University Park Community Solar LLC, Maryland

People across the United States are seeking alternatives to conventional energy sources. Motivations vary from concerns over global warming to increasing energy independence, and hedging against rising fuel costs to because it is chic to be green.

Advances in solar technology have made photovoltaics a much sought after energy alternative.

But a 2008 study by the National Renewable Energy Laboratory found that less than 27% of residential rooftops are suitable for hosting an on site photovoltaic system, after taking into consideration structural, shading, and ownership issues.

Today, most states have laws that preclude “community solar” projects. That is, most consumers of electricity are not, today, permitted to aggregate their purchase of photovoltaic generated electricity with others, except through their electric power utility.

A recent federal government inventory found less than 81 megawatts of community solar projects in total (versus over 4,400 megawatts of installed residential rooftop solar in the U.S.). Today there are only a handful of community projects actually producing power in Arizona, Colorado, California and Maryland.

But community solar appears poised to shine brightly.

State legislatures and public service commissions are beginning to authorize community solar, although faced with opposition from dinosaur monopoly utilities, many are pilot programs of limited megawatt scope like the pilot authorized earlier this year by Maryland House Bill 1087.

There are many models for community solar and among those most discussed are: a utility sponsored model in which the regulated utility owns or operates a project that is open to voluntary ratepayer participation; a special purpose entity model in which individual investors join in a business enterprise to develop a community solar project; and a non-profit “buy a brick” model in which donors contribute to a community installation owned by a charitable non-profit corporation.

There are real opportunities in the Wild West business of community solar. Of course the allocation of costs and benefits will largely be driven by financial and tax considerations in this highly regulated area. And don’t forget the lawyers who in these mostly uncharted waters will have to offer advice about how the project structure addresses securities laws, utilities regulation, and the complexity of agreements between various project participants.

While there are LEED credits for on site and off site renewable energy (including that were achieved by 48% of LEED EBOM-2009 certified projects) those credits are not yet available for community solar. However, Baltimore City, one of the first jurisdictions in the nation to have a mandatory renewable energy requirement for all new construction does recognize community solar in its adoption of the IgCC.

The early winners in this new marketplace will likely be those that can balance the benefits and concerns related to the participation of electric companies, including investor-owned utilities, in community solar; can determine whether and how community solar or virtual net energy metering have a substantially different technical impact on the distribution system than traditional net energy metering; articulate and actually deliver on how community solar can help reduce the cost of compliance with state renewable energy portfolio standards; and ultimately resolve the impacts on energy costs, reliability, and cost allocation for ratepayers.

It is clear that there are opportunities in net metering aggregation, and it sells better to refer to this emergent marketplace innovation as community solar.