Green choice? Community solar attracting attention in Midwestern states as a path to boost competition, meet renewable energy goals

June 26, 2023

As renewable energy’s market share grows and large wind and solar facilities proliferate, many states are allowing a smaller-scale alternative: “community solar.”

The U.S. Department of Energy defines community solar as “any solar project or purchasing program, within a geographic area, in which the benefits of a solar project flow to multiple customers such as individuals, businesses, nonprofits and other groups.”

Community solar projects can be owned and operated by a for-profit company or nonprofit community organization, or have utilities “sponsor” them.

Customers within the service area of the utility in which the project is located “subscribe” to a percentage of its electrical output and receive an electric bill credit for their share.

One goal for community solar is to place renewable energy projects on land or spaces that would otherwise go undeveloped or unused, says Matt Hargarten, vice president of campaigns for the Coalition for Community Solar Access.Maps of solar energy production as of January 2023, and potential production by 2027, in Midwestern states

“There’s a lot of land near urban areas where there isn’t a lot of incentives for developers to go there,” he says. “A lot of them are built on warehouse rooftops — think Amazon [warehouses] — a lot of states encourage that.”

At the start of this year, 22 states, including Illinois and Minnesota, had enacted laws enabling community solar by specifying that such projects are not utilities, and authorizing “virtual metering” so subscribers can benefit from the community solar production.

Such laws are necessary because most states consider any entity that generates and sells electricity to be a utility subject to state regulation, Hargarten says. “I don’t know of any state where you can do third-party community solar without [an enabling] law in place,” he says.

Laws in place, changing in Illinois and Minnesota

In Illinois, the Future Energy Jobs Act from 2016 (SB 2814) created the Solar for All program, under which the Illinois Power Agency or utilities bought renewable energy credits from qualifying community solar projects in low-income areas.

The Climate and Equitable Jobs Act (SB 2408 of 2021) expanded the program by including community solar among myriad renewable energy initiatives intended to help collectively meet the state’s goal of 100 percent clean energy by 2050. This newer law:

• allows individual community solar projects to generate up to 5 MW of power, up from 2;

• boosts annual funding for community solar, aiming to raise its statewide generating capacity from 213 MW to 1,500 MW;

• shifts the project selection process from a lottery to one based on a project’s score on siting and other criteria; and

• increases annual Illinois Solar for All funding from $10 million to $50 million, allowing for the annual purchase of 3.8 million renewable energy credits through 2030.

Those credits are divided among varying types of renewable energy projects, with 27.5 percent designated for community, rooftop and residential solar — the third-highest share after wind energy and utility-scale solar.

Minnesota, which was the first Midwestern state to enact community solar legislation (HF 729 of 2013), recently updated its law.

The 2013 law required the state’s largest electric utility, Xcel, to establish a community solar “garden” program option for its customers, with generation capacity of up to 1 MW. Xcel is required to buy electricity from those gardens under a formula that was modified in 2016 to become an annual recalculation of the value of solar energy.

Under HF 2310, signed into law in May, this existing program will be joined by a new community solar garden initiative starting in 2024. It will be run by the Minnesota Department of Commerce and is targeted for residential subscribers.

As of next year, new gardens must have at least 25 subscribers per megawatt, at least half of whom must be from low- or middle-income households. That emphasis on reaching less-affluent residents makes Minnesota’s new program a “modernized best of class” for state-based, community-solar laws, Hargarten says.

HF 2310 also lets community solar gardens generate up to 5 MW and eliminates a requirement that subscribers live in the county or adjacent county where a garden is located.

‘Stand on their own’

Community solar can be attractive to legislators for different reasons.Table of community solar projects in U.S. states as of December 2022

“For me, it’s about competition; it’s about the monopoly the power companies have and it’s about the high power rates in southeast Wisconsin,” says state Sen. Duey Stroebel, author of this year’s SB 226, which would authorize community solar and grant rule-making authority to the Public Service Commission. “It’s a way to push back against high power rates.”

While Stroebel says the green energy angle is incidental for him, it’s front-and-center for Michigan Sen. Jeff Irwin, the main sponsor of this year’s SB 153, which also would establish a community solar program. (A companion bill, SB 152, would require the Michigan Public Service Commission to draft operating rules within one year of passage.)

“I’m a big believer in clean energy and, as solar becomes more efficient and more affordable, it becomes a better energy option,” Irwin says.

The Wisconsin and Michigan bills (neither of which had passed as of early June) would authorize projects of up to 5 MW and require them to have at least three subscribers.

The Wisconsin measure would allow community solar facilities to be up to 35 acres, but only in communities that approve them by a two-thirds vote of the host jurisdiction’s governing body.

Projects would be subject to local zoning and property taxation. (Under current Wisconsin law, people who generate electricity for others are exempt from property taxation but are subject to a tax based on gross revenues).

Subscribers would have to be in the service territory of the investor-owned utility whose transmission lines the project would use.

Ultimately, Stroebel says, projects would “have to stand on their own.”

“They have to make economic sense,” he says. “If they can sell subscriptions, then they’ll be successful. If they can’t, they won’t.”

Irwin’s bill would require that at least 30 percent of a project’s output be reserved for low-income households or organizations that provide services, assistance or housing to low-income individuals (including tribal governments or tribally designated housing authorities).

According to Irwin, community solar is needed in Michigan because most residents can’t afford to install solar panels, roofs aren’t well-aligned for the panels, or tree cover makes rooftop solar impractical. Subscribing to a community solar project, then, becomes the best option.

And since local governments are afforded strong siting control, Irwin adds, community solar also is a way for utilities to avoid or overcome local resistance to large, industrial-scale operations.