by Emma Foehringer Merchant
April 29, 2019

Colorado became home to the first statewide community solar program after it passed the Community Solar Gardens Act in 2010. 

About nine years later, the state is still among the largest community solar markets in the U.S. in installed capacity. But advocates say Colorado's program has moved from front-runner to straggler as more states establish innovative programs and pilots, many using lessons that came directly from Colorado. 

“Compared to other programs in the country, at this point it's way behind,” said Paul Spencer, CEO of Clean Energy Collective, a community solar developer that installed Colorado’s first project. “It just hasn’t evolved with the times.”

Colorado’s current program allows for projects up to 2 megawatts, which must have more than 10 subscribers. Capacity is allotted through a request for proposal (RFP) process, with investor-owned utilities (the state has just two: Xcel Energy and Black Hills Energy) providing plans to the Public Utilities Commission on how much they are seeking to acquire. The PUC has the final say on establishing annual capacity and settled on an annual total between 30 and 40 megawatts through 2019. 

Colorado is the only state that uses that RFP structure for community solar, and so far, it’s cut both ways. The state installed 20 megawatts of community solar last year, bringing its total installed base to about 55 megawatts, according to Wood Mackenzie Power & Renewables.

That places Colorado fourth in the country for cumulative capacity, but leaders such as Minnesota — with 580 megawatts in place — have moved much faster. 

A bill in Colorado's legislature, the Community Solar Gardens Modernization Act or HB 19-1003, would make a few modifications to the program if it succeeds. Stakeholders say that’s needed progress, but they also argue it’s not enough.

Community solar advocates would like to see the RFP process changed, project sizes increased and more flexibility for project siting. 

Thus far, the community solar market has been driven by strong growth in just a few states with pilots or strong incentives. But WoodMac says that’s changing, with 2019 being “an inflection point” as new states enter the market and begin to drive growth.

How Colorado chooses to update its first-of-its-kind program should offer lessons for others on guiding a market from its infancy to sustainable maturity. 

"Halfway there"

In reality, HB 19-1003 only deals with a couple of the issues advocates have highlighted.

It raises the project size cap to 5 megawatts from 2 megawatts. It also allows projects to service subscribers anywhere in the same investor-owned utility territory, rather than from a project in the same or an adjacent county, as set out in the current program. 

Representative Chris Hansen, a sponsor of the modernization bill, said those changes would allow developers to take advantage of economies of scale and the best siting for projects. 

A recent amendment also directs the commission to look at whether subscribers can decide to keep the renewable energy credits (RECs) associated with their subscription or sell them to the utility.

“Utilities here have made huge investments in wind and solar, but the community solar garden piece is one that needed updating,” said Hansen. “Hopefully with this bill we’ll create more opportunity, lower the cost for customers and therefore see an increase in the number of projects.”

 Yet while Hansen’s legislation would update several of the program’s shortcomings, experts say it won't solve everything.

“The program has to modernize holistically,” said Jeff Cramer, executive director of the Coalition for Community Solar Access. “[HB 19-]1003 offers a couple good solutions, but it’s only halfway there.” 

Most significantly, Cramer and several other advocates said the process to allot projects needs to change to one that allows interconnection outside of the traditional RFP. He floated the idea of implementing a value-of-solar tariff program in its place. 

“The RFP process is broken, and there needs to be a new path or significant improvements,” he said. 

Marta Tomic, community solar program director at Vote Solar, said the RFP is “an obvious hindrance to the program scaling.” 

Cramer and others said the state needs to deal with the issue of negative RECs — where developers have to pay the utility to take on RECs rather than getting paid for them. Those negative prices arose several years ago in Colorado’s program and have further complicated RFP bidding by taking away a developer's incentive.

Clean Energy Collective's Spencer said he’d like to see some type of multi-year target for Colorado’s program as well, which would encourage growth and create developer confidence. Though Clean Energy Collective is based in Colorado, the developer only installed about 5 megawatts there out of approximately 50 to 60 megawatts nationally in 2018.

“The majority of our megawatts these days are in those markets that are better equipped and better designed to sustain community solar, which are on the East Coast right now,” said Spencer. “Those policies were enacted further down the road, learned from Colorado, took it to the next level and expanded things.”

The legislature's limitations

Developers would also like to see more flexibility built into the program’s low-income requirement, which is a 5 percent carve-out for each project (Xcel has a separate settlement allowing it to own and operate 100 percent of low-income subscriber projects that count toward the 5 percent). The state is currently meeting the goal, but developers say that applying the carve-out to each project rather than a portfolio can make it difficult to finance projects.

“We’re typically just giving away 5 percent of the array,” said Spencer. 

Luke Ilderton, chief program officer at Energy Outreach Colorado, an organization that works on energy affordability, said the state is still grappling with the best way to include low-income customers. 

“Serving a limited amount of people with free subscriptions is not the ideal model that people thought of when trying to make an equity component in that original legislation in 2010,” said Ilderton.

“[Developers] have not been successful at even giving away subscriptions, because there’s a huge hesitation by that consumer. […] The opportunity seems too good to be true.” 

Ilderton said he’s glad to see affordable housing groups and consumer advocates, who already have relationships in underserved communities, participating more in the community solar process to engage potential subscribers. The organization would also like to see on-bill credits, where subscribers receive just one bill rather than two, made a part of the program. 

Vote Solar’s Tomic said she’d like to see Colorado increase the portion of its program going to low-income subscribers, in line with more recently established programs from states including New Jersey and Maryland.

According to Ilderton, not all of these concerns may be best resolved through legislation. Some may require changes through regulatory rulemaking. 

Hansen, too, recognizes there may be more tweaks required to fully invigorate Colorado’s community solar market, but he said some should be handled by the Public Utilities Commission (PUC) rather than the legislature.

“I...joke with people here [that] the General Assembly sometimes struggles to do math. We should not be in the deep weeds when it comes to the calculations that the PUC needs to make,” Hansen said. “We need to leave them to do that work and let the legislature set the overall policy and framework and direction for the state.” 

The commission is considering updates to the rules for community solar gardens as part of a docket they’ve dubbed “the mother of all rulemakings.” It’s now open for public comment.

Hitting refresh on the nation's first market

As that docket proceeds and the modernization bill works through the state legislature, Colorado will have to decide how to match current best practices for a national market it helped create. 

“Colorado has been a leader in a lot of ways, but it’s time to refresh that leadership,” said Tom Figel, director of community solar at Grid Alternatives, which worked on a demonstration project in the state for low-income community solar subscribers. 

Calling the current docket “the mother of all rulemakings” surely suggests ambitious goals for its outcome. But since Colorado created its community solar program in 2010, some stakeholders feel progress at the PUC has been too moderate. 

“They’ve taken an incremental approach that some have looked at and said, 'It’s just not fast enough at opening the market,'” said Keith Hay, director of utility policy at the Colorado Energy Office. 

Hay, who previously served as a policy adviser and staff member for the utility commission, said the modernization act could serve as an agenda-setter allowing the PUC to take more expansive action. 

“In our minds [at the Energy Office] community solar gardens are an important part of getting to the governor’s vision of 100 percent clean energy by 2040,” Hay said.

“To that end, the modernization act is really just an opportunity for the commission to look at the current market and hopefully achieve the scale necessary for developers to reduce the cost of participation to customers.”