Part I: The Business and Economics of Community Solar

Written By: Stratton Report
January 25, 2016

Sunshare

The Business and Economics of Community Solar

Part I: An Interview with Christopher Sayler, Director of Finance, SunShare

SunShare is a four year old company that develops of community solar projects. It is based in Colorado, the first state to pass community-solar enabling legislation.  Fortune, quoting GTM Research, recently described the firm as one of the two leading community solar development organizations in the country.  Stratton Report was fortunate enough to correspond with Mr. Sayler by email on the economics of this new trend, which appears to be on the brink of explosive growth.

 

Stratton Report: Could you tell us a bit about SunShare’s history and business focus?  How did your organization come about? What attracted your organization to community solar?

 

Christopher Sayler: SunShare was founded in Colorado Springs, CO in 2011 by David Amster-Olszewski, who worked with the city council to create one of the first competitive Community Solar programs with Colorado Springs Utilities, a municipal utility. The founder, Amster-Olszewski realized most homes are not suitable for rooftop solar systems- a home has to have a shade-less, south facing roof. Those without these qualifications and anyone living in apartments or condos are excluded from having a rooftop system. Community solar is available to anyone.  Since then, we have expanded to Denver Metro and Minnesota working with other electric utilities.

 

SR: What are the relative economics of community solar vs. individual residential solar projects?  How are renewable energy credits handled under each model?

 

CS: Community Solar Gardens (CSGs) are typically between 1 and 5 megawatts in size. Therefore, we can take advantage of economies of scale vis-à-vis residential rooftop. While the economics vary by market, in Colorado, for example, Xcel Energy credits customers at a rate roughly equal to the retail rate minus transmission and distribution. We typically don’t compete head-to-head with residential rooftop for customers – we address the market segment that cannot participate in rooftop solar.  That said, the economics come out fairly similar for the customer between residential rooftop and Community Solar.

 

SR: Are there other practical or logistical advantages to community solar?

 

CS: Since Community Solar Gardens are ground mounted, and in some locations utilize single-axis tracking, the production for a CSG is higher than with rooftop systems.  Instead of developing many small systems located in many different areas, Community Solar has the advantage of developing fewer, larger systems and building them on the parts of the grid that can best utilize the capacity – something the utilities appreciate as well.

 

SR: What are the “infrastructure” requirements—relationships with utilities, cities and/or communities—necessary to make community solar work?

 

CS: First of all, CSG programs are going to look very different in different states and different utilities. That being said, the most successful CSG programs are in states with legislative support. Obviously, some sort of relationship with the utility is a must, since we rely on the utility to connect the solar gardens to the utility grid and for their customers to participate in the solar gardens. Community buy-in and engagement is crucial for a really successful program.

 

SR: How does SunShare’s approach to community solar handle the disparity between the approximately 25-year functional life of solar facilities and the fact that Americans tend to move every 5 years? 

 

CS: We have found that while Americans do tend to move every 5-7 years, most people move fairly close to where they lived before – i.e. they move within the same utility service territory.  The great part about Community Solar is that if a subscriber moves within a utility service territory, they can move their subscription with them.  If a subscriber moves outside of the service territory, we help facility the transfer of their subscription to another customer.

 

SR: Is community solar competitive with, or compatible with, PACE financing?

 

CS: We have not pursued PACE financing for our projects.  Regarding whether Community Solar is compatible with PACE, since the assets are remotely located to the energy off-take, we have a hard time seeing how it can be considered a part of the “property” that is being “assessed”. As mentioned above, CSGs don’t really compete head-to-head with on-site, rooftop residential or commercial & industrial (which utilize PACE), so there isn’t a competition between PACE and CSGs.

 

SR: What is your firm’s geographic footprint?

 

CS: We currently operate in Colorado and Minnesota, with intentions of opening operations in new markets in the coming year.

 

SR: Several utilities (e.g., DTE) have programs that they describe as “community solar.”  Do you know if they utilize the same model your firm does, or would utility ownership change the structure of such a program?  

 

CS: Community Solar programs can vary greatly in their structures. I suggest taking a look at the Solar Energy Power Association’s (SEPA) Community Solar model rules to get an idea.  SunShare participates in open markets where we can compete for the opportunity to develop, own, and operate CSGs.  We are exploring numerous partnerships with utilities, however, and we are open to providing only a part of the value chain – such as residential subscriptions.

 

SR: How does your firm obtain financing?  Does it provide financing to the members of a community power project?

 

CS: SunShare utilizes project financing – similar to financing used on residential rooftop solar or utility scale solar to monetize both the tax benefits and the future cash flows.  We do provide our subscribers the opportunity to pay over time in a PPA-like contract we call a Solar Service Agreement.