eei.sirfall2016.community solar, shelton...subscription community solar option. – utilities should...

Gain a sustainable advantage

EEI SRI • September 30, 2016

Solar Solutions:

Give the customer what they want!


Our Vision: Every home & building in America is

energy responsible and sustainability is ordinary


We create a market advantage for

organizations who create a

sustainable, energy-responsible

future.

7

Context setting


86% of the Fortune 500 now

publishes an annual

sustainability report.

9

Energy efficiency

and renewable

energy initiatives

are at the

top of Corporate

America’s priority

lists when it

comes to

sustainability.

10

66% of business decision-

makers in the US and Canada

expect to increase their

reliance on more renewably

generated electricity.

Shelton 2016 B2B Pulse


Two sustainability initiatives are important to

consumers, regardless of sector:

•  Consumer Mandate #1: All companies, regardless

of sector, should address

the waste they create

•  Consumer Mandate #2: All companies,

regardless of sector,

should be using

renewable energy

Shelton 2016 Eco Pulse


The Current Residential Solar Landscape

Consideration by Type Consideration Interest

59% are interested in getting solar power for their

home 34% are seriously

considering renewable energy

options

16% are currently considering rooftop

solar

14% are currently considering

community solar

SEPA - Shelton 2016 National Study


So what’s the right path

forward for utilities to provide

the solar energy customers

clearly want?

Shelton 2016 B2B Pulse

Community Solar

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What is Community Solar?

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Key Questions and Programmatic Attributes

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Who runs the program?

• Program Administrator • System Owner/Purchaser

What is the value proposition?

• Offer/Transaction • Production Guarantee • Economic Proposition • Target Customer Classes

What size system is appropriate?

• Siting & Scale • Participation Limit: Residential • Participation Limit: Non-Residential

What are the terms & conditions?

• One-Time Sign-Up Fee • Fee Treatment • Minimum Term • Unsubscribed Energy • Subscription Transferability • Program Length • REC Treatment

www.sepapower.org

Most Common Structures

•  Customer pays up front to purchase or lease a panel and receives a credit on their bill tied to system production

•  Bill credit reflects an allocation of actual system output based on proportionate share of system

•  kWh credit •  Monetary ($/kWh) credit

•  Mimics a rooftop ownership model in that up front capital is required

•  Economics based on a payback period analysis

•  Majority of programs in existence leverage this structure

•  Roughly 84% of all programs today require either an upfront payment, or allow for financing of an upfront payment over a period of time

•  Customer subscribes to program in either kW or kWh blocks and receives a credit on their bill tied to system production

•  kWh blocks: guaranteed output each month at fixed payment per block

•  kW blocks: variable output each month at fixed price per kWh or fixed payment per block

•  Customer pays a premium on day one for solar blocks, but that price is fixed for a long term (e.g., 20 years) providing a rate hedge

•  Mimics a rooftop lease model •  Economics based on break-even

analysis •  Fewer programs historically, but

gaining interest across the country •  Roughly 16% of programs today

Up Front Payment Model “Panel Lease”

Ongoing Payment Model “Block Subscription”

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www.sepapower.org

Untapped Market Today

18

Source: SEPA Analysis

Rooftop Solar

Community Solar

Utility-Scale Solar

Cumulative Installed US Capacity (2014 MW)

• Median program is 102.5 kW • 75% of programs leverage systems less than 800 kW • Largest programs are around 20 MW (TEP, SRP, Xcel, RMP)


14% 47% Current consideration Interest after education

Residential landscape


19% 52% Current consideration Interest after education

Commercial landscape


Residential:

The panel lease market


Low-end market potential for panel lease model, or roughly 2.5%

of households

2,800,000


Solar lease target •  Younger, affluent couples

–  25-54

•  Suburban

•  White collar

•  More likely to live in the NE

Care about: •  Saving money

•  The environment

•  Being good role models for their kids

•  Time management

Why a Community Solar lease? •  Like having an ownership stake

•  In-community location is more

important to them

•  Worried about in-consistent

production of a rooftop system


Messaging

Community solar is good for the planet!

•  Promote environmental benefits,

including curbing climate change.

Take your kids to see your solar array!

•  Talk about future generations/being a

good role model.

Solar without the hassle!

•  Note key community solar strengths:

lower risk of inconsistent output or

maintenance headaches.

Photo Source: www.metro.us/Clean Energy Collective


There’s definitely a “right” way to package a lease

•  20+ year term

•  $595+ per panel

•  No on-bill financing

•  Less ownership – customer doesn’t “own” the panels or power the panels produce

•  Location based on efficiency/lowest cost to utility (often distant)

•  Most capacity currently generated by non-utility-owned arrays.

•  Often no real-time access to production information

•  5-10 year term

•  $395/panel

•  On bill financing

•  Customer “owns” the power the

panels produce (and even better)

“owns” the panels

•  Location in the community or

within 15 minutes driving

•  Utility sponsor or solar co./utility

partnership

•  Real-time panel production info

via web portal or smartphone

app.

High Probability of Success (optimal model)

Low Probability of Success (common current model)


Residential:

The block subscription market


Low-end market potential for block subscription rate model, or

roughly 3% of households

3,700,000


Block subscription target •  Female, 45+

•  Suburban

•  Well educated and middle class

•  No kids at home

•  More likely to live in the South

Care about: •  The environment

•  Locking in lower energy costs

•  Being responsible

Why a Community Solar lease? •  Haven’t really thought much about

solar before

•  Utility sponsorship is more important

to them

•  Adverse to ongoing maintenance

required for a rooftop system


Messaging

Community solar is good for the planet!

•  Though they haven’t considered solar viable for themselves, they’re

concerned re climate change

Community solar is affordable!

•  Point to the economic benefit of locking in what will likely be a lower-than-

average rate over a long term.

You can be part of the solution!

•  Help them feel empowered


There’s a “right” way to package a subscription

•  2 year term w/option to renew

•  $100 non-refundable deposit or “sign-up fee”

•  $.03-$.05 premium kWh rate

•  Most capacity currently generated by non-utility-owned arrays.

•  Location based on efficiency/lowest cost to utility (often distant)

•  No real-time access to production information

•  20+ year term

•  No sign-up fee or $50 refundable deposit (after 2-5 year participation)

•  $.01-$.02 premium kWh rate

•  Utility sponsor or solar co./utility partnership

•  Location within community

•  Real-time panel production info via web portal or smartphone app

High Probability of Success (optimal model)

Low Probability of Success (current model)


Overall, the best package from a customer

perspective:

•  “Community Shared Solar” = best description

•  If leasing:

–  Shorter (5-10 year) terms; < $495/panel

•  If subscribing :

–  Longer (up to 20 year) subscription rate term is OK; premium kWh subscription rate won’t fly above $.01/kWh

– No sign-up fee

– Non-refundable deposits don’t fly

•  Utility involvement in community solar projects preferred

•  Siting in their community or within a 15 minute driving distance preferred

•  Need access to panel power production info.


Key takeaways

•  Build your CS arrays within a 15 minute drive of most likely subscribers

•  Offer a robust portfolio of options – including a panel lease and a block subscription community solar option.

–  Utilities should include a rooftop option in that portfolio. Roughly a quarter of residential customers are at stake.

–  Utilities should be involved in the deal. Most customers trust their utilities more than independent developers to produce and deliver solar electricity.

•  Rethink price points and terms, using the guidance noted here to craft the offers with the highest likelihood of success.

•  Budget for a significant marketing effort

–  Most consumers have no idea there’s even such a thing as community solar. Without a big marketing push, interest will stay at 14% of market; with a push,

interest grows to 47%

•  Target the right audiences for each type of program and tailor your messaging accordingly.

–  Include an app that gives real-time power production information.

–  Offer panel lease financing


Commercial market

Lease and subscription


Low-end market potential for panel lease model, or roughly 4%

of American businesses

308,000


•  Younger executives (CEO/CFO/COO; 18-44 years old)

•  Small to mid-size companies (revenue less than $10 million – majority have fewer than 10 employees)

•  Own their building and operate in a single location

•  More likely than average to be located in the Midwest

•  More likely than average to be in business services.

Cares about: •  Being a good corporate citizen

•  Reducing energy costs

Why a Community Solar lease? •  Less risk and better monthly cost benefits

•  Likes the idea of Sponsorship by a reputable solar company, working in

partnership with the utility

Panel Lease Target


Messaging

Be a good corporate citizen!

•  They feel a strong sense of responsibility and report already undertaking at

least 5 sustainability initiatives

Community solar is good for the bottom line!

•  If they can’t make the economic case for it they won’t do it. They’re also not

willing to pay extra for visibility of the panels


Low-end market potential for subscription rate model, or roughly

2% of American businesses

132,000


•  Older owners/partners(at least 45 years

old)

•  Small companies (1-9 employees;

revenue less than $5 million)

•  Lease their buildings

•  Located in the Midwest or Northeast

•  More likely than average to be in

business services, manufacturing or

technology.

Cares about: •  Reducing energy costs

•  Control and independence from their

electric utility

Why a Community Solar lease? •  No maintenance costs

•  Sponsorship by local utility

Block Subscription Target


Messaging

Get control over your energy costs!

•  The bottom line is their top driver…and they are control-oriented

All the advantages of solar without messing with your rooftop!

•  They’re wary of the impact of rooftop solar on their property values and resale

value. And many don’t own their buildings

Be recognized for your contribution

•  This target does want the array to be local and visible…and they want credit

for their participation


Key takeaways


General takeaways

•  Information changes the game…so plan on a significant

marketing effort

•  Community solar really is an excellent option for smaller

businesses; not so much for large corporations (they want

to own their own systems)

–  Targeting the right types of businesses and the right decision-

makers is key


Businesses are participating in/considering a wide variety

of renewable options – they want options.

•  8% say they’re buying RECS and 23% are currently considering them.

•  7% have some other renewable generation solution (e.g., geothermal) and

20% are considering them.

•  6% are participating in a green power plan and 20% are considering one.

•  And many (18%) participate in more than one option and 42% are currently

considering more than one option.

RECOMMENDATION:

Offer a diverse portfolio of renewable energy options.


The market for business community solar is

significant, but smaller than rooftop/onsite.

•  27% are currently considering rooftop/onsite.

•  After exposure to rooftop cost and lease/financing examples and community

solar models, interest in rooftop increased.

•  Given a final choice, most (50%) will be more likely to consider rooftop (either

leased, purchase, or financed), compared to 39% who will be more likely to

chose a community solar option.

RECOMMENDATION

Unlike consumers, community solar isn’t seen as an acceptable alternative to those who are interested in their own system, but CS does offer a viable option to a different market – particularly smaller companies who lease, rather than own, their facilities. So offer both alternatives.

SEPA conducted a survey of over 640 current community solar subscribers across multiple programs nationwide •  ~40% of subscribers in qualified programs

responded •  95% CI, +/- 4% MoE

How Successful are Existing Programs?

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Strong Customer Satisfaction

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Additional Survey Findings

Education is Critical Program Demographics

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Discussion


Want to learn more about how your customers

are making decisions re solar and how to get in

the game?

John Sterling Senior Director, Research &

Advisory Services [email protected]

202-559-2022

Contact Information


Thank You!

Suzanne Shelton, CEO

Shelton Group

[email protected]

@sheltongrp

865-524-8385

eei.sirfall2016.community solar, shelton...subscription community solar option. – utilities should...

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