Suppose electricity consumers want to lower their utility bills or reduce their carbon emissions. What can they do? Renewable energy alternatives such as solar photovoltaic and wind generation are one option. Another option is reducing consumption through conservation or greater efficiency of chillers, motors, and furnaces.
These self-help projects are often referred to as “distributed generation” projects because they substitute for generation delivered to the consumer’s meter by the utility. Consumers install solar or wind generators on their rooftops or land and use the electricity produced before they draw on the utility’s grid. The electricity they make themselves reduces kilowatt-for-kilowatt the power they buy from the utility, thereby reducing their costs just as if they consumed less.
Now suppose consumers are unable to install solar or wind on their rooftops or land? Unless the utility itself invests in large scale alternative energy projects that generate electricity for the utility grid, these consumers would have no access to renewables.
Community solar – sometimes known as shared solar – gives consumers an alternative to both distributed generation and utility scale projects.
Consumers can join together – or be joined together by a private developer – and help to build a solar project that functions like a utility project, feeding energy into the grid. The utility then credits those consumers’ bills with the value of the renewable energy produced through net metering.
Does community solar take the place of distributed solar? Are participants in a community or shared solar project receiving solar energy as they would if they installed solar on their rooftops or land?
“No!” According to utilities, regulators, consumer protection agencies, and others, consumers of community or shared solar are not receiving solar energy from the solar project. That energy is going into the utility grid. They are only receiving solar “credits,” that is, the “benefits of solar.” The utility and all of its customers are the only ones receiving the electricity generated by the solar project.
Sounds like mere semantics? Form over substance? A silly philosophical question like “How many angels can dance on the head of a pin?”
Community solar developers would argue that were it not for the community solar project – and the joint efforts of consumers – there would be no incremental solar. Therefore any consumer who participates in a community or shared solar project is buying solar.
Community solar or shared solar, in other words, is a substitute for rooftop solar, i.e., distributed generation.
Not so fast, says the Federal Trade Commission. Late in 2012 the FTC issued a revision of its so-called Green Guides that addressed the range of permissible and impermissible claims made with respect to solar energy such as touting unqualified benefits like “eco-friendly” and “green.”
The Guides also warned solar developers who sold the environmental attributes of projects – known as Solar Renewable Energy Credits or SRECs – about claiming that the electricity their projects generated continued to remain “solar.”
For example, the FTC said:
“Marketers who generate renewable energy – say, by using solar panels – but sell RECs for all the renewable energy they generate shouldn’t claim they "use" renewable energy. Using the term "hosting" would be deceptive in this circumstance.”
The FTC is not alone in expressing its concern about the marketing of community or shared solar. In 2014 a group of Vermont residents filed a petition asking the FTC to investigate Green Mountain Power, a Vermont utility, for falsely claiming that it was providing consumers with solar energy from utility scale projects when it had sold the SRECs from the. 90% of the SRECs sold were purchased by utilities in neighboring Massachusetts and Connecticut which presumably used the SRECs to meet their RPS requirements.
The FTC chose not to investigate Green Mountain. At the same time, in a letter dated February 5, 2015 it advised the utility to describe accurately to consumers what was happening to the environmental attributes which it was selling.
In December 2015 the Vermont Attorney General issued guidance to developers advising them that once SRECs are sold a solar project can no longer be considered renewable. The AG cited the FTC’s conclusion that such claims would be considered misleading and stated that the following statements would be considered acceptable:
- “The renewable attributes (RECs) of this electricity will be sold by us to keep the cost of your panels affordable.”
- “We retain the renewable credits (RECs) associated with our solar farms. We expect to sell these and use proceeds from them to keep your price per panel as low as possible.”
What other “semantical” formulations might satisfy the FTC and VT AG?
A review of community solar suppliers suggests that developers are bending over backwards to avoid misleading consumers. Instead of “selling solar” they say they are “selling solar credits” or the “benefits of solar.” Instead of saying that community solar replaced rooftop solar they say “community solar customers can enjoy the benefits of solar without costly rooftop installations.”
So is community solar really solar? Or is it a scam and marketing gimic? Is it green? Or is it brown? Are these distinctions mere semantics or are they more substantive?
In our view the answer is irrelevant. Consumers deserve to be told the subtleties of how SRECs are sold and how they receive “solar benefits” but not “solar energy.”
No one should be deceived into thinking that solar electricity is flowing through the utility’s wires directly into their home or business. The truth – that community and shared solar is a hybrid of both utility scale projects and distributed generation – does not detract from the fact that subscribers to remote solar farms are enjoying lower bills and reducing greenhouse gas emissions at the same time.