Note: This blog is the fourth in a four-part series examining the evolution of U.S. solar companies.
In the final part of my series focused on the future of U.S. solar companies, I will cover yieldcos and community solar.
The solar market has seen a dramatic increase in the number of yieldcos during the past 2 years. My colleague, Roberto Rodriguez Labastida, recently blogged on the topic, explaining that the idea behind yieldcos involves the creation of a company to buy and retain operational infrastructure projects and pass the majority of cash flows from those assets to investors in the form of dividends. Structurally, yieldcos are similar to real estate investment trusts. They are also almost ideal for renewable energy projects, including wind farms.
In July 2014, SunEdison established a yieldco, called TerraForm Power Inc., which raised approximately $500 million through a successful initial public offering. In March 2014, First Solar and SunPower combined forces to offer a joint yieldco called 8point3, the amount of time, in minutes, it takes for light to travel from the sun to earth. The joint yieldco will include 87% utility-scale power plants and 13% rooftop, with installations in the United States, Chile, and Japan. There are also more than 15 other yieldcos from other large renewable energy providers, including NRG Yield, NextEra Energy Partners, Abengoa Yield, Pattern Energy Group, and Transalta Renewables.
To facilitate the rollout of community solar, U.S. states are expanding policies for virtual net metering, allowing multiple customers to participate in the same metering system and share the output from a single solar facility. Whether or not they are required to be physically connected to the system varies by policy. Here is a selection of historical and current shared solar programs:
- California: Virtual net metering for multi-tenant buildings is required for investor-owned utilities (IOUs), and Senate Bill 43: Green Tariff Shared Renewables Program established a future clean electricity rate for all customers.
- Colorado: Through the Community Solar Gardens Act, IOUs were required to accept 6 MW per year from community solar gardens for 2011 through 2013 (2 MW project limit, minimum of 10 participants, restricted to same municipality or county as the garden).
- Delaware: Through community net metering, full retail credit is given for participants on the same distribution feeder as the community energy facility (subject to a net energy metering cap, minimum of two participants).
- Minnesota: Through the solar Energy Jobs Act, Xcel Energy is required to credit community solar gardens at the retail rate (1 MW size limit, at least five participants, subscriptions for 25 years). The Minnesota Public Utility Commission recently provided further clarification that expanded the system size limit to 5 MW alternating current (AC).
Pure-play community solar companies, such as Clean Energy Collective and SunShare, are now being joined by major players, including SunRun and SolarCity. SolarCity stated that it will partner with Minnesota-based developer Sunrise Energy Ventures to develop up to 100 1 MW (AC) community solar installations. While this market is expected to require time to develop, as each public utility commission sets the rules in each state, the opportunities and pipelines of projects are growing.
Looking back, and ahead, at the trends covered in this four-part blog series, U.S. solar PV companies have done a remarkable job adapting to the changing landscape. Moving beyond the expiration of the 30% Investment Tax Credit (ITC) at the end of 2016 is just another one of those evolutions.