Community solar could be an essential part of the recipe to ensure an equitable energy transition
Community solar is part of the recipe policymakers and investors are considering to ensure an equitable energy transition – a transition that considers the environmental, social, and economic impacts of such a change. It is at the nexus of those who can afford to decarbonize and those who cannot. Businesses, investors, and policymakers are recognizing community solar as a means to not only advance their clean energy goals, but a means to do so in a manner that creates a measurable positive impact on at-risk communities.
At the same time, environmental, social, and governance (ESG) investing is center stage in the United States’ American Jobs Plan, developing into prescriptive rules on addressing climate risk within the Securities and Exchange Commission (SEC), and is finding its way into investor-owned utility (IOU) integrated resources plans (IRPs) and state energy equity offices as regulators seek to ensure positive social impact in their communities from the clean energy transition.
In the 20 states (plus Washington D.C.) that have state-enabled community solar legislation, community solar is subsidized by state incentives and/or performance-based incentives. It is one of the few products that enable a reduction on the supply charge of a utility customer’s electricity bill. With proactive coordination between developers and utilities, combining community solar with energy efficiency and weatherization offerings (other ingredients in the recipe) can maximize customer bill savings. But, scaling community solar to expand access to low-income customers nationwide fundamentally requires commercial and industrial (C&I) customers to anchor community solar projects the same way an Albertson’s anchors a local shopping center.
- Starbucks for example, which is on a path to become a resource-positive company, is procuring solar power from up to 23 community solar projects in New York to offset 70% of its energy use in the state. Starbucks committed $97M of tax equity to the projects through the financial services company Churchill Stateside Group. New York community solar programs require that at least 60% of each community solar project’s output go to residential and small business subscribers.
Often accompanying community solar in the states that have community solar legislation are requirements for developers to offer a prescriptive amount of their community solar project output or a prescriptive amount of the state program’s output to low-income customers. This allows low-income customers to enjoy the same benefits of solar as others in their community, most often at a deeper discount. In states that do not have community solar legislation, developers are able to sell their project output to the customers of their choosing. These customers tend to be C&I customers with decarbonization goals and enough credit backing to ensure the community solar project gets financed.
In the vein of environmental, social, and governance (ESG), the benefits of community solar are widely known to be:
- Cleaner electricity
- Increase in local jobs
- Increase in local tax revenue
- Microsoft pledged to develop 500 MW of solar projects in disadvantaged communities and grant an additional $50M to community-led job training and other environmental justice programs, in partnership with Sol Systems.
- Chanel committed $35M towards solar energy projects developed by Sunrun for low-income multifamily households in California.
- Duke Realty is leasing 1M square feet of industrial roof space to Solar Landscape to extend 51% of the community solar power generated from 18,000 solar panels to low-income customers in New Jersey. Solar Landscape also offers workforce development training.
- Johnson Controls partnered with GRID Alternatives and Capital Dynamics to invest in a 2 MW community solar project for the Housing Authority for the City of Pueblo, Colorado, which is designed to offer a mix of qualified, low-income and multi-family affordable housing residents bill savings while offering job training and new career pathways for local residents.
These types of partnerships help uplift income-constrained and historically under-represented customers from poverty. Uplifting historically under-represented customers from the systemic racism that persists in a community requires a different set of anti-racist policies and solutions, which community solar stakeholders can address through similar jobs and ownership requirements. To ensure progress and successful outcomes, metrics must be established, and should be independently measured and verified by a company like DNV.
As community solar transitions from its state planned and subsidized growth trajectory in the next decade, C&I customers and the equity players will be looking beyond their decarbonization goals to leverage clean energy to expand their diversity, equity, and inclusion and/or ESG goals outwardly to positively influence the communities that are impacted by their very existence. Community solar is the ingredient in the energy transition recipe that enables ESG investing to “rise” to the Triple Bottom Line.
DNV is releasing a four-part series describing the inner workings and market for community solar and storage in the United States to help energy stakeholders understand the fundamentals and market opportunity in community solar and storage. The four-part series highlights:
- Program design
- Market activity and outlook
- Active market players
- Value of community solar