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New York and Connecticut recently joined at least 13 other states, including Hawai’i and Maryland, in establishing measures that could significantly expand access to renewable energy generation in those states through community-based renewable energy programs. Because certain federal tax credits for solar energy are set to decrease or expire, if not extended at the end of 2016, many other states are currently considering legislation or regulations that can quickly establish such programs.
In the absence of extension of the credits, solar energy facilities must be operational by the end of 2016 to take advantage of the credits. Both the New York and Connecticut measures are designed to ensure community solar programs can be implemented in those states by that date.
Community solar programs are also encouraged at the federal level. On July 7, 2015, the White House announced a National Community Solar Partnership initiative, which emphasizes expanding access to solar generation for those households and businesses otherwise unable to participate. A recent government report estimates that nearly 50 percent of consumers and businesses are unable to host photovoltaic systems. This Partnership, comprised of housing authorities, rural electric co-ops, power companies, and organizations in more than 20 states, is committing to put in place more than 260 solar energy projects, including projects to help low- and moderate-income communities save on their energy bills and advance community solar.
Community solar projects expand access to renewable energy by allowing multiple residential, commercial, or industrial electric customers to invest in or subscribe to one central solar energy project and offset electric usage or charges–through virtual net metering–based on their share of the solar energy generated by the project. While the “traditional” solar model generally requires direct home or business premises ownership, access, or control, community solar removes this obstacle. Community solar projects can be sited in a variety of places, whether ground-mounted on open land, or installed on the roof of a commercial or government building or a community center.
On July 17, the New York Public Service Commission (PSC) issued a final order instituting and outlining a shared renewables program (called Community DG). The initiative was proposed in Governor Andrew Cuomo’s 2015 State of Opportunity Agenda to provide opportunities for renters, homeowners, low-income residents, schools, and businesses to join together to set up shared renewable energy facilities and share net metering credits.
Under the PSC order, a Community DG project involves several parties, including the project sponsor (the entity that will organize and own/operate the project), the project facility developer, the utility, and the membership of the project. Projects are limited to 2 MW. The PSC envisions that a group of at least 10 customers, who are all located in the same service territory and NYISO load zone where the project is located, will join as members that will associate as, or contract with, some form of business, not-for-profit, or governmental entity. This entity will become the “project sponsor,” which, along with organizing and owning or operating the project, is responsible for interfacing with the developer, the interconnecting utility, and the membership. Alternatively, the developer may be the sponsor.
Each member of the project must own or contract for a proportion of the credits accumulated at the generation facility’s meter, as a percentage of the facility’s output. Each member must contract for, or own, a minimum amount of 1,000 kWh annually (but cannot take more than that member’s historic average annual consumption). If any individual members have a demand greater than 25 kW, these members collectively can receive no more than a 40 percent share of the project’s credits. The utility is responsible for distributing the remote net metering credits from the facility to the members. Excess credits to a member are carried over from month to month for an annual period, after which the excess credits would be returned to the sponsor. Utilities are required to file tariff sheets providing for the Community DG programs, which take effect October 19, 2015.
The PSC divided the shared renewables program into two phases. The first (October 19, 2015-April 30, 2016) will focus on promoting two types of projects—those that encourage low-income customer participation, and those that locate at sites where they would bolster grid reliability or provide other locational benefits. Only projects that advance these principles can be interconnected during this Phase I period. Other projects that do not qualify as Phase I projects can move forward, but cannot actually be interconnected until Phase II. Starting May 1, 2016, (the beginning of Phase II), utilities may open their entire service territories to Community DG projects, which need not fall within the categories specified for Phase I.
The PSC left open several issues for additional proceedings. For example, the PSC will address how to encourage low-income customer participation in Community DG, and will examine certain fees or charges utilities may wish to impose on project sponsors and members. The PSC will also address several issues in its ongoing “Reforming the Energy Vision” proceeding that may impact the Community DG program.
On June 23, Connecticut Governor Dannel Malloy signed into law Public Act No. 15-113, which directs the Connecticut Department of Energy and Environmental Protection (Department), in consultation with electric distribution companies (EDCs), to establish a two-year pilot program to support the development of shared clean energy facilities. Each facility must have at least two subscribers, be located in the same EDC territory as its subscribers, and have a nameplate capacity rating of 4 MW or less. On or before January 1, 2016, the Department is required to solicit proposals from subscriber organizations seeking to develop such facilities.
The law requires the Department to choose projects from the proposals submitted, for a total aggregate nameplate capacity of 6 MW. The nameplate capacity allowed for each individual project(s) depends upon the EDC’s service area size. Specifically, if the EDC has a service area of 17 or fewer cities or towns, the project(s) cannot have a nameplate capacity of more than 2 MW in the aggregate. If the EDC has a service area of 18 or more cities or towns, the project(s) cannot have a nameplate capacity of more than 4 MW in the aggregate. The Department must establish a billing credit for subscribers, as well as consumer protections, including disclosures that must be made when a subscription is sold or resold.
The selected pilot program participants are subject to certain reporting requirements. On or before January 1, 2018, the Department must report to the Connecticut General Assembly on the success of Connecticut’s pilot program and assess the success of other states that allow shared solar facilities. The Department is also required to recommend whether a permanent program should be established and recommend any necessary legislation.
Ballard Spahr’s Energy and Project Finance Group assists clients in developing strategies to thrive in the fast-changing regulatory, technological and financing environment of the energy industry. If you have questions about this alert, please contact Howard H. Shafferman or Katie Leesman.
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