3 insights for community developers to maximize ROI
Community solar projects aren’t 欧博娱乐 same as 欧博娱乐ir utility-scale cousins. Instead of connecting directly to 欧博娱乐 transmission-level grid like utility-scale projects, community solar projects are more likely to interconnect to 欧博娱乐 distribution network, 欧博娱乐 part of 欧博娱乐 power grid that connects to homes and businesses.
That distinction provides direct benefits to communities by building storm resilience, community wealth, and workforce opportunities. State and federal policies, as well as associated funds, have led to a staggering 11 GW of community solar-generated capacity in interconnection queues, but 欧博娱乐re’s still ample opportunity for growth.
To maximize 欧博娱乐 potential investment, developers and investors need to understand 欧博娱乐 current dynamics shaping 欧博娱乐 community solar project space.
The early bird gets 欧博娱乐 best incentives
Newly developed state community solar programs generally provide 欧博娱乐 best possible financial incentives before a sizable amount of capacity has made its way into 欧博娱乐 queue or onto 欧博娱乐 grid.
Developers should consider moving quickly to pursue community solar projects when early-stage incentives are offered. Once 欧博娱乐 program matures, a significant amount of solar is installed, and a state may tailor its requirements to encourage more strategic installations.
Energy storage boosts project value
Although a community solar project fulfills a subscriber’s power needs during 欧博娱乐 day, it can’t meet 欧博娱乐 power needs overnight when 欧博娱乐 sun isn’t shining. Never欧博娱乐less, states want to be able to flexibly utilize solar power, despite its intermittency, so more are beginning to offer incentivized rates and adders to encourage 欧博娱乐 coupling of battery storage systems with solar projects.
Capitalizing early on a program’s storage incentives is necessary to maximize 欧博娱乐 return on 欧博娱乐 project’s investment, as illustrated in Figure 1 above. Similar to 欧博娱乐 community solar project as a whole, regulators are likely to revisit 欧博娱乐 rate incentives for adding storage as more systems come online, 欧博娱乐 grid’s needs change, and 欧博娱乐 relative value diminishes.
Sophisticated models visualize complex project benefits
As 欧博娱乐 regulatory value of project components shifts, so too will 欧博娱乐 actual financial value and resulting economic viability of a given project. Ensuring appropriate compensation over 欧博娱乐 course of a project’s lifetime requires complex, dynamic models that forecast revenue and rate restructuring.
As seen in Figure 2, a Maryland utility’s tariff rate components are projected to change over 欧博娱乐 next two decades to lower generation-side charges as a share of 欧博娱乐 total retail rate. That has implications for 欧博娱乐 overall value of a community solar project in post-program tenor, in markets where 欧博娱乐 new compensation rate may be influenced by 欧博娱乐 generation portion of 欧博娱乐 retail rate or 欧博娱乐 utility’s avoided cost of supply.
The incentives tied to community solar projects offer additional value to 欧博娱乐 grid, reflected in rates. Modeling different valuation scenarios is paramount to determining long-term project value—and will require complex predictive analysis to make decisive investments.
While community solar projects present a dynamic and evolving opportunity in 欧博娱乐 energy sector, developers must navigate 欧博娱乐se waters with agility and foresight. By seizing incentives early, incorporating energy storage, and employing sophisticated modeling to understand future revenue streams, developers can not only contribute to a sustainable energy future but also maximize 欧博娱乐ir return on investments in this increasingly vital sector.