(Source: Joe Deets from Community Solar Solutions. Used with permission)
Today, I have a great interview for you community solar development lessons learned.
I spoke with Joe Deets from Community Solar Solutions in Washington State. Joe was responsible for lobbying in the state of Washington for a community solar bill and has developed a number of community solar project. While there is a lot of talk and buzz about community solar, there are not many that have actually lobbied for bills and developed projects.
A few weeks ago, I wrote a piece on Community Solar 101 that was a basic overview of community solar principals. Joe found this, signed up for a free course on commercial solar finance basics, and started sharing some of this insights. I decided to reach out to interview him and we had a great conversation.
Here are a few of the most important things you’ll learn in the interview.
- How the projects are legally structured in Washington State and how the legal structure impacts the sales and development process of a community solar project.
- How Joe learned to get around the catch 22 of signing up both members and hosts. A host doesn’t want to put in the time to have an array built on their property if there are no members and members don’t want to sign up for something that might not exist.
- Why the challenge with community solar is largely legal and not technical and what Joe learned about speeding up legal negotiations with project hosts to decrease development time.
- How billing works with the utility.
Here are some key facts about the project that Joe shared
Project is located on the City Hall building for the City of Bainbridge Island, Washington (near Seattle).
Project was led by Community Solar Solutions. I am the Executive Director. Now that the project is complete I handle the administrative functions and generally keep an eye of the system.
100% of the funding came from 25 local families.
Modules & inverters from Itek Energy in Bellingham WA.
Racking from Summodo Corp. in Vancouver WA.
Installation by Sunergy Systems in Seattle.
Legal structure is a tenants-in-common.
Legal agreement with the City is a Site Lease and Solar Services Agreement, signed between Community Solar Solutions and the City of Bainbridge Island.
Lease expires on June 30, 2020, to coincide with the sunsetting of the WA State production incentives. At that time the City has the option to purchase the system at FMV, or we take it down.
Here’s a few more pictures of the project
Here’s a more in-depth review of what we talked about. This is fairly sequential, so feel free to skip in the interview.
- How he worked with a state senator to pass a bill in Washington allowing for community solar.
- How long the bill took to pass
- The limitations of the community solar legislation in Washington based on who can host the site
- The largest challenge with project development even after the law was passed. Hint: it’s lead time with the host. It took Joe 2 years to get the first project.
- How the project is structured legally.
- What he learned about getting members signed up early. Joe calls members investors because that’s how it’s structure in Washington. He said the key is to sign a simple indication of interest with potential members. He said the conversion from the indication to sales was very high, they all signed up. Getting the LOIs was also key in getting the host involved, even though there is nothing binding. In total, Joe signed up 25 local investors.
- Why community solar is a legal challenge, not a technical challenge.
- These projects are difficult. He had 1 successful project out of 5.
- Why did 4 out of 5 projects fail? The majority of the reason was the counter party didn’t understand what they were doing. The attorneys on the other side simply didn’t understand what they were talking about so they made unreasonable terms.
- Key lesson learned about negotiations with site hosts. They are incredible time sinks, it’s key you figure out how to expedite the process. Don’t negotiate on the contract ONLY negotiate on the term sheet. The term sheet is only 2 to 3 pages and it summarizes the document. If you have an agreement not he term sheet, you’re 95% there.
- Make sure to gauging the interest of the counter party. Are they chomping at the bit or not?
- What exactly was changed in the new law? Was it creating a new law or changing an existing law? They had to change the exiting production based incentive based on where the system was.
- He had an important ally with the senator that’s the chairman of the energy committee that was 100% on board.
- How “tenants-in-common” is the legal structure used to develop the solar project. How does the structure works?
- Each project has 25 separate legal owners. When referring to the project, it’s not an “it” it’s an “us”. If the project is sued, who gets sued? All of them will be sued.
- How does 25 owners, impact the organization of the project and the money flows with the ITC, depreciation, etc. How do these cash flows work? Even though there are separate owners, there is an administrator. When it comes to dealing with these entities, the utility issues the production check to the administrator and then he distributors the funds based on percentage ownership. The utility doesn’t want to deal with 25 different owners.
- How does billing work? Hint, it’s simpler than it looks. It doesn’t go through the existing bill system. It’s a complete separate arrangement. There is no virtual net metering. It’s not technically changing their bill, but it’s effectively changing their bill. This is for private developers. A utility is allowed to develop a project and have virtual net metering.
- What do you see as the barrier to community solar? Are you optimistic or pessimistic and why?
- Bearish: The statue needs to change. Production based incentives end in 2020, every year they loose value, which makes it harder to develop projects. Community solar takes a long time to developer. 6 to 9 months, would be very fast. Joe knows the interest is there, it’s the development timeline and local state incentives dying.
- Bullish: The more solar there is, the more that there is going to be. it becomes exponential by nature. one community solar facility at city hall created more solar than the project itself.
If you have any questions about the interview or the project, please put them in the comment section.
If you’d like to get in touch with Joe, he said Linkedin is best. His profile is here.
Lastly, if you’d like to learn more about community solar, we have an entire section on community solar in our Free Course: Commercial Solar PPAs 101.