Navigant Research Blog

Community-Based Solar Models Take Root

Peter Asmus — January 3, 2013

The solar photovoltaic (PV) market has expanded rapidly over the last year, largely thanks to new business models emerging at both ends of the market, small and large.  Power purchase agreements (PPAs) have allowed residents who don’t wish to (or can’t) pay for solar systems upfront to lease the systems from third-party vendors, and still save money if their current costs are compared to previous utility bills.

For utilities, the steep drop in the commodity price of solar PV has led to utility-scale projects that can generate the same amount of power as coal or small nuclear plants.

In 2013, I believe we will see a greater emphasis on solar PV projects that will fit between these two extremes.  A case in point is the concept of community solar, which includes projects known as “solar gardens.” “Virtual” solar power purchase programs are spreading throughout the country, and showing up for the first time within investor-owned utilities (IOUs) under the category of solar gardens in Colorado and other states.

While feed-in tariffs made headlines in the solar PV industry in 2012, the emphasis now seems to be shifting to the concept of virtual net metering, which enables communities, and those without good solar access, to still benefit from distributed renewable resources by crediting power flows to specific customers volunteering to pay a small premium, even if the renewable generating source is not located on-site.

Municipal utilities in the Pacific Northwest have been leaders in this regard, launching some of the nation’s first community solar programs.

Planting Gardens

Since 60% or more of urban residents rent, and thus have no incentive to invest in rooftop solar PV systems, these new models of solar PV deployment take advantage of the best centralized sites, and then virtually allocate this power to customers located throughout a utility service territory or across an entire state.

A new law introduced in California in 2011 would have made virtual net metering available throughout the state.  The bill was killed in 2012, due to opposition from California’s two largest private utilities, but it was supported by San Diego Gas & Electric. It’s only a matter of time before this, or a similar law, is enacted in California.

Colorado has already expanded the solar gardens model to investor-owned utilities, and just this past month, brought on line the largest community solar project in the nation. Other solar garden projects for municipal utilities also popping up in Minnesota, New York and Pennsylvania, among other states.  Nevertheless, the United Kingdom has bragging rights to the largest community solar project in the world, which totals 5 megwatts in peak capacity.

Perhaps the most interesting twist to community solar comes from Oakland-based Mosaic, which is began applying the Internet-based crowd funding model to projects ranging from a Navajo Native American reservation in Arizona to the Asian Resource Center on its own East Bay California turf just in time for Christmas.  For as little as $25, anyone can earn 6.38% in interest annually for the next five years.  The company is not only attracting small investors, but also has already nabbed $2.7 million in venture capital and a $2 million grant from the federal Department of Energy.

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