This is an extract from a recent report “Meaningful Household Savings” by The Clean Energy States Alliance. This extract specifically focuses on the case studies.
1. Sunwealth
Sunwealth is a solar investment firm that finances and manages solar projects. They have completed 716 projects across the country, many of them community solar projects. For the community solar projects in Massachusetts and New York, where they have developed many of their projects, Sunwealth uses a model that aims to be easy for potential subscribers to understand and risk-free for customers. There is no credit check, no enrollment fee, and subscribers can cancel at any time. Sunwealth believes that complicated terms that are difficult to explain can increase a company’s acquisition costs and leave customers feeling uncomfortable with a long-term contract. The Sunwealth team takes an inclusive approach to community outreach and works with trusted community leaders to share educational materials about the program. Through partnerships with municipalities, housing organizations, and nonprofits, Sunwealth communicates to potential subscribers about the benefits of a community solar program through a trusted community partner. Household savings are provided through discounted credits from the production of the community solar array. Each subscriber is enrolled to receive a certain share of the output from the array based on their estimated electricity usage. The solar output from the array is sent directly to the local grid, and the electric utility distributes credits for the energy generated to the subscribing household’s monthly electric bill. Sunwealth then charges the household for those credits at a locked-in discount, typically 20-25 percent. In other words, for every kilowatt-hour of electricity the solar array generates for the subscriber, the subscriber receives 20-25 percent discount off the cost of the credits. If production from the array is less than anticipated, the number of credits each subscriber receives is reduced proportionately.
To address seasonal variations in solar output and electricity use, Sunwealth sizes a household’s subscription to roughly 85 percent of its projected electricity consumption. This mitigates instances where subscribers receive and must pay for credits that they cannot immediately use because they exceed the household’s electricity consumption in a month. In the rare case that they receive too many credits in a month, the credits roll over and can be used in ensuing months. Although households receive a 20-25 percent discount on the credits created from the solar array, it does not mean that their total electricity bill is reduced by 20-25 percent. As noted above, the subscription is scaled to approximately 85 percent of household electricity use, so the savings would be scaled accordingly. In other words, subscribers with a 25 percent discount on credits experience 85 percent of a 25 percent reduction in the electricity costs associated with solar production, or a 21.25 percent reduction. The average Sunwealth subscriber saves around $300 a year, which amounts to $6,000 throughout the lifetime of the project. Note that the credits cover both the energy supply and the transmission/distribution portions of the subscriber’s bill, but do not account for any monthly fixed charges. Sunwealth takes on the risk of price volatility. If the value of the solar output changes or retail electricity prices change, the household continues to receive the same number of credits from the electric utility for the solar output and still pays for the credits at the same discounted rate. Sunwealth can offer this price stability for the customer by building a financial model that accounts for contingencies such as solar credit price changes, maintenance costs, and a certain amount of customer churn. They set their subscription prices based on projections for those factors, and have the ability to adjust allocations at any point if a subscriber should receive more or fewer credits. The savings that Sunwealth offers community solar subscribers vary from state to state depending upon the maturity of the solar market, the level of state incentives, the range of solar policies in place, and retail electricity prices. In addition, state incentives and program rules can change the extent to which savings are guaranteed and how they are guaranteed. For example, in the Massachusetts SMART program that Sunwealth participates in, the total compensation rate is guaranteed for 20 years.
2. Cooperative Energy Futures
Cooperatives are organized under state laws and can be for-profit or nonprofit. As cooperatives, they must be democratic (one member, one vote, including annual board elections) and entail profit sharing for members. Cooperative Energy Futures (CEF) is a Minneapolis-based, for-profit cooperative, or 308(B), under Minnesota state law. It owns and operates multiple community solar projects in Illinois and Minnesota. Generally, the cooperative includes three categories of customers/owner-members, based on income brackets. CEF charges a subscription fee for the projects as a rate expressed in $/kWh based on a year-one percentage savings target. The middle-income bracket receives a rate that provides customers with a saving equivalent to a 20 percent bill credit discount rate. Customers with lower incomes (<80% area median income) receive a lower rate and thus higher savings, while customers with higher income (>150% area median income) receive a higher rate and thus lower savings from the project. The rate escalates by 2 percent per year versus a projected average utility rate increase of 3 percent per year. With that in mind, the savings percentage is meant to increase over time. Projects are sized at the maximum capacity allowed by the PUC rules based on consumers’ historical consumption. If loads increase, the subscription sizes (in kilowatts) can also increase within these constraints.
Once per year, a “true up” occurs where the utility pays the value of extra credits back to the customers if they have not been used. Each customer also pays a one-time fixed fee ($25 in Minnesota and $5 in Illinois) to become a lifetime cooperative member. As the cooperative starts to profit, members start receiving dividends. Such dividends do not necessarily materialize in year one. Dividend sharing occurs not at the scale of individual projects in which customers are subscribing, but at the scale of the cooperative in which customers are also member-owners. As a result, financial returns for members-owners increase on the 10-year horizon as financing for the initial projects held by the cooperative gets repaid, and ownership within tax equity structures flips to the cooperative. In addition, as projects accumulate within the cooperative, the additional investments can delay dividends distribution but increase the return potential. Understanding the total value received by customers/member-owners requires stacking the projects over their lifetime, an exercise familiar to solar asset managers. CEF profit sharing is organized “through a combination of cash distributions and equity accounts.” Such equity accounts build over time and they, along with a member’s initial membership fee, represent the extent of a member-owner’s liability in the cooperative.
3. California’s Solar on Multifamily Affordable Housing Program
The SOMAH Program was established in 2017, building on the previous California Multifamily Affordable Solar Housing program (MASH), which helped install over 57 MW of solar PV from 2009 for 2021. SOMAH is jointly administered by the Association for Energy Affordability, Center for Sustainable Energy, and GRID Alternatives in collaboration with California Housing Partnership. It is overseen by the California Public Utilities Commission. SOMAH does not include a specific savings target or requirement, but the program ensures and enforces tenant economic benefits via a signed affidavit for applicants or host customers as a condition of providing incentive payments. These consumer protection provisions include the following: at least 51 percent of the solar system’s electric output must directly offset tenant loads; no portion of the project cost can be passed on to tenants, either directly or indirectly; there can be no rent increases due to the solar installation; and the host customer cannot master meter the property or otherwise remove the tenant’s control of the utility bill. Although savings vary by participating utility, PG&E, SCE, and SDG&E all achieved significant savings from 2020 to 2022. For these three utilities, respectively, the SOMAH tenant average monthly year-over-year bill differences between 2020 and 2022 were -39.3 percent, -47.5 percent, and -61.3 percent, adjusted to 2020 base-year values, as verified by a triennial third-party program evaluation. All solar generation is exported or sold via a SOMAH-specific VNEM tariff. Each utility in the program has its own VNEM allocation forms, which property owners use to distribute bill credits from the system’s generation to tenant meters or common area meters.
The amount of savings that the tenant receives greatly depends on the program’s unique incentive design, which is calculated based on system sizing, installed system capacity, tenant allocation, other funding sources, cost-effective energy efficiency measures, Expected Performance-Based Buydown (EPBB), and tax credits. An EPBB incentive, like its close cousin the Performance-Based Incentive (PBI), seeks to influence system performance in the long run by incenting good solar design. While a PBI most directly guarantees system performance based on actual production, it is seen as more administratively expensive to manage when compared to an EPBB.35 Without the Investment Tax Credit (ITC) and Low-Income Housing Tax Credit (LIHTC), the SOMAH standard tenant rate per AC Watt is $3.50 while the common area rate is $1.19. Accounting for the ITC and LIHTC for LMI customers, the tenant rate decreases by half to $1.75 while the common area rate is $0.65. Additionally, SOMAH champions a dual-layer protection between host customer and solar providers to ensure savings to households through (1) a 20-year Performance Reporting and Monitoring Service (PRMS) contract on the owner side and (2) fleet monitoring on the SOMAH program administrator side with separate utility generation reports. Monitoring of a building owner’s entire building stock utilizes software that brings all inverter data into a single platform and allows comparisons between actual vs. expected performance. This monitoring system allows for tight compliance and proactive communication if a system is malfunctioning or under-producing. HUD has issued a memo about the SOMAH program indicating that tenants’ VNEM credits are excluded from annual income and are also excluded when calculating utility allowances.
4. DC Solar For All
DC Solar For All, in partnership with the DC Sustainability Energy Utility, has helped reduce electricity bills by 50 percent or $500 per year (the program’s savings target) for over 9,000 income-eligible households. The program provides “meaningful savings” to low-income households, but also to small businesses and nonprofits, through both direct bill credits and indirect (in-kind) benefits. A key feature is that there is no cost to the LMI households that participate. The community solar farm at Oxon Run, with a total capacity of 2.65 MW is a good example of the direct-credit savings approach used in DC Solar For All. It provides $500 in savings annually for about 750 households in the District. Using NREL’s PV Watt Solar Production Tool and the 2016 average DC household residential electricity consumption (about 8,400 kWh annually) as a baseline, the project determined that 3.5 watts per household subscription would optimally reach the program’s savings target. Another noteworthy community-solar project of DC Solar For All lies in Dupont Park. It is a hybrid project that channels savings through both direct credits and indirect benefits. Groundswell, a DC Solar For All grant awardee, worked with churches to use their buildings as community solar host sites. Through a streamlined operational model, solar production first goes to the church’s master meter and is then re-valued at the residential retail rate in dollar terms.
The program delivers meaningful indirect benefits to 44 eligible senior households. These indirect benefits include transportation assistance (e.g., help with grocery shopping), food subsidies, (e.g., supplements to customers’ SNAP benefits or offsets for food costs), and educational services (e.g., free financial management). Aiming for proactivity in subscription management, DC Solar For All adopts two key practices to ensure the stability and equity of savings for their subscribers: (1) ad hoc resizing of customers’ individual subscriptions in response to production issues, and (2) biannual reconciliation by comparing savings across all Community Renewable Energy projects to ensure that every subscriber is on track to meet the $500 per year savings target. The benefits are managed and verified through a grant that imposes flow-down requirements, necessitating detailed reporting on the benefits provided. The grantees, who are DC Solar For All’s authorized vendors, are required to supply a breakdown of production levels, the total dollar value of the energy produced, the amount distributed to eligible households, and the nature of the in-kind benefits provided. Additionally, they must submit a budget breakdown and expenditure documentation to demonstrate that the benefits were delivered as required. DC Solar For All determined that it would be beneficial to have a memorandum of understanding that mandates this reporting. If similar guidelines are established at the federal level, they should be explicitly communicated and enforced.
5. Illinois Solar for All
The Illinois Solar for All (ILSFA) is a noteworthy example of a major state LMI solar program that guarantees savings to participants. It was created by the state’s Future Energy Jobs Act (FEJA) in 2016, to “expand the reach of solar energy” as part of FEJA’s broader goal to require 100 percent renewable electricity in Illinois by 2050. The 2021 Climate and Equitable Jobs Act expanded ILSFA by increasing funding for it and encouraging the development of projects promoting energy sovereignty. The program is administered by the Illinois Power Agency, an independent state agency. To participate in the program, solar companies must be approved by the State of Illinois and must agree to a strict set of vendor requirements. Compared to most other state LMI solar programs, ILSFA has more detailed and rigorous vendor rules and consumer protection measures. In terms of household savings, ILSFA requires that participating households who receive rooftop solar installations cannot have any upfront costs and ongoing costs and fees cannot exceed 50 percent of the value of the energy generated. For example, if a solar system that is installed on a home generates enough energy to yield $1,000 worth of net metering credits on the home’s electricity bill in the first year, the household’s total costs and fees must not exceed $500 for that year.
Similarly, over a 15-year contract, if the system’s energy value is $15,000, the participant’s savings must be at least $7,500 over that period. Similarly, community solar customers cannot have any upfront costs and the “ongoing costs and fees cannot exceed 50 percent of the value of the bill credits applied to the customer’s electric bill. For customers who reside in a multifamily affordable building who do not pay for their own utility bill, they must receive through indirect benefits the savings from no less than 50 percent of the net metering credits that their property owner receives. For community solar customers, their savings value is determined by anticipated bill credits from their energy supplier. This savings requirement is assessed in the first year and throughout the contract term for customers on an annual basis by utilizing an ILSFA-standardized methodology, as detailed in the program manual. The program’s consumer protection provisions include a tier-based Program Violation Response Matrix that outlines disciplinary consequences following consumer complaints for vendors’ noncompliance actions. If a project fails to deliver the required savings, non-disciplinary measures such as enhanced monitoring by ILSFA are first enforced to correct the issue. With repeated violations, the severity of the consequences escalates, culminating with the vendor’s permanent expulsion from ILSFA.
Access the report here
