Cleantech Market Intelligence
A Fresh Take on the U.S. Community Solar Market
As discussed in my blog last October, community solar (also known as shared solar) has become a hot topic across the United States over the last couple of years as residences and businesses seek alternatives to conventional energy sources. This past year, Navigant has been working on the U.S. Department of Energy’s Sunshot-funded Community Solar Value Project, which seeks to make community solar better through project design, procurement, targeted marketing, and incorporating companion measures that attack solar integration challenges.
In March 2016, Navigant Research released a new slide-based report, Community Solar and Virtual Net Metering, which examines the burgeoning community solar market in the United States. The report focuses on technology and policy trends, customer adoption, program business models, utility program rollouts, and the vendor landscape through 2025, and is one of the first community solar reports released after the extension of the Federal Investment Tax Credit in December 2015.
Driven by reduced system cost and sustained demand for clean energy in the residential and commercial sector, Navigant Research expects the total installed capacity from community solar programs across the country to reach 1.5 GW by 2020, then to grow fourfold from 2020 to 2025.
Solar Installation Costs and CS Deployment Curve, United States: 2016-2025
Today, 14 states and the District of Columbia have shared renewables policies in place, and many more states are considering policies. Through 2015, Arizona, Colorado, and Missouri developed the most solar capacity through community solar programs. The total installed capacity in the United States as of December 2015 was 88.5 MW. Driven by policy, other states, including Massachusetts, Minnesota, and California, are expected to pave the way in the future. Due to California’s Senate Bill 43, which sets a statewide program cap of 600 MW, Navigant Research estimates that California will represent 50% of the installed U.S. community solar market in 2020.
Distribution of Community Solar by State and Capacity: 2015
(Source: Navigant Research)
Distribution of Community Solar by State and Capacity: 2020 Estimate
With the ongoing debate across the country over the value of solar (VOS) and net energy metering (NEM) policy reform, uncertainty exists regarding how states will compensate distributed energy resources in the future. As solar penetration increases, it is expected that states will continue to consider and adopt changes to full retail rate NEM policy. Although states with NEM initially adopted full retail rate NEM policy for distributed behind-the-meter solar, community solar only receives full retail rate NEM compensation in Massachusetts, while Colorado and Minnesota offer a VOS rate. California values community solar at the avoided cost of energy, and other community solar programs compensate solar electricity on a case-by-case basis.
NEM rate reform may actually accelerate the shift from distributed behind-the-meter rooftop solar to larger scale community solar due to the fact that installing larger systems is more cost-effective. The Rocky Mountain Institute is currently working to further drive down the cost of community solar, testing the hypothesis of whether community-scale solar can be the highest value and lowest cost form of solar on the grid.
State policy, which influences the compensation rate ($/kWh) received by the utility customer for both behind-the-meter, customer-driven and virtually net metered utility or state legislation-driven community solar, will have the largest impact on the continued growth of the solar market. Especially important is (1) whether states will replace full-retail rate net metering for behind-the-meter solar (which seems likely), and (2) how community solar will be valued moving forward (e.g., retail rate, VOS rate, or avoided cost rate). These state decisions will drive the local and national expansion of the behind-the-meter and virtually net metered solar market in the near term.