Document Actions
Sacramento Municipal Utility's (SMUD) Solar Shares Program
Background: SMUD has long been a leader in US solar energy deployment and has crafted many programs to reduce the economic barriers to solar energy deployment. SMUD currently offers a rebate of $2.50 for each watt of installed residential solar. SMUD also uses a 3-tiered rate system for residential electricity billing in order to encourage conservation, in which higher levels of consumption are billed at higher rates. Inadvertently, however, this rate structure can penalize some net-metered customer generators who first invest in efficiency measures. Because these customers pay a lower rate for electricity, they also receive a lower credit for their net-metered power.
Program Goals: The primary goal of SMUD’s Solar Shares program is to make solar energy accessible when customer-sited generation is not an option. Solar Shares, therefore, targets renters, as well as homeowners that may have solar siting issues. With the program, SMUD also hopes to remove the rate-tier “penalty” for customer generators that invest in efficiency first (described above), and to devise an incentive program that encourages customer participation but that costs the utility less than the customer-sited solar rebate of $2.50 per watt
Financing & Ownership: SMUD considered community ownership models like those attempted in Ellensburg and Ashland, but had legal concerns regarding the sale of securities. SMUD determined that it was unclear whether or not selling shares of a solar property would require SEC oversight/involvement. Thus, SMUD designed a system that allows customers to purchase output from a solar project on a monthly basis. The utility uses a monthly “virtual net-metering” model based on expected system generation.
SMUD put the 1-MW system construction, ownership, and operation out to bid, and awarded the contract to enXco. Thus, enXco actually owns the system, and provides the power generation to SMUD through a twenty-year power purchase agreement. In turn, SMUD supplies the solar power to customers enrolled in their voluntary SolarShares program. This partnership between utility and developer enables all customers to be "virtual solar owners."
Customers (households) are defined as small, medium, and large energy users based on the previous year of consumption. The category of consumption determines the price per kWh. Solar Shares customers can choose to meet 20-40% of their energy use through the program. Originally, SMUD considered letting customers choose their own level of investment, but the utility wanted a distribution of small, medium, and large consumers. With small and large customers being incentivized at different amounts, the blended incentive rate is approximately $1.50 per watt. While customers receive all the environmental benefits of buying solar power, they avoid the large upfront costs by paying over 20 years.
The following chart shows the Solar Shares program structure, with costs per share per customer class:
Members pay a fixed monthly Solar Shares fee. Over the course of a year, this fee exceeds the amount SMUD customers would otherwise pay for electricity. However, the credit that Solar Shares members receive for production can exceed the fixed Solar Shares fee in any given month, depending on system performance. Small customers pay a lower premium (meaning the production credit goes further toward the fixed fee) than larger customers do, rewarding conservation.
SMUD retires associated Renewable Energy Certificates (RECs) on behalf of the customers, and cannot resell them, so that participating homes are truly solar powered.
Comment: By offering different customer categories, SMUD has added complexity to the program. Each customer receives an individual quote, a practice that makes it difficult for staff to answer prospective members’ questions and to promote the program. According to the Program Manager, there is no easy answer to the common question, “how much does it cost to participate?”
Market Research: SMUD conducted focus groups to gain more insight into ratepayers’ interest in and understanding of the Solar Shares program. The focus groups described the concept as a solar-based green power option. SMUD concluded that not only were people interested in joining the Solar Shares program, but that they would also continue to purchase SMUD’s other green power offering, Greenergy.
The Solar Shares array is located approximately 40 minutes from downtown Sacramento. It is within SMUD’s service territory, but is not readily accessible to SMUD customers. Thus, the Program Manager believes that messaging is key to connecting participants to the project. SMUD does not emphasize the “localness” of the project but instead touts the benefits of solar power and the “virtual” ownership model.
Marketing and Participation: SMUD made a conscientious effort not to market Solar Shares to existing Greenergy customers, even though the focus group participants indicated that they would be inclined to participate in both programs. This attempt to avoid merely transferring clean energy customers from one program to another created a marketing challenge, as many of the “lowest hanging fruit” had already been picked. SMUD did a “media blitz” at the program’s launch and acquired most of their customers at that time. To make Solar Shares members feel more connected to the project, SMUD distributes to each customer a window cling that announces participation in the program. As of November 2008, SMUD had acquired 444 Solar Shares customers, and had “sold” approximately 70% of the system.
