12 Apr Community Solar: The Operational Challenges
By Kumar Parameswaran
Over the last few years, solar energy has been the fastest growing energy source in almost every part of the world – from China to India to Africa, Europe and Americas. There are many factors that have contributed to this growth, but perhaps the most significant one has been affordability. Thanks to technological advances as well as regulatory policies, solar power has become competitive with more traditional sources of energy and this trend is expected to continue. Of the different business models, community solar projects have seen perhaps the fastest growth in the last few years, offered by Community Solar Service Providers (CSSP). For a general discussion on what community solar is please see my previous blog: Community Solar: Making clean power accessible
In this article, we discuss the operational challenges faced by the CSSPs. Many of the states are in early stages of determining the regulatory framework needed, and therefore the policies vary widely across the country. You can find a very good discussion of the state of regulations here: https://www.nrel.gov/docs/fy18osti/70663.pdf.
Making Sense to the Customer
The challenges start with the very first step: acquiring customers. State regulations often impose eligibility requirements in terms of physical proximity of customers to the solar project location (it’s not called community solar for nothing), minimum number of subscriptions to be sold and caps on the participation levels by any individual customer. This effectively reduces the size of the addressable market, and therefore prolongs the sales cycle. Once the requisite approvals have been granted, then the project has to be built and commissioned. That has its set of challenges beyond engineering: National Energy Code (NEC) has been busy writing and re-writing standards of operation to ensure that the solar installations work well with grid reliability and resilience. The net result is that it can take anywhere up to 24 months between enrolling the first customer and actually producing the first KWH of electricity.
The next challenge is the tax calendar. In order to squeeze the tax credits into the current year, many of the installations rush to finish the project before year end: in other words, beginning of winter. Solar energy production is the lowest in winter months, increasing gradually till the height of summer, and so are the credits generated by the projects. The first impression of the customer is: what savings?
The next challenge is to assemble the bill, and I use the word “assemble” deliberately. There are currently no standardized transactions for data exchange between the utility which is responsible for the enrollment of the customer, metering data and billing the transmission and distribution charges (T&D) and the supplier who is responsible for the energy charges as well as the CSSP responsible for the solar project subscriptions. Also, the credits are calculated based on complicated utility tariffs, and often CSSPs are not privy to the details of the utility bills.
Thus, for a CSSP to estimate the credit a customer receives as a result of their participation is an exercise in investigative reporting, not accounting.
Often, CSSPs use home-grown systems, with various Microsoft Excel spreadsheets. The combination of data issues, structural deficiencies of the billing systems, lack of data interchange standards and ad-hoc operational procedures creates a chaotic environment – the confused customer is the tip of that iceberg.
Components of a Solution
In the first part of this article I talked about the operational challenges with community solar. Now, lets look at ways to overcome these challenges. The first step is to implement a relatively easy enrollment process. This consists of two steps:
- A pricing mechanism that uses a combination of information that can be provided easily by the customer (such as name, address, and if it gets that far, credit check information such as D&B or Social Security Number), and publicly available data (e.g. real estate databases, EPRI information etc.) to be used as a proxy for the customer’s energy usage – not arcane information such as utility account number and rate classes. Present a limited set of options for the customer to choose from.
- A robust CRM which can capture the information and maintain customer engagement. After all, it is called “community” solar for a reason, and the physical proximity can be used to great advantage. Moreover, by maintaining contact, and mining social media data, better options in pricing and contract terms can be offered to the customer – remember, this is a long journey.
The next step is to implement a robust billing system. Due to the lack of standards in data transmission and the fact that just about every utility’s system was not designed for this brave new world, the challenge of calculating how much credit the customer received is significant. Those savings must be shown on the bill on a monthly basis as well as on a longer term – perhaps yearly or for the contract term. We cannot expect the customer to look at bills from two or three vendors and do the arithmetic to calculate savings. To do that it involves modeling hundreds (if not thousands) of complex billing rates and tariffs, multiple pricing cycles (to calculate the credits at the project and customer level, and then allocating it according to their participation terms, and perhaps using those savings calculations in billing the subscription fees), and complex accounting requirements. The good news is that thanks to technology and innovators, there are solutions available on the market.
Finally, to quote my friend Jim Steffes, the four big “D” components of the energy future today are: Digitization, Decentralization, Decarbonization and Design. And according to all the studies, these trends are accelerating, driven by technology, deregulation, a greater sense of individual commitment towards a cleaner world, and of course innovation. Operational excellence is no longer an option – it is the basic building block.
Kumar Parameswaran is the Executive Vice President, HansenCX