Deep Dive # 4 : What are the risks of Community Solar?
Overview: Community Solar is a relatively low-risk way to reduce energy costs, but consistent savings depend on carefully sizing your subscription based on a risk-adjusted review of your electricity spend. With state-specific regulations adding complexity, partnering with Turquoise Trail Energy Solutions helps manage these risks and guide your business toward reliable savings.
Community Solar partnerships are often low-risk for subscribers, especially under the popular Fixed % Discount and Fixed $/kWh discount models discussed previously. While these setups offers predictable benefits, one key decision must be made upfront: choosing the right number of panels to subscribe to, where getting that right is essential to maximizing value and minimizing financial risk.
The #1 Risk : Oversized Subscriptions
Before getting into the considerations for sizing a community solar opportunity, it can be helpful to review what happens if an opportunity is sized incorrectly. Community solar partnerships generate bill credits, which again can be used against your electric bill to reduce your costs. The issue that can arise is if a facility receives more bill credits than they can effectively claim towards their electric utility bill; the expectation would still be that the payment is made for the bill credits delivered to the electricity account, but those bill credits may not be able to actually drive savings.
For example, let’s consider a facility that has $10,000 in annual electricity costs on their utility bill, and enters into an oversized partnership that generates $15,000 worth of bill credits a year. The bill credits can only be claimed against electricity costs of the utility bill, so in this case only $10,000 of the bill credits can be used, with $5,000 in excess. But since $15,000 of bill credits were delivered, the facility will need to pay back a portion of all that was delivered, regardless of whether it was used. If the Fixed % discount is 20%, this results in a situation where only $10,000 of value was delivered at a cost of $12,000 (or 80% payment of the $15,000 of bill credits delivered).
Sizing the Opportunity Optimally
To make sure your facility gets the most out of Community Solar, without ending up with more credits than you can use, it starts with reviewing your last 12 months of electric bills to determine total electricity costs. From there, there will be an adjustment for expected changes in operations and the application of a conservative buffer to avoid any risk of overcommitting. This risk-adjusted number becomes the initially recommended subscription size. Finally, state-specific rules are checked to confirm the recommendation is within limits, such as not subscribing to more solar energy than energy an account uses in a year. This will all lead to a final recommendation on the optimal size for a partnership to maximize value while also minimizing risk of ever paying out of pocket of unused credits.
Community solar partnerships are not risk free, but with an expert like Turquoise Trail Energy Solutions in your corner, financial risk can be minimized from the very beginning by having an informed and guided process for deciding the right amount of community solar to sign up for. If you’re interested in learning more about how much to sign up for based on your facility’s consumption, reach out to our team for a free review of your bills with a recommendation on the path forward!
