TODAY’S STUDY: What Maryland’s Community Solar Law Shows

Community Solar In Maryland

November 2017 (Solar United Neighbors)

Introduction

The sun shines everywhere in Maryland. But too few Marylanders could take advantage of solar energy until the advent of a statewide community solar program. Community, or shared, solar makes it possible for anyone with an electric bill to access solar energy, even if they can’t put it where they live. Shared solar means photovoltaic (PV) systems can be somewhere else in the community (in a field, on a building, over a parking lot, and elsewhere) but provide the benefits of solar electricity to participating subscribers. Community solar also represents a significant opportunity to expand direct access to Maryland’s renewable energy economy to everyone in the state. A successful program that delivers energy savings to a wide variety of participants and builds a diverse portfolio of shared renewable projects will broaden and deepen the state’s constituency for renewable, clean, distributed energy. It will also make the case for a permanent and expanded program.

History

Community shared solar has spread across the country. It began when city of Ellensburg created the first community solar facility in the country1 in 2006. Programs that permitted a third party to develop projects began with laws in Delaware in 2010 and Vermont and Colorado in 2011. Currently fourteen states and the District of Columbia2 have laws that allow non-utilities to provide shared renewables. Before the Maryland legislature passed statewide community solar legislation in 2015, local efforts like the University Park Solar LLC3,and the Greenbelt Community Solar, LLC4 tried to make community solar a reality for their communities by allowing individuals to invest in and benefit from a shared solar array at another location. Solar United Neighbors of Maryland worked closely with the University Park project founders to develop a model that would work. These innovative, private efforts were successful but proved difficult to set up and scale. They also didn’t provide credits that show up directly on your electric bill. In response, Solar United Neighbors of Maryland, Sierra Club, and other solar activists, like University Park Solar LLC founder David Brosch, spent time educating legislators on the need and benefits of a statewide program. This built an understanding and interest in bringing community solar to the state.

Starting in 2012, Maryland legislators made several attempts to pass community solar legislation. In 2015, with a bill introduced by Delegate Luke Clippinger and the support of MDV-SEIA, Earthjustice, Chesapeake Climate Action Network, Sierra Club, Solar United Neighbors of Maryland and others, they succeeded. In May 2015, Governor Hogan signed House Bill 10875 into law. The Public Service Commission convened its Net Metering Working Group in mid-summer of 2015 under the leadership of the Commission’s Electricity Division Director, Phil Vanderheyden. This began the process of drafting regulations to implement the new legislation.

The Net Metering Working Group is an ongoing, open stakeholder group comprised of representatives from the utilities, the Office of People’s Counsel, solar industry, ratepayer advocates, and other groups. It provides a means by which Commission staff can solicit stakeholder input and collaborate on the formulation of new and updating of existing regulations. It also allows for informal public discourse and for staff to identify consensus and non-consensus positions when preparing draft regulations for consideration by the Public Service Commissioners.

The Net Metering Working Group met regularly with Commission staff from the summer through November 2015. Commission staff filed draft regulations for consideration by the Commissioners on November 10, 2015. Two days later, the Commission opened Rule Making 56 (RM 56) to formally consider the proposed draft regulations and public comments6 submitted the following month. Solar United Neighbors of Maryland, the local energy industry association (MDV-SEIA), Fuel Fund of Maryland, GRID Alternatives, Sierra Club, the Interstate Renewable Energy Council (IREC), Vote Solar, and others saw the need to demonstrate support through submitted comments and in person testimony. This was due to the strong opposition to a full retail credit utilities demonstrated in working group sessions. We submitted formal comments and 71 letters from individuals expressing support for crediting the full value of the community solar energy on a participant’s bill and for ensuring equitable program access for low- and moderate-income (LMI) residents.

The Commission heard testimony about the proposed regulations in mid-December 2015. By February 2016, Commission staff submitted revised draft regulations. Through our coordination, 160 Maryland residents submitted letters to the Commission. These submissions again voiced strong support for a full retail credit and equitable program access for low- and moderate-income residents. The Commission heard public comments in February of 2016. The state of Maryland published program regulations7 in the Maryland Register in April of that year. The Commission formally adopted the regulations, including a full retail electricity credit, on June 14, 2016. The regulations became final one month later.

With regulations final, each utility submitted proposed tariffs for implementing the program in their territories. Baltimore Gas and Electric (BGE), Potomac Edison, and Pepco Holdings International (PHI) (owner of Pepco & Delmarva Power) filed their tariffs in Fall 2016. In January of, 2017 the Public Service Commission reviewed submitted tariffs and heard public comments. In February the Public Service Commission ruled on the tariffs requesting changes be made. On March 29, 2017 the Public Service Commission accepted re-submitted tariffs marking the launch of community solar in Maryland.

In late May 2017, the Public Service Commission processed and released an initial batch of Subscriber Organization approvals. Subscriber Organizations are the entities that will own and operate the shared solar arrays and offer energy subscriptions to customers. These organizations began to apply for interconnection with the local utility in June. Utility companies began informing organizations of conditional interconnection approval in July. With conditional approval in hand, subscriber organizations began to request space in the program for each of their projects. By August, utility companies began notifying applicants about whether they received space for the program’s first year.

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Program structure and current status

Program Structure

Commission’s regulations have several key provisions that make it consistent with community solar best practices8. This includes a full retail credit rate for all electricity subscribed to by customers of a shared solar array and specific provisions in the allocation of program capacity to encourage projects with low- and moderate-income customer participation.

A full retail credit for all electricity subscribed to by customers means that on a kilowatthour basis, the value of subscribed energy is equivalent to on-site net-metered solar. The regulations allow for utilities to choose to apply a kWh credit or the dollar equivalent. If a dollar credit is chosen, “the electric company shall apply a credit no less than the value to the subscriber of the credit had it been applied to the subscriber’s bill as a reduction in metered kilowatt hours.” (COMAR 20.62.02.04(D)) As a result, subscribers to community solar, including participants who have no option to install their own solar arrays, will have the same experience as someone who had solar on their property. Broadly, the existence of community solar enables equity of access to renewable energy in the state. The existence of a full retail credit goes one step further and enables equitable access to the economic benefits of solar.

The program also leverages the scarce resource of the capacity categories to encourage a diversity of projects. A fixed amount of space is available to allocate in the program and this space is divided into categories by utility territory, by year, and by project type. The LMI category encourages low-to-moderate income focused projects that have at least 30% of their energy output subscribed to by incomequalified subscribers. The LMI category could motivate developers to offer subscriptions to low- and moderate-income customers because the program has an attractive retail credit rate for subscribers and space is limited. This could especially be the case once they are unable to access the program in the Open category, which is the category available to any project type up to the maximum allowed system size of 2 MW (AC). It remains to be seen whether the structure of the program proves sufficient in accomplishing this goal and whether or not low-income residential customers will experience savings from community solar subscriptions. If these happen, the pilot program will have met one of the legislation’s key motivations.

Key Program Provisions

• Length of program: Three years (began in March 2017)

• Participating utilities: All Investor-Owned Utilities (IOUs) are required to participate (BGE, Delmarva Power, Pepco, and Potomac Edison). Municipal and cooperative utilities may optionally participate.

• Program size: 1.5% of Maryland’s 2015 peak demand (~196 MW) allocated over the course of the three year pilot period and divided up by utility territory.

• All projects participating in the program contribute to the state’s 1,500 MW net metering cap.

• The Subscriber Organization owns and has title to all Solar Renewable Energy Credits (SRECs) produced by the project.

• Utilities must provide a regularly updated list of projects applying to participate in the program and their current status.

• Projects brought online during pilot period shall continue under the same regulations for 25 years.

• Maximum project size: 2 MW (AC)

• Minimum subscription size: 2 kW average subscription size per project

• Minimum participants per project: 2

• Maximum participants per project: 350

• Project subscription limits: Subscriptions larger than 200 kW must not make up more than 60% of a facility's subscriptions.

• Program space allocations:

– 40% to Open Category: Any project up to max size for the program

– 30% to Small, Brownfield, Other category: Projects up to 500 kW, or on rooftops, parking lots, roadways, or parking structures, or on brownfields, or serving more than 51% of their output to LMI customers

– 30% to LMI Category: Projects serving more than 30% of their output to LMI customers, of which at least 10% must go to low-income.

• Low-to-moderate defined as:

– Low-income = up to 175% of the Federal Poverty Line

– Moderate-income = up to 80% of the Area Median Income

– An operator of a low-income multifamily dwelling unit may apply to the Commission to qualify as a low-income subscriber for the purposes of the pilot program.

• Customers can be any rate class (residential, commercial, municipal, etc.).

• Customers must be in the same utility territory as the shared array.

• Customers receive full retail rate for all electricity to which they subscribe from the shared array.

• Unsubscribed energy from the shared array will be purchased from the Subscriber Organization by the utility at the generation rate as defined in each company’s tariff.

Application Process

The application process established for accessing the program intends to screen out those projects that are not yet mature. This design is, in part, a response to the “gold rush” experience in Minnesota’s program that saw a high number of project applications received in a rush at the start of the program. This glut of applications, many of which were barely developed, created logjam for program administrators and utilities reviewing these applications. Multiple steps and requirements are included to avoid this.

First, the program requires organizations to apply with the PSC to be registered subscriber organizations. Then, developers must seek approval for interconnection and must submit remaining evidence of project maturity. This includes proof of site control and proof of having applied for applicable permits. Developers have twelve months to complete their project once they gain access to the program. Projects that fail to meet this deadline must pay a penalty to extend their time limit an additional six months.

These requirements have succeeded in preventing early-stage projects from occupying program capacity. However, because of pent up interest and developer effort in preparation for the program, the PSC chose to open the interconnection application window at a specific time for each utility. This was the best option identified by the Net Metering Working group that ensured fair access without resorting to assigning system capacity in a more random fashion such as a lottery. As a result, the interconnection queue application became a primary limiting factor for successful entry into the program in year one. This resulted in some projects not gaining access to the program merely because they submitted their interconnection queue applications seconds after their competitors.

At the time of this report, more than 20 different solar developers have applied for space in the program across the four participating utility territories. This wide participation is a good initial indicator that, while the application process is multi-staged and involved, it has still drawn a wide array of developers willing to risk their time and capital to participate in the program.

Current Status (September 2017)

With the program officially open and developers actively working on projects and seeking admission to the program, a picture is starting to develop as to the type, scale, and distribution of these projects throughout the state. Initial signs are for the most part encouraging. At least some activity is happening in all participating utilities territory. Activity in not only occurring in the Open category, but also the Small/Brownfield/ Other (SBO) category and the low-to-moderate (LMI) category as well. A quick glance at projects admitted so far for Delmarva9, Pepco10, BG&E11, and Potomac Edison12 shows this to be true. These projects will likely come online from Q2 to Q4 in 2018 with subscriber organizations looking for customers in the coming months, leading up to those facilities beginning operation.

The application and allocation process for year two of the pilot program is expected to begin in April 2018. In order to provide a level playing field for late entrants to the community solar market, projects that did not get access to the program in year one will not be able to preserve their spot for year two. These projects must re-apply in year two. After year two, the Commission may re-evaluate whether to maintain a queue for year three projects.

Application & development process: Organizations wishing to build and operate a community solar project must do the following to gain access:

STEP 1: Apply to the Public Service Commission to be a Subscriber Organization and receive approval and a Subscriber Organization ID from the Commission; Application requirements* include:

• Basic company information.

• Posting a Subscriber Organization bond.

• Information on projects to be developed.

STEP 2: Approved Subscriber Organizations can then apply to the utility company for conditional interconnection approval for each project.

STEP 3: Upon receiving conditional interconnection approval from the utility, apply to the utility for space in the program by:

• Filling out the required form.

• Declaring which program category they are applying to.

• Providing conditional interconnection approval.

• Providing proof of site control for the array location.

• Providing proof of having applied for applicable permits in the jurisdiction where the array is located.

• Additionally for brown-field projects, applicants must provide evidence of brownfield status.

STEP 4: Upon receiving confirmation of admission to the program from the utility, they are ready to continue developing their projects and have 12 months to begin operating their project before being removed from the program. If they fail to do so within that time period they can pay $50 per kilowatt (kW) to extend their time limit for an additional six months. Projects applying in the LMI category are exempt from this additional payment requirement…

Future Prospects for Community Solar in Maryland

It’s been a long road to bring community solar to Maryland. After years of experiments, community activism, and unsuccessful legislation, Maryland’s recently launched program is on the cusp of making solar accessible to almost everyone in the state. The program contains many features that reflect the best practices for community solar. Chief among them are a full retail credit rate for energy subscriptions and significant capacity reserved for low-to-moderate income inclusion.

Like any new program, it also has challenges ahead of it and questions that remain. With the low SREC prices in today’s market, will project developers be able to deliver savings to their customers? Will smaller and community-based projects be able to access the program? Will projects be developed across Maryland or be concentrated in certain areas? Will LMI capacity be underutilized, again leaving low-to-moderate income Marylanders out of the renewable energy economy? Can the program be improved to ensure benefits for LMI participants are maximized?

The answers to these questions and others like them will determine whether the legislature turns the pilot program into a permanent one. Yet, with a program sized to just 1.5% of the state’s total electricity demand, the community solar pilot can only do so much in its current form. A permanent program, building on the pilot’s successes and learning from its mistakes, will need to grow beyond the size constraints currently in place. If Maryland’s clean, renewable, distributed energy movement can make that happen, an expanded program will play a central role in speeding Maryland toward a renewable energy economy that’s accessible to and benefits all residents.

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