Community Solar and Value of Solar

A professional commentator asked me to share some thoughts about how VOS fits with community or shared solar.

Community solar application of the VOS shows the strength of the VOS concept. In the
study by the Connecticut Academy of Science and Engineering in which I participated, we concluded that VOS analysis was the best path for calculating the value of the offset credit. There, we used the term “Shared Clean Energy Facility,” or SCEF, since not just solar and not just in one community.

First, since customers get their offsetting energy from offsite, VOST in a 2-part rate allows us to recognize the distinct locational costs and benefits of consumption and production, each in their own distinct location on the grid.

Second, since VOST is a type of net metering, we still need clarity in several jurisdictions about the ability and legality to offset consumption from a remote site. Ideally, the federal government would also allow residential tax credits for SCEFs configured to otherwise stay within the lines of “generation for use” rather than “generation for sale.” As I read the IRS and FERC precedent, this should not be an issue - it is the purpose of the generation that is dispositive. Location is only indicative.

Third, one would expect slightly lower VOS value since the SCEF arrangement does not avoid all the grid costs that a rooftop system does. Appropriately detailed analysis would address the average “minimum distribution plant” typically allocated to customers and adjust from that. For example, if the average distribution charge assumes 5 miles of distribution system to serve a customer, and if the SCEF is located 2.5 miles from its customers, we might discuss reducing the distribution system avoided cost in the VOS by 1/2.

Fourth, although the VOS might be a little lower, the SCEF model also allows site developers to prospect for lowest cost/highest value sites, as well as exploit economies of plant scale. The SCEF movement should encourage regulators and utilities to get more granular about smart, resilient, valuable siting of these facilities.

This means that utilities should be making available short, mid, and long-term marginal distribution capacity cost at the sub-nodal (feeder?) level to third-party developers, and should be incorporating those values in resource planning.

In other words, my friend, “location, location, location.”