When President Jimmy Carter installed rooftop solar panels on the White House, public support for adoption of renewable energy was at a then all-time high and many imagined the possibility of rooftop solar on their own homes and in their own communities. Yet, barriers such as the high up-front installation cost of panels, and of homeownership in general, meant that for long stretches, powering homes with solar panels remained an option only for corporations and the wealthy. The current moment, however, presents broader public support for renewable energy along with policy initiatives that support a wider array of renewable energy options.
Investment incentives in community solar created by the Inflation Reduction Act of 2022 (“IRA”) have arrived at a time when over 50% of Americans interested in solar panels are unable to afford their own array.[1] This combination of demand and funding opens the possibilities of solar energy to an ever widening base of consumers who support the clean energy transition. The U.S. EPA’s forthcoming Notice of Funding Opportunities (“NOFO”) surrounding community solar indicates that policy makers are expanding the scope of incentives, thereby broadening the market for solar energy.
Opportunities Presented
To help mitigate costs standing in the way of solar adoption for homeowners, several new methods of procurement have been proposed. One such method, the subscription-based method of community solar, allows for greater participation across socioeconomic levels, directly undercutting two of the largest barriers to participation in the solar market – homeownership and the cost of panel installation. By subscribing to a community-wide project, community members can avoid the upfront costs of installing a purely local or rooftop solar system, but still reap the benefits of the clean energy transition and its new programs and incentives. According to research by Wood Mackenzie, developers in the renewable energy space invested $1.3 billion in community solar projects in 2022, and the market is set to double in the next 5 years. These market trends, coupled with the policy signal sent by the new funding available under the IRA, indicate this currently undercapitalized market is still in its infancy.
Community Solar Funding under the IRA
One such signal is the IRA’s $27 billion infusion into the EPA’s Greenhouse Gas Reduction Fund.[2] The EPA is advancing 3 separate grant competitions with this infusion. Through the newly named “Solar for All” competition, the EPA plans to utilize $7 billion to award up to 60 grants to “projects that deploy residential and community solar, associated storage technologies, and related upgrades.”. Additionally, the agency announced it will distribute a further $20 billion in grant funding through the General and Low-Income Assistance Competition, which will focus on providing financial and technical assistance to low-income and disadvantaged communities. The EPA is developing the grant competition now and intends to release a Notice of Funding Opportunities to the public in early summer of 2023.
State Level Cooperation
Whether any individual community or developer is well positioned to take advantage of this infusion of funding largely depends on the legal frameworks of states, counties, and cities, as well as the stance that the electric local utility has taken on community solar programs. Minnesota, New York, Massachusetts, Illinois, Colorado, and New Jersey all boast robust support for, and adoption of, community solar at a state level, and form the contingent of leading states in terms of operating capacity.[3] While legislators in each have approached the problem differently, the common thread is that each of these states either incentivizes or mandates a certain level of community solar deployment, and in some cases both. In total, only 22 states have enacted shared renewables legislation that explicitly enables delivery methods such as community solar.[4] In states without direct support, utilities may still offer community solar programs like those available in Florida, Arkansas, and Texas.[5]
Next Steps
Distributed generation models like community solar will not single-handedly tackle the energy transition, and there are still many states without sufficient frameworks to take advantage of this new round of funding. That said, as the types of incentive programs and policies supporting renewable energy continue to diversify, and the amount of funding continues to increase to match the public’s prioritization of an energy transition, renewable energy developers should remain vigilant for initiatives in their operations area and continue to explore inclusive solutions and delivery methods to partner with a widening base of customer communities.
[1] https://www.nrel.gov/docs/fy15osti/63892.pdf
[2] https://www.epa.gov/newsreleases/epa-announces-initial-program-design-greenhouse-gas-reduction-fund
[3] https://insideclimatenews.org/news/23022023/inside-clean-energy-community-solar/
[4] https://www.epa.gov/green-power-markets/shared-renewables#fn2
[5] Id.
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