in the world employed in manufacturing is likely to decrease. But who knows, South Australia does have some advantages for industry over other parts of Australia. Maybe we can build something useful here beyond artificial reef makers (submarines).

          • vensonata

            Thanks. Very informative. What it seems to me is looming is that when substantial rooftop solar with higher efficiency start to appear (above 35% perhaps) then storage is necessary. Now it may be that houses without solar will have storage and use the spill over or perhaps all houses will have storage. Wind is not available in certain geographic areas and so I see solar plus storage clusters…whole towns perhaps. But they end up being like a hologram, it is really a cluster of individually independent houses that forms a grid.

          • Ronald Brakels

            Well, there is no point where storage is necessary. We can just curtail production when there’s too much, as well as make electricity prices more flexible so households can benefit from zero or negative prices when there’s a surplus. However it really does seem certain that we will end up with additional storage, whether in homes and businesses, in electric cars, or as thermal or other utility scale storage. So we may end up curtailing some renewable production rather than storing it because that may turn out to be the most cost effective option, but that is okay, just so long as we are not emitting greenhouse gases into the atmosphere.

          • vensonata .

            Well, storage is not necessary…with PV. No negative side effects from overproduction, but surely a waste. For instance as I type at 9:47 am on this brilliant sunny morning with two feet of snow, my batteries are full already and the 12 kw Pv array is going to produce another 50 kwh at least by the end of the day. I can use about 10kwh of that….the rest would be nice to store, or use. I can see storage hitting 3cents kwh in few years. At that point it is about the same as wind or PV as complementary energy providers. Would you bother with wind, if PV and batteries sufficed for 100% of supply and you didn’t have to manage two variable sources?

          • Ronald Brakels

            At three US cents a kilowatt-hour for storage the energy source Australia would mostly use to generate electricity at night is coal. We suck. The marginal cost of generating electricity from stranded coal here appears to be under 1.5 US cents a kilowatt-hour. But, if state governments because as welcoming of rooftop solar as South Australia and its price continues to fall, that alone could destroy coal generation by pushing wholesale electricity prices below the marginal cost of coal for periods during the day, with or without low cost storage.

          • Ronald Brakels

            Today on a sunny Sunday rooftop solar provided 30% of electricity consumption about an hour after solar noon. If the skies had been completely clear it might have been 33% or more.

  • Roger Lambert

    Zach – First and foremost – thank you for this article about publicly-owned solar!

    And may there be many more to come, because when everyone shares in the costs of renewable energy ownership, everyone can share in the benefits:

    1) whole-sale purchasing provides more PV for the buck
    2) Standardized simple structures provide more PV for the buck
    3) Economy of scale for electronics provides more PV for the buck.
    4) More PV for the buck means faster ROI
    5) Faster ROI means that communities who own their (now payed-off) infrastructure will be getting their power essentially for free.
    6) People who enjoy getting their power for free enjoy voting for more renewable energy policy and more infrastructure. Getting your power for way less than fossil fuels is the best argument there is against the AGW-denying nay-sayers who falsely claim that renewable energy will be bad for the economy.

  • sjc_1

    “..and others who can’t go solar via rooftop for a variety of reasons.”

    They can cover school roofs and the parking lots can be covered cooling cars as well.

Back to Top ↑