Clean Energy Collective debuts program to enable IOUs to rate base community solar

Dive Brief:

  • Community solar developer Clean Energy Collective (CEC) announced it has constructed a program that allows investor-owned utilities (IOUs) to own and rate base community arrays. The move opens a new window of opportunity for utilities and helps them justify community-shared solar without adding a subsidy, CEC said. 
  • The program will allow IOUs to both meet their customers’ growing demand for access to solar energy generation without any risk of potential costs to non-solar-owning ratepayers. At the same time, it will let them fulfill their obligation to shareholders to earn a profit on the investment, CEC said.
  • Community shared solar has previously been rate-based but not without it adding a premium to the electricity rate. The CEC proposal will provide a competitive rate because of the declining cost of installing solar, rising electricity rates, CEC’s program management expertise and the availability of the 30% federal investment tax credit (ITC), the developer said.   

Dive Insight:

The window of opportunity for investor-owned utilities to cash in on community solar is narrowing as the federal tax credit is set to sunset by the end of 2016.

But a recent proposal project by CEC, considered a leader in developing community-shared solar, could help IOUs to invest in community-shared solar to fulfill growing demand from customers without shifting costs to cover the generation to non-solar consumers. It also allows the utility to own the system and add it to their rate base, CEC said. 

"Many regulated utilities have viewed solar ownership as a challenge to a prudent RE strategy,” CEC's CEO Paul Spencer said in a statement. “Through this new community solar model, IOUs can now effectively rate base community solar assets on their grid without the risk of cross-subsidization.”

Currently, the 30% ITC is set to revert to its pre-2006 level of 10% at the end of 2016. Monetizing the ITC is crucial to CEC’s financial formula.

Through the utility's deal with CEC, proceeds are returned on a schedule that tracks the utility's guaranteed revenue requirement and gives it the positive net present value. The utility then earns the profit margin needed to meet its obligation to shareholders, Spencer told Utility Dive.

CEC would continue to provide the marketing, billing, and software services that allow it to guarantee array subscribers a 10% to 15% discount from their retail electricity rate, according to Brandon Conard, vice president of structured finance at CEC. Although there are no finalized deals signed yet with an IOU, talks are ongoing, Conard said. Conard said that the program has been vetted by experts in regulatory affairs.

Filed Under: Solar & Renewables Corporate News
Top image credit: From Wright-Hennepin Electric Cooperative/Jerry Kranz (used with permission)