The Growth of Shared Renewable Energy

By Megan Cleveland | Vol . 24, No. 47 / December 2016


Did you know?

  • Shared renewable energy programs bring renewable energy to those unable or unwilling to install renewables, like rooftop solar, at their homes or businesses.
  • States can take one of two legislative paths to authorize shared renewables—virtual net metering or community renewables programs—or they can take a hybrid approach.
  • At least 15 states and the District of Columbia have enacted legislation authorizing shared renewables.

Renewable energy has been growing rapidly and generated approximately 13 percent of all U.S. electricity in 2015. One growing sector—shared renewable energy—offers an alternative to on-site, “rooftop” solar.

Shared renewable energy programs allow multiple customers to invest in a medium-sized renewable energy facility (located on-site or off-site) and directly benefit from the energy produced. Shared renewables facilities can be owned by the utility, third parties or by the customers themselves. These programs provide access to renewables for customers who are unable or unwilling to install solar on their homes or businesses due to shaded or old roofs, homeowner’s association regulations, home rental, unfavorable roof orientation or limited access to capital or financing. The National Renewable Energy Laboratory reports that about 49 percent of households and 48 percent of businesses are currently unable to host a solar system.

Shared renewables appeal to many policymakers and consumers because they allow more people to access renewable energy. They also avoid shifting costs to non-participating customers, because subscribers pay for capital and operating costs through their subscription agreements. Many utilities are also interested in these programs because they allow them the flexibility to place shared renewable facilities in strategic locations. Because they are not confined to a specific location, utilities can build shared facilities where they alleviate a strained area of the grid or make efficient use of land, such as brownfields.

However, shared renewables face several challenges, including determining rate structure and deciding whether utilities or customers receive the credits offered for generating renewable energy. Additionally, if not properly designed, programs can still present barriers for low-income customers and generate cost-shift concerns.

Shared renewables programs have grown quickly. In 2010, there were two shared solar projects in the U.S., and in 2016, over 100 projects are operating in at least 26 states. Although the majority are solar projects, there are a small number of shared wind projects. At least 10 states with shared renewables legislation include provisions that allow additional renewable energy technologies. 

State Action

At least 15 states and the District of Columbia have enacted legislation authorizing shared renewables. States have taken one of two legislative paths to do so—through virtual net metering or community renewables programs—or they have employed a hybrid approach.

Virtual net metering (VNEM) is a bill crediting system that allows multiple customers to offset their energy use with electricity generated from a single shared renewables system. Also called community or group net metering, VNEM is embedded in the existing net metering framework, allowing participating customers to receive credit on their individual electricity bills. Virtual net metering also allows property owners with multiple meters to distribute net metering credits to different individual accounts, such as to tenants in a multi-family property.

Rhode Island passed legislation in 2016 authorizing community net metering for systems up to 10 megawatts (MW) in capacity. Legislation set an aggregate cap of 30 MW for community net metering systems until the end of 2018, when the Public Utilities Commission can expand or modify this amount. Community net metering systems must have either at least three subscribers or at least one low- or moderate-income subscriber.

States can also establish shared community renewables pilots or programs and then determine how—and how much—customers are compensated. Minnesota enacted legislation in 2013 authorizing community solar gardens (CSGs) with a capacity of up to 1 MW and at least five subscribers. Subscribers receive compensation at the retail rate as a credit on their electric bill for the energy produced by their share in the garden. Alternatively, CSG customers can be compensated under an optional Value of Solar (VOS) rate—an alternative to net metering using metrics that include utility variable and fixed costs, and environmental impacts. In Colorado, 2010 legislation authorized CSGs with a capacity of up to 2 MW and at least 10 subscribers. Colorado subscribers are allocated benefits through VNEM at the retail rate. Colorado also reserves 5 percent of all CSGs for low-income subscribers.

Several states have taken a hybrid approach: enacting legislation authorizing virtual net metering for shared community renewables as well as establishing shared community renewables programs or pilots. Connecticut authorized VNEM in 2011 for municipal customers, expanding it with legislation in 2013 to include agricultural customers. Virtual net metering is limited to 3 MW in capacity and municipal customers are allowed to combine up to five additional subscriber accounts (10 under specific circumstances) while agricultural hosts can combine up to 10 subscriber accounts.. Additional legislation was enacted in 2015, authorizing a two-year shared clean energy facility pilot program. Eligible projects must be 4 MW or less in capacity and have at least two subscribers. The bill established an aggregate cap of 6 MW for the pilot program.

Legislation is not required for all shared renewables projects—such as for cooperative utilities—and a number of states without shared renewables legislation currently have operating projects.

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