Piecing together the community solar puzzle

(Credit: NREL)

Contributed by Nate Owen, CEO of Ampion

The rapid growth of community solar is changing the renewable energy landscape, making solar energy more accessible and equitable to homeowners, renters, and businesses, while offering lucrative opportunities for developers and investors.

Throughout the last decade, dozens of states have enacted legislation that enables community solar. The Inflation Reduction Act of 2022 was the most monumental piece of renewable energy legislation in U.S. history, demonstrating support for clean energy on a federal level. The demand for community solar is clear, but heightened demand comes with challenges.

We entered the community solar industry on the ground floor, have seen these challenges, and adapted to the obstacles that came our way. I founded Ampion, a community solar subscription management company, in 2014 with a breadth of experience working in retail energy in the early stages of utility deregulation. I worked with utilities and energy generators across the country to establish market rules, business processes, and data exchange standards. Previously, as a founder of an energy services firm, I led a team that developed customer information, billing, and payment processing systems. How difficult could it be to apply this experience to the community solar industry?

In short, it’s difficult work, but it’s made easier with the right people, processes, and tools. Here’s what we’ve learned when piecing together the community solar puzzle.

Effectively managing any community distributed generation (CDG) project requires compliance expertise to meet state and federal regulations.

This is where community solar implementation has become increasingly complex. An increase in regulatory changes that vary by region, utilities with legacy data systems, changing qualification requirements for low-income participation, and unclear guidance for obtaining Inflation Reduction Act (IRA) incentives are all factors that require specialized expertise.

Another regulatory intricacy that developers and asset owners need to know is when subscriber disclosure forms need to be signed. Some states don’t require disclosure forms – you can just show the disclosure to the subscriber, but they don’t need to sign it. Other states require that the subscriber sign it. And in Illinois, the subscriber must sign the disclosure form before signing the contract (and the state regulator is quite particular about this). Failure to properly present the disclosure form can result in a massive operational headache, fines, and other penalties that reduce the financial performance of projects.

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Community solar policies and qualifications vary not only by state but by utility as well. Developers or their subscription management partners have to know the termination rights and timing of subscriber disclosure forms for each utility across all markets in which they operate – no small task for active developers with a diverse project footprint. And these qualifications and requirements are constantly changing across states and utilities. There are detailed requirements determining what qualifies someone as a low-income subscriber that can vary on a state and federal level.

Collect, store, and qualify program eligibility evidence in a compliant manner.

The Inflation Reduction Act of 2022 placed more emphasis on low-income subscribers, offering significant incentives to solar developers whose sites enroll low-income off-takers. Servicing low-to-moderate income (LMI) subscribers is now a central focus in nearly all community solar programs, with the IRA and state initiatives driving a lot of developer and asset owner investment decisions.

It has never been more important to understand the nitty-gritty details of these programs, in particular the eligibility requirements. Collecting, storing, and qualifying low-income evidence are some key capabilities that community solar providers have had to take on. Understanding how to determine eligibility and securely store evidence of that eligibility is paramount – not only for program participation but also in the event of IRS and state audits.

Plus, different markets have different eligibility requirements. For example, qualifications for New York’s Inclusive Community Solar Adder are different from New Jersey’s Permanent Community Solar Program LMI qualifications, and the IRA eligibility requirements are different from any state program’s requirements.

Build or outsource a state-of-the-art billing system to accommodate billing complexities.

In typical dual-billing community solar programs, subscription management companies act as the intermediary between the subscriber and the solar developer. These companies bill subscribers for their portion of the solar farm’s output and ensure that these payments make it to the solar developer in a timely manner.

Where billing gets especially tricky is in the case of low-income housing organizations, multi-tenant buildings, chain restaurants, and other types of complex subscribers with multiple utility accounts. We realized we needed our own unique billing system to support these types of subscribers. To manage all subscriber types, you need expert engineers and software developers to address multi-tenant billing, behind-the-meter billing, and accounts with multiple different payment methods.

To accommodate developers and investors with multiple stakeholders, we needed to be able to direct funds to different bank accounts. Your billing system needs advanced flow of funds capabilities to accommodate different payment requirements. These types of billing capabilities don’t typically come to mind when one thinks of community solar, but they’re a part of what keeps these programs running.

Invest in people and technology to help integrate with often outdated utility systems.

In our experience, many utilities have old-school technology and manual processes that can cause issues in billing subscribers accurately. Utilities have been particularly challenged with the introduction of the net crediting billing paradigm in which the subscriber pays just a single bill to the utility with their community solar credits applied, rather than the dual billing paradigm that requires fewer changes from the utility companies.

You need a team that automates manual processes between the subscriber and the utility, significantly increasing the speed of sharing billing data and improving accuracy. As a subscription management company, the goal is to step in between the parties and come up with a solution that works for all, even though the root cause of the problem is often with the utility. Legacy data systems also pose a challenge, which makes the right software a critical piece of the community solar puzzle. Investors and developers need reliable systems that streamline processes, ensure compliance, and enable efficient revenue management across different markets.

You will encounter interconnection delays on the utility level.

The number one issue plaguing the community solar industry today is the time it takes for solar projects to interconnect with the electrical grid. Interconnection processes, which involve the utility installing transmission meters and additional infrastructure, can take years to complete. Waiting for sites to get interconnected to the grid is a nightmare.

With more and more renewable energy projects in the queue to be interconnected, the process is getting slower. This lag can cause subscribers to lose interest or faith in the program and is one of the biggest inhibitors to program growth. To scale this industry, there needs to be a persistent and diligent focus on improving all steps of the interconnection process, so that in the very near future it takes days – not months or years.

You need to market services, bill customers, and operate across the country in compliance with local shared renewable program requirements. The community solar landscape is exciting, rewarding, and truly a revolution in market and energy product design, but it comes with challenges. It’s all about bringing benefits to everyday people and helping us transition to cleaner forms of power.

Developers, utilities, policymakers, and subscription management companies can all do the work to help create these community programs and make them better. We can all work with states on their rules and create regulations that encourage utilities to update their systems and incorporate the nuances of community solar into their billing systems. You can’t have a thriving community solar market unless all these puzzle pieces fit together.

About the author

Nate Owen, CEO of Ampion, has over 25 years of experience in retail energy and CDG. He has founded two successful energy billing and service companies: Ampion and ESG (Energy Service Group).

In 2013, Nate saw an opportunity to manage the operational details in the growing community solar space and eventually started Ampion in 2014. Since then, the company has grown into a well-respected public benefit corporation that aims to make Community Solar accessible to all. Under Nate’s leadership, Ampion develops software solutions that allow renewable energy companies to market services, bill customers, and operate across the country in compliance with local shared renewable energy program requirements.