Not Just for Rooftops: A Look at Community Solar in Maine

Much of the discussion around solar policy focuses on rooftop solar. While rooftop solar is an option for certain homeowners with suitable rooftops and some extra cash in the bank (or the ability to obtain financing), rooftop solar is not available to a large segment of the population. Community solar offers the possibility of making solar panels accessible to a much larger group of interested investors. Because transaction costs and other “soft costs” make up a large portion of solar energy projects, community solar benefits from greater efficiencies and could reduce the payback period compared to smaller, single-owner projects.

Although Maine’s community solar capacity has been slow to take off, since 2014 community solar farms have begun to crop up around the state. Several large projects are currently in the works, including a large project in China, Maine scheduled for completion this fall.

Below is an overview of how community solar works in Maine.

Site Location/Size Limit: The first step is to find a host for the panels. Obviously, sunlight is a major factor in siting the project. Proximity to power lines may also be a factor and the ability to easily interconnect with the grid. Certain locations on the grid are more accessible to solar installations, as some areas may require grid upgrades before solar installations are workable. The PUC is currently considering changes to the interconnection procedures for small generators, which would likely impact community solar facilities.

Projects are currently limited to a total capacity of 660 kW.

Co-Ownership. Unlike many solar projects that involve third-party ownership with corresponding power purchase agreements, all community solar projects require actual co-ownership. One potential downside of the ownership requirement is that solar panels require a large up-front investment. Although financing may be available for some investors, the up-front costs may be an insurmountable obstacle for others.

Net Metering. Community solar projects generate electricity that is then fed into the electric grid. The community solar participants are electricity users connected to that same grid, albeit in different locations. Under what is sometimes referred to as “virtual net metering” community solar participants receive a credit on their electric bills for the amount of electricity generated in proportion to their investment in the project. Participants may bank unused credits and apply them against their usage over a 12-month period.

Meter Limit. Under Maine’s community solar program, participation in community solar farms is capped at 10 meters. One advantage of community solar is that the benefits are portable, meaning if a participant moves they can continue to receive bill credits at a new meter. The only limitation is that the participants must be served by the same electric utility—CMP in Southern Maine, Emera Maine in Northern and Eastern Maine. (Consumer owned utilities are not required to allow net metering).

Tax Credits. The IRS has issued a private letter ruling that individual investors in an off-site, net-metered community solar project are eligible for federal income tax credits that are available to homeowners with rooftop panels. This is a critical incentive for solar investment and, with the extension of these tax credits through 2022, will play an important role in encouraging these projects.

PUC Docket. The PUC is currently reviewing net metering rules in Maine and any changes could have a direct impact on community solar. While net metering compensation is one of the biggest questions—whether solar continue to be compensated at the full retail rate of electricity or some lower rate—other questions are important for the future of community solar. Should the 10 meter limit be raised, or lowered? What about the size limit of 660 kW? Should the ownership requirement be eliminated to allow for third-party ownership? Will investors continue to be allowed to bank credits over a year-long period? Will existing projects be grandfathered or will the new rules apply to all existing facilities? The PUC may decide these questions or ultimately defer to the Legislature, which is likely to take another run at a solar bill next session.