Subscription Solar: Now Customers Can Benefit From Green Energy Even If They Have No Solar Panels

More than 40% of consumers are interested in joining community solar subscriptions, and a new way to subscribe to solar energy is growing in popularity.

Source: Bigstock

Washington Gov. Jay Inslee may have just ended his presidential campaign, but his signature issue — climate change — is sure to play a prominent role in the 2020 election year. One aspect of the trend toward green energy has a new and evolving subscription component, available even to those who can’t invest directly in solar panels on the roofs of their houses.

Solar energy from photovoltaic (PV) cells has a very simple basis: Put PV panels in sunlight and get electricity out. For businesses and homeowners in sunny locations, with roofs that face the right way, that’s fine. But for energy users who don’t fit this model, there is another way: band together with similar energy users, collectively put up solar panels in an off-site location and share the energy. This is the “community solar” model — Jay Inslee mentions it twice on his campaign site. With the panels located off-site, it is possible for customers to use solar energy even if they have inefficient roof configurations — heck, even if they don’t own their own roofs! Renters are excellent candidates for community solar participation.

For context, here’s total PV power generation in the United States:

(Source: IEA, via Statista)

That’s 50,000 kilowatts, or 50 gigawatts, of power. Only a fraction of that is generated by community solar, but a new subscription business is primed to change that.

An earlier model for community solar saw participants investing a large dollar amount to buy a share in the off-site solar facility, and then reaping the benefits over time. But the customer base of eco-aware energy users with cash on hand is small. So a new model has emerged that promises to vastly increase the number of people who can join in.

The newest community solar business model starts with a company that pays for the solar facility without customer buy-in. Then, the company sells subscriptions to customers who receive credits on their electricity statements, lowering their monthly bills. The 10% to 15% bill reductions are greater than the subscription cost. What’s more, the company guarantees that the amount of the discount will never decrease.

A willingness to engage with this community model is high, according to Deloitte Insights research polling consumers. “Consistent with prior years, 40 percent would be extremely or very interested in purchasing a share in a community solar project, and that interest is highest among Millennials, at 49 percent.” Presumably, even more would be interested in a subscription option, since some would not choose to pursue the purchase option.

It is not just environment-oriented consumers who are considering community solar — large commercial power users are also interested, according to Todd Glass and Heather Curlee at Utility Drive, a trade news publication:

Many “marquis” commercial and industrial customers of U.S. utilities are grappling with falling commodity prices and shareholder pressure to reduce carbon footprints, and have met substantial resistance when working with their utilities to meet these challenges. As a result, they are turning to a variety of alternatives, including “virtual” power purchase agreements, community choice aggregators and community solar.

Here is data (through 2015, with a forecast for 2016 and 2017) that details the growth in community solar power generation:

(Source: Greentech Media, via Statista)

I would usually never show offer data from 2015 with such an outrageous forecast, but some newer data I found confirms the prediction, and then some. Here are some facts from a Greentech Media report by Emma Foehringer Merchant, writing in July 2018:

  • Community solar installations could reach a total of 84 gigawatts of operating capacity, serve 8.8 million customers and account for as much as 2.6 percent of U.S. electricity consumption by 2030. … Current community solar capacity through Q1 2018 sits at just below 1 gigawatt, a little less than 2 percent of overall installed solar capacity in the U.S. But a look back at the past eight years shows the market is just beginning to take off. Because community solar uses a subscription model and doesn’t require the space for an installation on site at the user’s residence, it’s theoretically more accessible.

Another Greentech Media report, from Tom Hunt, writing in March 2019, verifies this incredible growth curve and notes an important trend:

  • In less than a decade, community solar has become the fastest-growing segment within the solar industry, achieving a five-year compound annual growth rate of 53 percent, opposed to 26 percent for the rest of solar. Legislators across the country are beginning to understand the value that community solar brings to their constituents: equitable access to clean and affordable energy for thousands of homeowners, renters and businesses. Today, we are seeing an unprecedented number of states introduce community solar legislation across the country, most recently including Pennsylvania, New Mexico and Florida.

In fact, 40% of states have adopted legislation to encourage community solar:

(Source: NC Clean Energy, via Statista)

And that’s 2018 data, so the percent is even higher now. The utility industry is heavily regulated, so this level of legislative support is key to continuing success in the subscription model, in which the subscription firm needs a dedicated long-term subscriber base to pay back the initial high costs of setting up the PV array.

One of the states supporting community solar with backing legislation is Minnesota. Although most states put a cap on total power that can be supported with legislative backing, Minnesota specifically imposed no caps, says John Farrell at CleanTechnica. That has made it a very attractive location for developers, and growth has been fast there. Take a look at how a successful state’s community solar subscriber base shapes up:

(Source: CleanTechnica)

State action can make the subscription option very attractive by guaranteeing fixed discounts. “Fixed discount subscriptions eliminate that uncertainty by guaranteeing a permanent reduction from the customer’s current utility bill from day one, typically ranging from 10% to 15%,” according to a Utility Dive report out just this month. “The guaranteed bill reduction makes subscriptions easier for developers to market and lowers customer acquisition costs. New York, Massachusetts, Illinois and Maryland’s programs currently use the fixed discount model.” ForeFront Power visualizes it this way:

(Source: ForeFront Power)

With support from states and industry, community solar projects are popping up all over: Maryland, Massachusetts, Vermont, Missouri, Connecticut, Colorado, Kentucky, and New York.

Insider Take

Although the idea of “subscribing” to solar power has yet to gain wide popular traction, the recurring revenue model makes a great deal of sense for PV energy generation companies who have high start-up costs. Over time, that consistent revenue stream is a perfect way to bring in regular income — and subscribers can feel comfortable knowing that their discount is fixed by guaranteed law.

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