By Mike McGehee, Mike.McGehee@chaberton.com
The views expressed in this blog are those of the author and not necessarily Chaberton Energy.
Community solar is designed to allow residents and small businesses to purchase electricity from an offsite solar installation. This allows people and companies who cannot have their own rooftop solar system to meet their electricity needs, to utilize clean solar energy, and to enjoy the financial and environmental benefits that solar energy provides. This spurs the development of solar installations, thereby helping to reduce greenhouse gas emissions from fossil fuel-based generation while diversifying the grid’s energy portfolio with inflation-proof generation. These installations are typically less than 40 acres, much smaller than utility-scale installations that can be hundreds of acres, and they connect to the electrical grid at the distribution level, the same level as residential homes. A community solar program enables companies to develop and finance community solar installations that provide direct and tangible benefits to homeowners and businesses in the form of electricity savings. This electricity is provided to people who subscribe to the installation, often at a discount from the standard utility rates, and often do not require any long-term commitments. The program also benefit local landowners, who lease their land for roughly 30 years to host a community solar installation.
California currently has less than 1 MW of solar installed from its Community Solar pilot program started in 2018. This stands in stark contrast to the more than 16,000 MW of total installed rooftop, commercial and utility scale solar capacity in California today. Much of this has to do with historical tax and financial incentives for these systems in California. However, in true California fashion, there have been seismic shifts in legislation and regulation which have greatly changed these incentives and ultimately shifted the balance toward Community Solar. First, California recently passed AB 2316 in September of 2022, which codified a viable Community Solar program requiring the participation of the investor-owned utilities PG&E, SCE and San Diego Gas and Electric, who serve the vast majority of California customers. Second, in December of 2022, the California Public Utilities Commission (CPUC) passed significant changes to the bill crediting (net metering) calculation for rooftop and commercial systems which result in variable credit rates and effectively much longer paybacks for future rooftop installations. These policy and regulatory changes act to dramatically redistribute the economics and benefits of solar throughout California. Community Solar is poised to offer the best overall combination of consumer value and grid benefit to the majority of Californians. Generally, the California Community Solar legislation allows each installation to be up to 5MW, with at least 50% of the output allocated to low-income households. With Community Solar, the financial benefits and savings of solar generation are now available to a much larger and economically diverse section of California residents.
While Community Solar does not require a roof, a full 5 MW facility equates to about 30 acres of land. Even though California is a large state, finding land “suitable” for solar is difficult with many other competing interests and regulations to consider. Agriculture is a large and extremely important industry in California, and Community Solar must carve out a complementary role. A solar array, especially a community solar project with its smaller footprint, can be sited alongside agricultural uses and provide tangible benefits to agriculture through the creation of new pollinator habitats. This also allows local landowners and farmers to diversify their investments while continuing to farm their properties. Additionally, solar energy projects act as a form of land preservation; these projects generally have an expected lifetime of 30-40 years. Afterwards, the array is easily removed, and the land underneath can be utilized for agriculture or other uses. Conservation programs like California’s Williamson Act make a majority of the land near appropriate infrastructure essentially ineligible for Community Solar in the near term. Beyond conservation programs and competing land uses, each county has unique zoning restrictions and must independently grapple with the concepts of Community Solar within their localized political and economic lenses. Finally, appropriate land must also be close to electric distribution lines and other infrastructure, which is often not the case in rural areas where land is available.
Despite these barriers, developers are actively seeking sites with the right combinations of characteristics for installations in California. When Community Solar is executed correctly, it can provide benefits to all stakeholders, from the lease revenue to local landowners, direct energy savings for local utility customers, benefits to local agriculture, and increased tax revenue to the local jurisdiction. The full program rules governing how Community Solar will be implemented are currently being written by the Public Utilities Commission and are expected to be finalized in the fall of 2023.