Community Solar Now on Horizon in Oregon With More Steps Ahead
by Sara Baldwin Auck and Erica Schroeder McConnell
Policymaking is a gradual process. At times, the journey from concept to implementation can feel like a modern day Oregon Trail: long and arduous. Last week, the namesake state of this fabled cross-country route reached a critical waypoint in its policy journey to enable community solar – allowing multiple individuals to participate in and share in the benefits of a shared solar project. As a result, Oregonians are now closer than ever to being able to access community solar.
On June 29, the Oregon Public Service Commission set forth a framework and detailed guidance for the state’s newly enacted Community Solar Program, enabled by Senate Bill 1547 (Section 22) in March 2016. Working collaboratively with the numerous stakeholders, IREC played an active role throughout the rulemaking process, providing guidance and extensive input on the program’s design.
This milestone represents a significant step forward for Oregon, and IREC commends the Commission and staff for their careful consideration and adoption of many national best practices, as reflected in IREC’s Shared Renewables Model Rules and Guiding Principles . Ultimately the program’s design impacts its attractiveness to participants and project providers. Although certain elements of the program diverge from best practices, and several details still require further discussion and Commission approval, IREC is hopeful that Oregon’s program will help to meaningfully expand access to clean renewable energy resources for more individuals and businesses in the state, while also fostering additional economic, societal, and environmental benefits.
IREC provides a high-level summary of the key features of the program below and more details on the program can be found in our State Shared Renewables Program Catalog. Significant work remains, however. Certain programmatic details still need to be determined, including a very important component—the bill credit rate. Many of these will be part of the forthcoming Program Implementation Manual, which will need to be developed. In addition, the Commission will have to solicit and select a Program Administrator and Low-Income Facilitator, a process it says could take as long as 120 days to complete. And Oregon utilities will also have to prepare for program launch, developing requisite tariffs, upgrading internal systems, and more.
Nonetheless, IREC is pleased to see Oregon reach this critical point in its implementation process and looks forward to continuing down the trail toward program launch.
Initial Program Capacity Tier: The initial program capacity tier for each utility will be set equal to 2.5 percent of each company’s 2016 system peak. For the three investor-owned utilities operating in Oregon (Portland Gas & Electric, PacifiCorp, and Idaho Power), the combined program capacity is approximately 160 MW. Fortunately, since these caps are quite low compared to overall market potential, the Commission has made clear that it can adjust this percentage in the future. The table below translates this into approximate MW for each utility.
Program Administration: The program establishes a third-party administrator for the community solar program, which will be selected through a competitive process. This administrator will be responsible for several functions, including creating the Program Implementation Manual in collaboration with Commission staff, registering project managers, reviewing project applications, managing the exchange of information between the various entities involved, establishing and maintaining a public project queue, helping to resolve disputes, and more. In addition, the rules establish a dedicated low-income facilitator to support the low-income component of the program, who will report to the program administrator.
Project Capacity and Other Requirements: Individual projects may be up to 3 MW in size, and a project and its participants must be located in the same utility service territory. Projects “that exhibit characteristics of a single development,” as defined in the rules, may not be co-located within a 5-mile radius, with limited exceptions for projects in a single municipality or urban area, such as aggregated rooftop projects. In addition to the 10-percent low-income requirement discussed below, at least 50-percent of each project must be allocated to residential and small commercial customers. Under the statute, both utilities and third-party developers may serve as project managers, that is, own projects and offer shares or subscriptions to participants. The rules strive to ensure a level playing field between these entities, including via a neutral, third-party administrator, as discussed above, and requiring on-bill payment and crediting, as discussed below. In addition, the rules lay out pre-certification and final certification processes for projects, which will be further developed as part of the Program Implementation Manual.
Participant Requirements and Restrictions: All retail electricity customers of Oregon investor-owned utilities may participate in the community solar program. The rules specify a few requirements and restrictions on participation, however, including: (1) ownership or subscription is limited to a customer’s average annual usage; (2) a single participant cannot own or subscribe to more than 40 percent of a project; and (3) while customers may participate in more than one project, a single participant cannot own or subscribe to more than 2 MW across multiple projects, although a participant and any affiliates (e.g., customers with multiple addresses, such as municipalities) may own or subscribe up to 4 MW.
Low-Income Customers: The statute requires that 10 percent of program’s total generating capacity be made available for use by low-income residential customers, and the Commission has the authority to review and adjust this percentage over time. The rules envision that 5 percent of each project must be allocated for use by low-income residential customers and an additional 5 percent of the total program must be allocated to serve those customers, to allow for flexibility in meeting the 10 percent target. However, the Commission recognized that additional deliberation on this component of the program is required, including with respect to how to define “low-income residential customer.” Specifically, the Commission indicated that financial incentives or other funding mechanism may be necessary to achieve this low-income participation target.
Bill Credit Rate: Although the Commission has specified that the community solar bill credit rate will be “based on the resource value of solar,” or RVOS, the Commission is still evaluating the RVOS in a separate proceeding, which has been ongoing for more than two years. The timing for resolution on this valuation issue remains unclear, which leaves a major component of Oregon’s community solar program undefined. The Commission recognized this issue in its Order, and allowed for the flexibility to adopt an interim rate if the RVOS is still not determined once the community solar program is closer to its ultimate launch date.
On-Bill Crediting and Payment: The utilities are required both to credit participants’ bills according to their shares or subscriptions in the program, and to allow for on-bill payment of program fees, including third-party subscription fees or other costs. Although the rules allow for limited exceptions to this requirement for unusual payment structures, they make clear that the expectation is that participants will see all the costs and benefits of program participation on their utility bills.
Unsold and Unsubscribed Energy: If requested, a utility must enter into a 20-year power purchase agreement to compensate project managers for energy not credited to participants on an “as-available” basis under Public Utility Regulatory Policies Act (PURPA) requirements. This PURPA rate is likely to be significantly lower than the bill credit rate, and thus to incentivize a project manager to maintain full or near-full participation in its project. The value of any remaining energy not credited to participants or otherwise sold must be used by the utility to assist low-income residential customers’ participation in the community solar program.
Renewable Energy Credits (RECs): The rules specify that RECs remain with participants and must be retired on their behalf, and thus may not be sold to utilities, third-party developers, or anyone else. They also establish requirements related to registration with the Western Renewable Energy Generation Information System (WREGIS), with an exception for small projects.
Consumer Protection: Project managers must include certain terms and conditions in their contracts, such as provisions addressing portability and transferability of shares, cancellation penalties and other fees, RECs, and more, and must make specified disclosures to participants. In addition, project managers must provide proposed forms, standard contracts, marketing materials, and a plan for meeting the low-income capacity requirement to the Program Administrator for review. The rules also specify that marketing materials must address any securities-related concerns.
Interconnection: In its Order, the Commission recognized the foundational importance of effective interconnection review to the community solar program. Although Oregon’s interconnection procedures are contained in a separate section of the rules and not directly affected by the Commission’s recent decision, the Commission directed staff and stakeholders to consider interconnection issues as part of the ongoing program implementation process.
Program Evaluation: While many elements of program evaluation are yet to be determined, the Commission specified that Commission Staff must “periodically” conduct public workshops and report on program progress. On this front, Staff plans to host a public workshop on July 19 to answer any questions and provide clarification on the adopted rules.