December 12, 2019 Cullen Howe
The Public Service Commission issued an order that allows consolidated billing for community solar projects. While we are still digesting the details, the order has major implications for scaling up such projects in New York. Consolidated billing will help spur the cost-effective completion of over 1 GW of community solar projects currently in development, which in turn will help the state reach its goal of 6 GW of distributed solar by 2025, as required by the Climate Leadership and Community Protection Act (CPCLA).
How Community Solar Works
Community solar, discussed in more detail here by my colleague Samantha Wilt, allows households to receive the benefits of solar energy without having to install panels on a rooftop. Roughly half of residences in the U.S. can’t host a solar installation because the occupants don’t own the property, or the roof is too old, too shady, or faces the wrong way for optimal sun exposure. Community solar eliminates these issues. Instead of buying and installing solar panels on a home or property, a person can subscribe to a portion of a large solar project nearby, often with a number of other people who live in the area. A portion of the electricity generated by these projects gets credited directly to a subscriber’s utility bill and the subscriber typically gets a discount on their total electricity costs.
Until today, subscribers to community solar projects in New York saw savings on their monthly utility bill, but were separately billed by the community solar developer for the costs of the project. Having credits and charges on separate bills is often confusing and thus can be a barrier for potential subscribers including low- and moderate-income (LMI) customers who may not want to pay a separate bill even if they ultimately save money as a result. In addition, requiring developers to separately bill customers for the costs of these projects adds significant operating costs to these projects and can make them more difficult to finance.
Consolidated Billing Could Mean Big Savings
With consolidated billing, the utility will collect the costs of the community solar project and will add this charge to a customer’s monthly utility bill along with the credits received from the project, as well as applicable billing fees. As a result, subscribers will only receive one monthly bill. Importantly, project developers will be able to collect the costs of these projects directly from the utility, which the order notes is expected to reduce these billing and customer-interface costs by as much as 85%, lowering the overall costs of these projects. For example, a 5 MW project could see savings of $60,000 per year. If every community solar project either in service or under development were to implement consolidated billing, the savings could be as high as $12 million per year, or $300 million over the next 25 years that most of these projects will be in service. In addition, like on-bill financing, allowing these charges to be collected from customer utility bills has the potential to reduce project financing costs given the greater certainty that these charges will be recovered (people tend to pay their utility bill because they don’t want their electricity to be turned off). Further, because of the higher likelihood that these charges will be recovered, potential barriers to participation by all customers, even those with no or low credit scores, will no longer be necessary.
Consolidated billing has another benefit as well. Community Choice Aggregation (CCA) programs, which allow local communities to leverage their combined demand to purchase renewable forms of power and other energy services, have not included community solar projects in their portfolios because of the high customer acquisition costs and because CCA programs typically use an “opt-out” model, in which customers are enrolled in the CCA unless they specifically decline to participate. Consolidated billing can eliminate the potential customer confusion concerning separate billing and allows CCA programs to provide their large customer bases (61 municipalities have enrolled in CCA programs, totaling over 167,000 customer accounts) with community solar programs at dramatically lower costs. While the order does not specifically allow CCA programs to use consolidated billing with an opt-out model, it directs staff to study this issue and issue recommendations by March 2020.
While there is much more work to be done to ensure that the state meets its climate goals as set forth in the CLCPA, today’s order represents an important step forward in ensuring that the benefits of solar reach all New Yorkers.