Decentralization Leads to Uptick in Community Solar Deployments

Accelerating investments in renewable energy technologies has been one of the most transformational changes in the energy sector. While this sector is evolving to a more diverse and decentralized model, new operating models have led to an increased uptake in solar deployments, especially in the behind-the-meter residential and commercial sectors. For customers without access to rooftop space, community solar (or shared renewable energy plants) offers offsite solar deployments. Such deployments are sometimes offered through subscriptions, bridging the gap between utility-scale and distributed solar installations. These projects are usually placed in front of the meter, with greater bankability offering a strong proposition for financial investors. Such projects primarily aim to benefit retail customers that are not equipped to set up their own systems. 

Some of the most commonly deployed community solar ownership models include the following:

• Utility-sponsored model: A utility owns or operates a community solar array.
  

• Special purpose entity model: Individuals form an enterprise to develop a community solar project that allows them to take advantage of state and federal tax incentives.
  

• Nonprofit model: A nonprofit entity administers a community solar project to benefit members.
  

Community solar is particularly popular in the US, where many states and utilities are working to increase opportunities through supportive legislation and financial mechanisms. By the end of 2019, community solar deployments were installed across 42 states in the US, representing more than 1.3 GW of total cumulative installed capacity. Colorado-based SunShare is one of the largest community solar companies in the US and recently reached its 100 MW community solar milestone spread across 77 community gardens. SunShare’s customers don’t have to make any initial investment and can easily subscribe to the local solar garden at a predetermined monthly rate. In the UK, the Heart of England Community Energy solar farm near Stratford-upon-Avon secured a new finance package of £16.3 million ($21.3 million) from Triodos Bank UK Ltd. and Social and Sustainable Capital LLP. The site has a capacity of 14.7 MW and can potentially power around 4,500 homes in the local area. 

Asia Pacific Deployments Lag

While the west warms up to the concept of shared renewable initiatives, Asia Pacific markets are lagging in deployments. Despite the market’s ability to create access for larger communities, insufficient regulatory support and undervaluation of solar credits has restrained the community solar market in the region. Utilities and regulators need to increase transparency in the way these subscriptions are structured to broaden access across potential customers. These programs will require extensive cooperation between the key stakeholders (utilities, solar companies, and regulators), for Asia Pacific to realize its ideal market potential. Investment in renewable technologies such as solar PV can help energy consumers improve their environmental profile and lower carbon footprint. Innovative financial and ownership models across community solar deployments aim to ensure that resources are allocated to new generation projects as efficiently as possible in a competitive, technology-agnostic manner.