In January 2012, research group Environment California released a report highlighting the phenomenal growth of solar energy in the state of California. California, which is leading the nation in deployments, has installed just over 1,000 megawatts of solar power through 2011. While California is the standard-bearer for solar energy in the U.S., countries such as Germany have installed 17 times that amount, with 4,000 megawatts deployed in the month of December 2011 alone.

The good news is that, according to the National Renewable Energy Laboratory (NREL), California has just begun to tap its potential for renewable energy. NREL estimates that existing buildings have the capacity to support up to 80,000 megawatts of rooftop solar systems. With ample rooftop space and surging energy demands, the potential to grow solar in California and beyond is significant. The question remains, however: how do we get there from here?

Financial innovations such as commercial Property Assessed Clean Energy (PACE) and expanded residential leasing options can help make solar more affordable for people who own their roof. For everybody else, a new kind of solar model is emerging: solar hosting.

Solar hosting provides another option for renters who don’t own a roof, as well as property owners with rooftops that aren’t ideal for solar due to technical limitations such as excess shading, lack of a proper southern orientation or having an uncertain roof replacement time horizon. Solar hosting also solves a problem for people reluctant to make long-term financial investments or individuals living or working in high-density, multi-story buildings that simply don’t have enough rooftop space to hold enough panels for everybody.

How does it work?

Solar hosting is a lot like web server hosting. If you don’t want to run your own server, you keep it in a co-location facility (sometimes called “the cloud”) and let somebody else take care of the network infrastructure and physical location management. Solar hosting works the same way. It lets you enjoy the benefit of solar panels, without having them physically located on your roof.

A variety of underlying business models can be supported with solar hosting. One size will likely not fit all needs, and several approaches and pricing models are expected to emerge in this growing marketplace. Solar can be sold as a “service,” which would be structured as a subscription. For example, you might “rent” a panel or purchase a block of kilowatt-hours. Alternatively, it could involve a fractional ownership model structured as a co-op, where the members have an ownership stake in an entity that owns the land and produces power. Another possibility is an allocation as part of a larger property deed similar to how some condominiums include title to a detached parking space. The condo complex or master-planned community of the future could include a small plot of land to host your own solar panels as part of your ownership deed.

Policy to the Rescue

In California, a bill (SB843) has been proposed to help unleash the potential of this new solar deployment framework. This policy innovation would allow individuals to subscribe to or own solar generation assets on non-contiguous parcels and credit them back to their own utility bill. Details of the billing mechanism have not yet been finalized, such as the price at which the solar generation credit is applied back to an individual’s utility bill. However, the potential to open up the solar market to both renters and rooftop owners with an “inhospitable environment” is certainly tantalizing.

Meanwhile, Colorado has already passed a solar hosting law and is in the early phases of a 6-megawatt pilot project; San Diego Gas and Electric has proposed a 10-megawatt pilot project to the California Public Utilities Commission (CPUC); and the state of Maryland has introduced its own solar hosting legislation (SB595).

Solar Everywhere

Rather than simply build out each traditional solar installation to meet only the needs of that particular site’s electricity consumption, what if property owners were actually incentivized to utilize 100 percent of their physical space capacity for solar and sell the excess power to other people? If California establishes the proper financial incentive structures, it could give Germany a run for its money. Countless jobs and economic development opportunities hang in the balance.

Just like web servers enabled the transformational model of “cloud computing,” solar hosting opens up an entirely new market for renewable energy. While many people will continue to put panels on their own facilities, solar hosting becomes a new option for people who want to “go solar" --  just not on their own roof. Why not give those people a chance to participate and expand solar access for everybody? 

Solar hosting opens those doors.

Lee Barken, CPA, LEED-AP is the Energy and Cleantech practice leader at Haskell & White, LLP and serves on the board of directors of CleanTECH San Diego and as Vice-Chair of the WREGIS Stakeholder Advisory Committee. Lee writes and speaks on the topics of renewable energy project finance, green building, IT audit compliance and wireless LAN technology.