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Insights: Community Solar – The Operational Challenges

Over the last few years, solar energy has been the fastest growing energy source in almost every part of the world – from China to India to Africa, Europe and Americas.  There are many factors that have contributed to this growth, but perhaps the most significant one has been affordability.  Thanks to technological advances as well as regulatory policies, solar power has become competitive with more traditional sources of energy and this trend is expected to continue. Of the different business models, community solar projects have seen perhaps the fastest growth in the last few years, offered by Community Solar Service Providers (CSSP).  

In this blog, we discuss the operational challenges faced by the CSSPs.  Many of the states are in early stages of determining the regulatory framework needed, and therefore the policies vary widely across the country.  You can find a very good discussion of the state of regulations here:

Making Sense to the Customer

HansenThe challenges start with the very first step: Acquiring customers.  State regulations often impose eligibility requirements in terms of physical proximity of customers to the solar project location (it’s not called community solar for nothing), minimum number of subscriptions to be sold and caps on the participation levels by any individual customer. This effectively reduces the size of the addressable market, and therefore prolongs the sales cycle. Once the requisite approvals have been granted, then the project has to be built and commissioned.  That has its set of challenges beyond engineering: National Energy Code (NEC) has been busy writing and re-writing standards of operation to ensure that the solar installations work well with grid reliability and resilience.  The net result is that it can take anywhere up to 24 months between enrolling the first customer and actually producing the first kWh of electricity.

The next challenge is the tax calendar.  In order to squeeze the tax credits into the current year, many of the installations rush to finish the project before year end: in other words, beginning of winter. Solar energy production is the lowest in winter months, increasing gradually till the height of summer, and so are the credits generated by the projects. The first impression of the customer is: what savings?

The next challenge is to assemble the bill, and we use the word “assemble” deliberately.  There are currently no standardised transactions for data exchange between the utility which is responsible for the enrollment of the customer and metering data and billing the transmission and distribution charges (T&D), the supplier who is responsible for the energy charges and the CSSP responsible for the solar project subscriptions. Also, the credits are calculated based on complicated utility tariffs, and often CSSPs are not privy to the details of the utility bills.

For a CSSP to estimate the credit a customer receives as a result of their participation is an exercise in investigative reporting, not accounting. Often, CSSPs use home-grown hacks of systems, with Microsoft Excel spreadsheets flying around.  The combination of data issues, structural deficiencies of the billing systems, lack of data interchange standards and ad-hoc operational procedures creates a chaotic environment – the confused customer is the tip of that iceberg.