Community Renewable Energy

Financing and Development Models

The concepts of financing and structuring ownership of a community solar system are interrelated.  There are many different types of policies and incentives aimed to move solar projects forward.  Often certain incentives pertain to certain ownership models (e.g. public versus private) or to different project scales (e.g. 5 kW versus 500 kW). 

There is no one-size-fits-all model for a Community Solar project.  The size and structure of the project depend on the resources and requirements of the community.  Some of the variable project elements include:

Who owns the energy and non-energy attributes (renewable energy certificates or RECs) associated with each kilowatt-hour generated by the project?

How do participants get credited for the electricity produced by the project? Do they receive a credit on their utility bill for a calculated percentage of the project’s actual metered production, or a percentage of expected production, or is there another mechanism? Are the participants credited at the full retail rate for the power?

Do participants qualify for the tax credits or production incentives currently available for single-owner installations? Is participation tax deductible?

Is the system financed privately or are public mechanisms such as Clean Renewable Energy Bonds used?

Do participants submit one upfront payment, or do they pay over time?

Will the project accept additional participants after completion of construction, or do participants have just a single opportunity to enroll? Does pre-construction enrollment determine the project size, or can the project be built to meet future demand?

Ownership Structure Considerations

were two of the first successful Community Solar projects in our region.  Both projects are owned and managed by municipal utilities.  

A utility-owned project is one project structure that has become fairly replicable.  The utility (public or private entity) develops and owns, or purchases from a developer, the solar array.  Utility-owned or city-owned (in the case of a municipal utility) land is available, and the management of electricity generation equipment is within the scope of business practices.  In addition, the utility already has a financial/billing arrangement with its customers for the purchase of power.  This may make the sharing of financial benefits (credit for power produced) with participants possible.  The term “virtual net metering” refers to crediting participants of a community solar project for their share of the electricity produced.  These attributes of the utility business ease some of the technical and logistical barriers to establishing community energy projects.  In addition, utilities may have access to special financing options, such as Clean Renewable Energy Bonds for municipal utilities, Business Energy Investment Tax Credits for investor-owned utilities, plus traditional financing opportunities.  

While utility ownership has some advantages, it is not the only possibility for community solar projects.  There are many community groups that want to develop and own solar energy independently from their utility.  It should be noted that even in these cases, community groups should notify the utility of their plans in order to streamline interconnection.  Community groups may structure a Community Solar project to take advantage of tax-deductible contributions (as in the case of Solar for Sakai on Bainbridge Island, WA) or may want to work within a corporate structure for capturing financial benefits.