Questions and Answers
Michigan Community Solar Q&A
What is Community Solar?
Community Solar allows residents, businesses, non-profits, and other electric users to support renewable solar energy without putting panels on their roofs. Community Solar facilities are shared by multiple community subscribers who receive credit on their electricity bills for their share of the power produced. Unlike utilityscale solar which requires hundreds of acres of land, these small facilities require 25-35 acres and are often co-located on functioning farmland giving farmers an opportunity to utilize underperforming land to power their communities. There are currently 21 states and the District of Columbia that allow community solar with the list growing quickly.
Why does Michigan need Community Solar?
Michigan is being left behind on a Community Solar boom taking place across the Midwest. Currently millions of Michigan consumers and businesses are being shut out of solar and because they don’t own their home or office building or their roof isn’t suitable for rooftop solar. Community Solar gives all Michiganders the voluntary choice to sign up for Community Solar projects regardless of their income level or if they own their home or business.
If Michigan allows Community Solar, will the costs of maintaining “the grid” be shifted to Non-Participating Customers?
No, they will not. A new national modeling study shows that scaling Community Solar actually reduces grid costs and translates into lower rates for all consumers. Cost savings come from reducing transmission constraints and losses, flattening local load, reducing risk by increasing the diversity of electric generation across the grid, and delaying the need for investing in near-term generation assets.
Community solar systems would still be linked to the utility-owned “grid’’ and community solar customers would still pay the “fixed’’ charge on their bills to help maintain it. What’s different is that community solar customers would pay a lower “energy’’ charge for electricity – and that charge will remain constant. That does cut into the utility monopoly business in a small way. But it doesn’t unfairly shift costs -- to anyone.
How does Community Solar compare to utility scale projects?
Utility and distributed scale solar (like community solar) both play an important role in building a reliable, clean and low-cost 21st century electric grid. That said, there are important differences between the two.
First, unlike utility scale solar which requires hundreds of acres of land, Community Solar facilities are small and require 25-35 acres and are often co-located on functioning farmland. This allows farmers to participate in our energy transition without having to sacrifice their farming operations.
Second, there is new research that shows small scale projects play an important role in building the lowest cost grid. When you place facilities closer to customers where the energy is being used, it reduces costly investments that utilities have to make on generation, transmission and distribution infrastructure. These savings get passed along to all ratepayers over the life of the projects.
Lastly, Community Solar facilities offer all subscribers immediate bill savings of approximately 10-15 percent. This includes disadvantaged communities who have been traditionally left behind in our energy transition.
Will Community Solar actually save consumers of electricity any money?
Michigan’s regulated monopoly investor-owned utilities earn 10 to 12 percent return on every dollar they spend to build their massive solar “farms’’ around the state. If state law were more flexible, as it is now in 22 states, community-sized solar systems will save money because they don’t need that massive -- and virtually guaranteed -- return on investment. (There’s a reason Michigan’s electricity prices are among the highest in the Midwest!)
How much could customers save?
Community Solar customers typically save about 10-15 percent on their energy bills, but that number varies per market.
What does the utility have to pay for the power?
Utilities don’t actually “buy” the subscribed power produced by a Community Solar facility. The power flows into the distribution grid and is utilized by all ratepayers, reducing the generation demands and costs to the utility. The Community Solar subscribers then receive a fair credit for that power on their electricity bill. The credit is equivalent to the utility’s generation and transmission costs, which are significantly reduced thanks to the new Community Solar being generated.
How much is the bill credit the utility has to put on a Community Solar subscriber’s bill?
Bill credit rates will be set by the Michigan Public Service Commission to ensure all subscribers, utilities and non-participating ratepayers are benefitting from the program. Utilities will recover appropriate program administration and distribution-level costs from subscribers. It is important the bill credit fairly compensates for the costs and benefits community solar projects bring to the electric grid and society as a whole.
The cost of Community Solar is higher than utility scale solar, why do we need it?
Advanced modeling and data analytics now show us that Community Solar at scale reduces direct grid costs and saves ratepayers millions. When you place facilities closer to customers where the energy is being used, it reduces costly investments that utilities have to make on generation, transmission and distribution infrastructure. These savings get passed along to all ratepayers over the life of the projects. These direct cost benefits are in addition to the societal benefits such as bill savings, economic development, job creation, and increased energy equity to name a few.
Will anyone be able to subscribe or is this only going to benefit large users?
Each facility will have a portion of their subscriptions dedicated to small commercial customers and individual household subscribers. This mix will depend on the final program rules, but usually at least 60 percent of the project goes to small customers and households.
Will the need for large areas of land pose an issue for development of Community Solar facilities?
Community Solar facilities require significantly less land than utility scale projects (25-35 acres for community solar versus hundreds of acres for utility scale) therefore can be developed on a wider array of property types. The development of small, Community Solar facilities will provide economic opportunities for state and private landholders of all sizes through the sale and leasing of land. In particular, community solar can provide a stable source of income to family farmers giving them a hedge against often fluctuating commodity prices and allow them to continue farming their land. In contrast to utility scale solar, Community Solar also spreads the benefits across many more landholders and tax jurisdictions.
Is the effort to bring Community Solar to Michigan being driven by “out-of-state” solar developers who are actually just a threat to Michigan’s domestic solar industry?
Just the opposite. Certainly, “out-of-state’’ developers are interested in Michigan because it lags most states in solar development. But this effort will open up Michigan’s solar market which, in other states, has resulted in an explosion of new companies -- in addition to support industries such as surveying, engineering, construction (etc.) needed to do the work. Open up the market and the marketplace will respond, which is exactly what Michigan needs.
If community solar comes to Michigan, will out-of-state developers use non-union labor to build Community Solar system?
If this effort succeeds, there will be an explosion in demand for professional and skilled labor -- both union and non-union – to build these systems. Michigan’s unions have a long-standing and understandable alliance with Michigan’s utilities. But this effort, if successful, will almost certainly result in a temporary shortage of skilled labor that will require all skilled hands-on-deck statewide, including union workers!
Considering that utilities already building massive amounts of new solar-powered electrical generation, who needs Community Solar?
This effort would open a niche in the marketplace to speed up Michigan’s lagging solar industry. Michigan utilities are currently racing to replace their massive coal-fired power plants with massive solar farms. At a regulated 10 percent return on investment, why wouldn’t they? But their system is slow, expensive, and requires billions of dollars’ worth of new powerlines to connect distant solar farms to customers. Locally generated solar is less costly, more efficient and would actually strengthen the reliability of the grid.