Shine defines distribution-scale solar (DSS; also known as community-scale solar) as projects ranging from around 0.5 to 10 megawatts (MW) and interconnected to the distribution grid (as opposed to the high-voltage transmission grid). DSS includes both community solar (shared solar) and DSS projects with utility off-takers.
Cost-sensitive buyers now can procure DSS to lower their energy costs and meet growing demands for clean, locally sourced energy—while driving investment and economic growth in their home communities.
DSS is a middle-market segment between utility-scale and so-called behind-the-meter, rooftop solar. Including both ground-mount and canopy installations—from a few acres to several dozen acres—these installations are large enough to access the economies of scale captured by utility-scale solar systems, and therefore can be developed at costs competitive with renewable and non-renewable power generation. In addition, DSS shares the distributed benefits of behind-the-meter solar, such as avoided transmission energy line losses, deferral of distribution infrastructure upgrades, and increased resilience.
One of the primary local benefits of a solar project is the creation of local jobs. A typical solar project requires a variety of construction professionals, including: skilled electrical labor, semi-skilled installation labor, fencing installers, and earth movers. Depending on the project location, some or all of these professionals may be local community members.
In addition to the job benefits described above, solar projects can provide economic stimulation to local communities by contributing to property tax revenues. Pursuing solar projects will help cooperatives reach renewable energy goals and move toward a lower-carbon economy. As US communities face increasing exposure to natural disasters, solar—when combined with battery storage and advanced grid management—offers an alternative, resilient energy source to communities. Diversifying energy supply through solar provides increased autonomy and protects energy users from the volatility of global energy markets/price volatility and increases in retail electricity rates (particularly through locked-in PPA deals). For low-income residents, solar can reduce the monthly energy burden through monthly bill credits.
ECONOMICS: PRICE AND VALUE
DSS prices can vary considerably, but have declined significantly in recent years, and projects can now be less than $50/MWh (link). This decline is mainly due to reductions in labor and hardware costs, extended PPA contracts, advancements in system design, aggregation of numerous projects into portfolios, and competitive requests for proposals.
DSS can drive value through avoided wholesale energy, avoided transmission charges, avoided generation capacity charges, deferral of substation upgrades, avoided hedge costs, increased resilience, and property tax reductions. RMI’s Shine Solar Procurement Framework Economic Analysis Tool can help estimate the value of DSS to a variety of off-takers and market segments.
If you are interested in reading further about the value of DSS, we recommend “Cost Is No Longer King, Picking The Right Metrics to Evaluate Solar Power”.
In most instances a PPA is an “all-in” price, which means that the co-op or muni will have no direct upfront project costs. In some instances, the buyer may choose to cover the cost of interconnection, land, or other costs in order to secure a lower PPA cost. The project will inevitably have some costs to the buyer, including administrative/legal fees required to negotiate a PPA, staff time, and fees for external consultants where needed (e.g., for financial feasibility analysis and/or land consultation).
Not necessarily. The federal Investment Tax Credit (ITC) provides a credit equal to 30 percent of eligible costs on solar installation for projects that commence construction through 2019. For projects that commence construction in 2020, the tax credit is 26 percent. For projects that begin in 2021, the credit is 22 percent. Following 2021, the credit is 0 percent for residential solar and remains at 10 percent for commercial and utility-scale solar. Given the ITC phase-out, module tariff uncertainty, and the opportunity to save money immediately, waiting might not be the best idea.
Technical interconnection questions are project specific and will be uncovered during studies conducted by technical experts. Below are some context-specific responses germane to the work Shine™ has completed in Colorado, New Mexico, and Texas.
The most common design types for DSS are either east-west tracking solar arrays (single-axis tracking) or south-facing fixed-tilt systems (fixed tilt). Single-axis tracking produces significantly more energy than a fixed-tilt system with the same nameplate capacity. It also tends to produce solar energy at a lower price (levelized cost of energy) compared to fixed-tilt systems and as a result, single-axis tracking now accounts for 80 percent of new capacity.
Fixed-tilt systems still may be the preferred configuration in a variety of situations including: regions that experience high snow or wind loads, sloped or rough sties, sites where it is not possible to drive posts (e.g., due to poor soils), or for smaller projects (approximately 500 kW and smaller).
A DSS array should be designed and interconnected to ensure there are no negative impacts to the local distribution grid. IEEE 1547 governs solar interconnection. Beyond minimizing negative grid impacts, smart inverters can provide ancillary services such as frequency control and voltage regulation (but these services may be outside the scope of most PPAs).
The first thing to consider is what services the storage will provide the buyer. Is it for demand charge reduction, energy arbitrage, participation in demand response programs, or backup power for resilience? Once you know what services storage is intended to provide, a financial evaluation model should be built or adapted to consider the extra value that the storage can provide (e.g., it will cost more than solar only, but since it will also provide extra value, it can provide a higher net present value).
DEVELOPMENT PROCESS AND CONSIDERATIONS
A buyer does not need to identify or own a site in order to procure solar. Providing good land will shorten the development process, decrease uncertainty and increase the fidelity of bids. If you have identified a site, we recommend using our Single-Axis Tracking Site Evaluation Tool to check the suitability of the site. However it is common not to have land and cooperatives do not need to identify a site.
If you don’t own land or do not have a site in mind, you can either work with a solar land surveyor/specialist to find appropriate land that you can purchase or lease and then offer this to developers for free. Or you can have developers go and find that land for you (ie. issue RFP without land, and have developers price in the purchase that they would manage and assume).
WORKING WITH AN INTERMEDIARY
Intermediaries provide important support to buyers in completing complex transactions and investing in forward market risk. In addition, an intermediary will help you understand and navigate an economic feasibility analysis, recruitment, and local/state incentives.
Most DSS buyers are one-time or infrequent solar buyers. As a result they may lack the market knowledge or capability to most effectively scope, procure, or develop a solar array. Intermediaries have significant market experience, and can help their clients navigate the challenges of solar procurement and development.