Association for Public Policy Analysis & Management

Deploying solar energy is likely to be a critical strategy in the transition to more sustainable urban and regional energy systems. But solar energy’s growth is constrained; in the United States. Even fewer consumers can support the high upfront finance requirements of solar, despite declining costs and favorable national, state, and local policies. A promising model to overcome these barriers is that of community solar programs, which allow multiple electricity consumers, often in close geographic proximity, to collectively finance a single offsite centralized solar project. By expanding the market in this way, community solar programs double the number of customers who can access solar energy.

Minnesota has long been on the forefront of community solar. But its program for the state’s largest utility has gone through several reforms that have created uncertainty and slowed development. Still, with over 50 megawatts operating by the end of 2016, Minnesota has one of the country’s largest community solar programs. In this paper, I evaluate Minnesota’s community solar programs, utilizing data on project development. Of particular interest is the cost-effectiveness, equitable sharing of costs and benefits, and community engagement in developing community solar projects.

In this paper, I quantify how shifting implementation rules have affected access to solar energy for residential and commercial Minnesota electricity customers. I study the effect on residential customers with a financial cash-flow model of community solar uptake based on publicly available community solar contracts and apply this model to demographic and electricity consumption data in Minnesota. I stratify the analysis of access to community solar by income bracket to understand the distributive impacts of the policy. A critical piece of this analysis is to understand the overall rate impacts of mandated tariffs paid to community solar programs – I will quantify rate impacts by building on the large literature that has examined this question in the context of traditional energy capital investments. A major concern underlying this part of the analysis is that despite increasingly favorable economics of community solar subscriptions, factors associated with lower income levels (particularly liquidity constrains, limited access to credit, and information barriers) regressively bias the distribution of benefits created by community solar programs.

Community solar programs are now adopted in over 15 states, yet no two community solar programs are identical. The results of this paper will help illustrate how the implementation of community solar programs affects performance, offer lessons to better anticipate the potential downfalls in program design, and identify best practices to enhance equitable access to the market for solar energy.