Barriers:

Access to capital remains the predominant barrier to community solar deployment, especially for community-owned solar, projects that serve primarily low- to moderate-income (LMI) customers, and smaller projects. According to one respondent, the average project size seen for LMI communities is 2 MW, which is not large enough to attract the necessary capital terms. Other respondents noted that, while public dollars can be used to incentivize projects, community solar may be a low priority for state and local governments, whose budgets are already impacted by the coronavirus pandemic. A lack of shared purpose between developers, installers, and suppliers may also exacerbate financial barriers. While some grant funding is available to support project development, applying for grants is time- and labor-intensive and solar grants do not always layer well with other competing interests.

For projects that serve LMI customers, customer acquisition and management costs and offtake risk can be additional barriers to accessing capital. Some projects have a credit score threshold for subscribers (typically requiring scores over 650), which can make it challenging to develop a pipeline of potential subscribers. Lack of access to credit-worthy subscribers, combined with the risk of customer default and churn can make attracting project investors difficult. Incentives for LMI projects help but may not accurately reflect the incremental difficulty of enrolling LMI subscribers and should be addressed as a separate issue. 

Proposed Solutions:

Access to best practices in community solar financing were a common request among respondents. The need spans many subject areas, including standardized templates for customer agreements bill credit designs, software for subscriber management, and lending applications; scalable business models, especially for LMI projects, alternate credit mechanisms, and how to best combine investment tax credits with other federal funding opportunities and philanthropic dollars. Respondents were also interested in examples of how projects have taken innovative financing approaches that include tax equity, renewable energy credits (RECs); and the value of avoided generation savings and resilience measures. Other interests included how projects have combined energy efficiency measures, energy assistance dollars, and storage to increase value for LMI customers.

Tools that help developers understand project feasibility, cost, and potential income could streamline applications for project financing. SETO could also continue to play a role in analyzing perceived risks associated with LMI subscribers and identify alternatives to the FICO credit score. Similarly, an evaluation of the performance of community solar loans, including those that support LMI projects, could help the market better understand lending risk.

Prize and challenge programs could also help incentivize equitable community solar development. SETO could set ambitious equity goals, such as eliminating energy poverty, and launch a second round of the Solar in Your Community Challenge that incentivizes projects that direct 40% of benefits to disadvantaged communities. SETO could also run a challenge program similar to Better Buildings Challenge, grouping stakeholders into categories of similar initiatives (e.g., schools, municipal buildings, farms, churches) and provide technical assistance and peer-exchange for specific project types. DOE could also create a national resilience competition for projects that reduce community vulnerability to disaster-related power outages through distributed solar plus storage.

Respondents also noted that the overall costs of a community solar project can be offset through innovative infrastructure, such as storage, and project design. Combining community solar with shared storage can generate additional revenue streams for projects and increase savings for subscribers, especially in areas where the cost of electricity is already low. Storage also reduces peak demand costs for the grid, which can contribute to savings for the whole community. Home electrification and including electric vehicle infrastructure can also contribute to the value of a community solar project.

SETO could also use funding opportunity announcements (FOAs) to incentivize certain project designs elements, such as billing systems, associated infrastructure, capacity building, and education. Many respondents recommended SETO provide funds to cover certain project costs. Grants were the most common suggestion. Multiple respondents requested grant support for capacity building, especially for local and tribal governments and community-based organizations to develop plans and implement community solar projects. Grant funding was also suggested for coverage of project application and interconnection costs, to support education and outreach to communities, to fund grid modeling for regulators, and to directly fund state and local government programs that offer virtual net-metering. Outside of grant funding, respondents also suggested that SETO/DOE create an aggregation fund to purchase receivables and reduce project risk, especially for projects that primarily serve LMI customers. To increase development of community or locally owned solar, respondents suggested that DOE create an incentive pool or offer low or 0% interest loans to community-based organizations or small developers.

Barriers:

Communities and small organizations pursuing ownership of community solar often lack the capacity to develop projects, which includes having the expertise and access to information about project design and financing, the time and funding to lead planning efforts, and the information or access to a network of credible developers.

Proposed Solutions:

Broad access to information about existing community solar projects, market and economic data, and credible community solar developers would allow for more equitable community solar deployment. For example, a customer-facing database of community solar projects with subscription availability and pricing could help customers understand their options and subscribe to projects. Aggregating state-level community solar economic data such as typical system costs, average subscription management and interconnection costs, utility policies, subscription rates, and available grants or incentives could help developers understand the market and identify the best locations for new projects. Communities or organizations interested in community solar could benefit from a database of experienced solar developers and consultants.

Access to a broad network of community solar stakeholders would facilitate collaboration and knowledge sharing across stakeholder groups. Respondents suggested that SETO hold convenings of stakeholder groups such as financial institutions, LMI program administrators, energy cooperatives, and municipal utilities to identify and elevate best practices and needs. In some stakeholder groups, such as state government officials, confidential or private meetings may support more transparency about challenges and needs. Convenings across stakeholder groups, such as between researchers and practitioners, could contribute to improved resource development and application of best practices. Online training was requested for first-time solar developers and building and maintenance staff responsible for the long-term operation of community solar projects. More flexible training materials and workshops were requested for community members to help them understand the benefits of solar and increase acceptance of community solar projects.

The human cost to capacity building could be addressed through the development of a fellowship program supported by DOE where fellows are place in community-based organizations to support deployment of community-driven community solar.

Barriers:

The current structure of the federal investment tax credit (ITC) creates a barrier to accessing capital for nonprofit and community organizations, state, local, and tribal governments, and cooperative and municipal utilities. In order for these groups to access capital generated by the ITC, they need to engage a tax equity partner, which can reduce the financial benefits to subscribers and can hinge project success on partnerships between entities that may have conflicting priorities and interests.

Proposed Solutions:

Legislative changes to the ITC could pivot it to an upfront credit or cash allowance, regardless of tax status or appetite, or directing the tax credits to community solar subscribers instead of the project owner would increase access to this benefit and make more projects financially feasible. In lieu of reform, some respondents suggested researching and promoting community solar project design where green banks, utilities, or even the subscriber can monetize the tax credit. Some suggested that SETO conduct an analysis of the impact of the ITC on equitable community solar deployment. Others suggested SETO provide technical assistance that specifically supports communities in accessing capital and tax equity.

Barriers:

Developing appropriate messaging and communication was widely recognized as a challenge for equitable community solar adoption and customer acquisition. Several highlighted that LMI and Black, Indigenous, and people of color (BIPOC) communities often lack access to information about community solar because they do not have networks that include investors, mentors, or even adopters of solar. Mistrust of alternative energy providers is also common among LMI and BIPOC communities due to a history of predatory energy sales tactics. A lack of a standard definition of community solar can also make it difficult for communities to advocate for community ownership.

Proposed Solutions:

There was significant interest in the development of best practices for community outreach and engagement. While community engagement strategies are often highly individualized, respondents indicated that a comparison of strategies for LMI outreach, including leveraging the Weatherization Assistance Program, public housing agencies, local institutions, or even CARES Act Funding could help programs improve engagement efforts. To support communication and messaging efforts, SETO could develop DOE-branded educational materials on community solar and the energy sector. These resources could have a dual benefit of helping standardized language around community solar. Standardized messaging, such as measuring bill savings benefits by comparing them to other household needs, could also support broader awareness of the benefits of community solar. Respondents suggested that resources be translated into multiple languages and be easily accessible on SETO websites. SETO could leverage community-based organizations as solar leaders and trust-builders to disseminate information about community solar or leading local energy planning workshops. Broader awareness could be supported by installing solar chargers or solar lighting on public buildings.

To help build trust in and connect community organizations with reputable developers, SETO could develop a certification or recognition program that provides public promotion for programs, developers, or projects applying best practices.

Barriers:

Respondents indicated that a lack of consumer protections and a history of mistrust of alternative utility providers in LMI communities can be a barrier for equitable community solar adoption.

Proposed Solutions:

Increasing market transparency and access to information on community solar pricing or creating recognition programs could lend credibility to solar developers and other community solar service providers. One respondent suggested providing support for communities or municipalities to enter into power purchase agreements (PPAs) themselves and provide subscriptions to residents to protect individuals from unscrupulous developers.

Barriers:

Inconsistent regulatory and policy conditions across states require organizations to become legal experts to develop projects. Legal fees for navigating complex regulatory environments or developing financial contracts, which can be especially complicated for LMI projects, can reduce the financial feasibility of a project. Policy and regulation can also impact community ownership. Some states have laws that restrict community solar project ownership to utilities and some utilities place restrictions on project size for interconnection or total renewable energy generation.

Respondents also noted that there are likely opportunities to enhance the value of LMI community solar programs under the FERC Order 2222 framework, but the business model and necessary customer protections are not yet well-defined. Additionally, some respondents expressed concern that performance risk, penalty exposure, and the additional complexity of wholesale market operations could detract from the primary purpose of LMI community solar programs, which is to provide bill savings to LMI residents.

Proposed Solutions:

Respondents highlighted a need for analysis of policies that affect community solar development, including LMI incentives, national interconnection policies, and policies specific to certain housing types such as manufactured housing and affordable housing properties receiving Housing and Urban Development (HUD) funding, as these policies have significant impacts on project design and financing.

Respondents requested that SETO provide materials to help them better understand the implications of FERC 2222 and the opportunities to aggregate solar energy supply to optimize use and sale of electricity from community installation.

Barriers:

The structure of a community solar program or project is highly dependent on policy and regulation, financing, and local context and needs. It is difficult for developers and communities to navigate these complex regulatory and financial environments when designing a community solar project, especially when incorporating LMI, community ownership, or resilience. Respondents also noted that it can be challenging to understand and ensure projects respond authentically to community needs. Program structure, from the ownership structure to income verification methods, to how bill credits are processed, can also impact the cost of subscribing customers and a projects overall financial viability.

Proposed Solutions:

Support from technical experts could help projects address specific challenges such as project design and subscription structure, financial feasibility, grid modeling, community outreach and engagement and legal support for contracts or financial agreements. Technical assistance could have broad application across projects but would also be beneficial to help individual recipients such as community organizations to identify innovative models that could increase benefits to LMI or other subscriber groups.

Innovative pilot programs could also support the development of best practices in program design. Respondents suggested programs that explore community solar development for specific housing types, such as manufactured or multifamily housing, projects that involve government-owned buildings as anchor tenants, the use of billing systems that do not require credit checks for subscribers, and community-owned solar projects that build wealth and hire local companies.

In response to the third section of the RFI, respondents highlighted multiple community solar models and project design strategies that contribute to community-ownership, improved resilience, and local wealth building. Models that support community ownership of solar include nonprofit or community-led solar cooperatives, and cooperative and municipal utilities as they operate locally, engage community members democratically as stakeholders, and remove the profit incentive for solar development. Respondents also highlighted the benefits of holistic models that combine community solar with energy retrofits or include workforce training from solar manufacturing to installation. Incorporating storage in community solar projects was suggested by many respondents. Community solar with storage improves project finances, ultimately delivering more financial benefits to subscribers. Storage also support valuable community resources such as electric vehicle charging stations and power municipal emergency shelters or other ‘resilience nodes’ for community members. Microgrids, scaled to serve communities, can further improve community resilience to power outages.

Community engagement is a critical strategy for designing projects for community-ownership, wealth building, and resilience. Community engagement should happen early and often in the program design process. Developers can host stakeholder meetings or community forums or could consult with local home care workers, disaster response workers, and others at the frontlines of community resilience to adequately understand and address the energy resilience needs for their region.

Several respondents also suggested incorporating inclusive financing models such as the Pay as You Save model, which eliminates the barrier of upfront costs to subscribers and can increase access to community solar projects, especially for LMI subscribers.

Barriers:

Subscribing and managing LMI households to community solar projects can create additional costs for project developers and owners. One respondent noted that the costs can be two to three times greater to subscribe and manage LMI households. Small subscription sizes, difficulty facilitating credits or monthly billing, the burden of income verification, and difficulty reaching LMI customers were all listed as barriers to subscriber acquisition and management.

Proposed Solutions:

Many respondents indicated a need for a tool that streamlines income verification and program eligibility for LMI customers. This tool could be created by utilizing existing federal access to income data, affordable housing related income-verification metrics (such as Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), Low Income Home Energy Assistance Program (LIHEAP)), or verifying LMI customers by geography (such as neighborhood or census tract).

Respondents reported a range of minimum bill savings that would be necessary to acquire and retain LMI customers. The minimum amount of necessary bill savings reported by respondents was a 10% reduction and the maximum amount reported was a 50% reduction. Most responses defined minimum bill savings to acquire LMI customers as a 20-30% reduction in electric utility costs. Some responses noted the importance of framing bill savings appropriately; for example, bill savings that are framed as a percentage or in relation to other household expenses, rather than a dollar amount, can be more attractive to LMI subscribers. More research on this subject is needed, according to respondents.

Respondents also noted that the regulatory environment has a large impact on subscriber acquisition and management costs. When regulatory environments promote greater savings for subscribers, it may become easier to enroll them. In New York, for example, the costs to subscribe and manage LMI customers started at $120/MWH, primarily due to subscriber churn. As the regulatory market became more supportive of LMI community solar, though, the costs dropped to $40/MWH. Engaging with states and utilities to support programs that bypass or streamline income verification may also reduce acquisition and management costs.

Funding support from SETO was also suggested as a method for reducing subscriber acquisition and management costs, especially in rural areas. One respondent suggested that SETO provide funding for community solar projects for electric utilities that average less than 20 customers per mile of line, given the increased difficulty of reaching and enrolling rural subscribers. Other respondents requested SETO provide credit backstops to expand eligibility for LMI customers.

The subscription structure itself can also be modified to decrease acquisition costs. For example, respondents reported that including an anchor tenant can decrease subscription costs by up to 55%. Multifamily solar can also provide easier access to potential subscribers and could incorporate automatically enrolling residents in community solar projects, requiring them to opt out rather than opt into a subscription. Respondents also suggested working with utilities, local organizations, and other programs to aggregate lists of potential LMI subscribers based on assistance they have already received or requested.

Finally, billing structures such as on-bill financing, requiring the utility rather than the developer to collect subscription payments, and sharing tax credits with subscribers can also support lower subscriber acquisition and management costs.

Respondents also requested that SETO conduct research to help identify or validate additional methods for reducing subscriber acquisition costs. Suggested research topics included:

• Analyzing the impact of greater savings on reducing acquisition costs, operating costs, and turnover, including comparing fixed versus variable benefits;
• Identifying methods of improving visibility of community solar bill credits; and,
• Identifying best practices for reducing administrative barriers to program application and income verification for LMI community solar programs.

Barriers:

Siting projects can be especially challenging for community-owned solar, including the challenges and costs of acquiring land, securing permits, complying with local ordinances, and even navigating the visual or habitat impacts of proposed projects. The cost of interconnection and grid improvements, as well as bottlenecks in interconnection applications, complexity of interconnection rules, and project size requirements can also be significant barriers to project development.

Proposed Solutions:

Identifying optimal sites for community solar, a common barrier, could be supported through tools that aggregate interconnection data, highlight high priority sites (such as ‘solar deserts’, brownfields or city-owned properties), and include equity metrics. Such a tool could even allow developers to submit project interconnection requests to their utility. Using the Low-Income Energy Affordability (LEAD) Tool as a model, SETO could develop a tool with an energy justice score that evaluates priority communities, potential emissions reductions, job creation, and opportunity zones.

Appropriate siting of infrastructure is critical to delivering these benefits. Developers should be careful to avoid siting projects on culturally significant land and may want to consider siting multiple smaller projects or incorporating agrivoltaics. To increase community resilience, projects should be sited at the community level, based on the frequency of and damage caused by outages and should also be co-located with critical community infrastructure such as schools, community centers, hospitals, or public safety facilities, creating community resilience hubs. City, state, and local governments should facilitate programs that incentivize networks of resilience hubs that can offer solutions on a regional scale, share best practices, and offer complementary services such as access to healthcare or recreation.

Barriers:

The process of designing, administering, and evaluating federal programs can be a barrier to equitable community solar development. Funding opportunities and grants, common tools of federal programs, can require organizations to dedicate significant time and resources toward applying, managing, and reporting on funds. This can be an especially large barrier for small organizations. Respondents noted that community engagement may not be included during program design and there is limited transparency around how resources are distributed and how project recipients are evaluated.

Proposed Solutions:

Respondents suggested that SETO include intentional community engagement during program design to ensure that programs and projects are informed by community needs. SETO could create an advisory committee of community-based organizations, who could in turn invite community members (especially those from LMI households) into the design process. Respondents noted that community-based advisors should be compensated for their time and expertise.  Respondents also suggested increased transparency around SETO activities and longer or more flexible application timelines for funding to make it easier for organizations to apply. Improved interagency collaboration around expanded solar access and reducing energy poverty could also improve the process for increasing community solar deployment.

Improved program evaluation, measurement, and verification received significant attention from respondents. Many indicated a need for equity metrics in program evaluation, such as energy burden reduction, upfront community engagement metrics, number of LMI households impacted, number of jobs created, and other tangible benefits to communities that host community solar. Other suggestions included weighting criteria for FOAs in favor of BIPOC communities and the creation of an evaluation, measurement, and verification framework for LMI solar developers to benchmark their performance against peers and highlight opportunities for improvement.