15 Nov 2022
By Gabe Phillips
The passage of the Inflation Reduction Act (IRA) should turbocharge Community Solar. In addition to the IRA extending tax credits for community solar projects, it includes additional benefits that will be particularly helpful for small-scale, equity-focused community solar.
To fully realize these benefits – and ensure these projects are fully subscribed – we must ensure that small and mid-sized businesses are involved as community solar subscribers.
These are tough times for small and mid-sized businesses. Inflation, high energy prices, and a difficult hiring environment have combined to make it particularly challenging. When these commercial and industrial businesses suffer, the entire economy suffers. Commercial and industrial ("C&I") companies are the main levers to move the economy quickly–the 31.7 million small businesses in the U.S. employ 61.2 million people.
The C&I sector is also one of the main sectors that can be utilized to quickly drive clean energy investment and deployment. The millions of small- and medium-sized commercial and industrial businesses are not yet leading the move towards clean energy. By bringing this sector into the clean energy economy, we'll be introducing millions of businesses and billions of dollars into clean energy – all while making a tremendous climate impact.
C&I consumption accounts for 60 percent of the electricity usage in the United States. That electricity generation produces 25 percent of our country's carbon emissions. Shifting commercial and industrial electricity usage toward renewables would make a significant dent in our national carbon footprint; including mid-sized companies would result in massive positive climate impact. These are precisely the companies that innovations in solar can help during these trying times.
We have the solution to one of their problems – we can cut their energy costs. Solar energy offers these businesses a way to get off of fossil fuels and lock in energy savings for decades to come. And, with advances in community solar programs in select states, more businesses can access those savings and receive the benefits from clean energy, all without any upfront investment, and without making any long-term commitment to pay for it.
The savings is meaningful – up to 10 percent off their utility bills plus rental income (if they're a project host). That's real money that can help businesses worry less about rising energy costs and focus on growing their business.
Typically, when filling the capacity of a community solar project, project owners will try to find one large company to act as the anchor subscriber. These anchor subscribers take a large percentage of the community solar capacity and, it's assumed, make it easier to fill the remainder.
There is a better way.
Instead of finding a single large anchor offtaker, community solar projects should recruit several, slightly smaller offtakers. There are millions of small businesses looking to reduce their energy costs and participate in the clean energy economy right now–and community solar offers the perfect solution for them. There is no upfront investment, the business doesn't need to own their building, and they support local jobs in the community.
Community solar won't solve all of their problems, but it will help.
Involving more C&I customers will help strengthen community solar investments, too.
Increasing the number of C&I subscribers provides credit risk diversification, differing usage patterns, and reduces the reliance on recruiting expensive residential customers for a project. Projects that rely on a single anchor bear significant concentration risks that easily jeopardize projects. Community solar is a great first step to involving this customer segment in the clean energy economy, and one which can pay big dividends for the community at large.
The Inflation Reduction Act (IRA) has given Community Solar the opportunity to be a key part of the clean energy transition. Now is the time.
Gabe Phillips is Founder and CEO of Catalyst Power, an independent, integrated provider of commercial electricity and gas as well as distributed energy solutions.
Catalyst Power | catalystpower.com