On today's episode of the solar podcast, Dave is speaking with Joel Gamerin, vice president and general manager of energy services at Arcadia, a community solar company. Join us as they break down exactly how community solar works, the economic benefits and how it's expanding renewable energy access beyond just rooftop panels.
Let's get started on the solar podcast.
[00:00:32] Dave Anderson:
Well, welcome back to the solar podcast. I'm Dave Anderson. Thrilled to be joined today with Joel Gamoran, who is actually a community solar expert. We've had a lot of different experts come on the podcast, but community solar is something that people talk a lot about. I don't think it's really that confusing, but there are sort of, there are a lot of different parts and pieces to it.
And I'd love to dive into it in a way that, that, uh, other podcasts haven't really talked about it. So, um, Joel, I'm sure there's lots of things that we could, uh, Uh, help us understand it's certainly about your bio or about your bio and where you come from. Uh, and ultimately how did you end up landing in the community solar space?
Uh, but most importantly joel, welcome to the
[00:01:09] Joel Gamoran:
Podcast. Yeah, uh, dave. Thanks a lot for having me I'm excited to be here and you're right, uh community solar, uh, maybe isn't quite as well known Um when it comes to the solar energy market, but that is rapidly changing and excited to uh, you know Help educate your audience today Yeah.
[00:01:28] Dave Anderson:
So maybe just give us a little bit of a rundown. So pre, uh, I mean, what's your first sort of like foray into renewable energy and then how did you transition into community
[00:01:37] Joel Gamoran:
Solar? Yeah, absolutely. So I actually started my career, uh, consulting and a lot of my clients were oil and gas companies. So that's kind of, uh, how I got into the industry.
Um, got, got the energy backgrounds and, uh, you know, after doing that for about six years, um, really wanted to switch teams, so to speak. Um, and, and got into, uh, consumer energy efficiency, which was, uh, a very software oriented, um, business model where we were enabling customers to take actions that would reduce their home energy bills, um, through a technology platform.
And um, from there I transitioned into, uh, similar consumer tech company, but focused on rooftop solar, right? Which is what most people think of when they hear solar cams, right? You think of panels on your roof. Well, working in that business for a few years. Um, sort of had this realization with leadership of the company that, um, what we were doing was great.
We were, you know, generating interest in solar and helping expand the market, but, you know, for every 10 customers who we had excited, wanting to move forward, you know, had the wherewithal to do it, there would always be a reason they couldn't move forward for about nine out of 10 customers, right? Whether it was.
They would need a new roof before they can move forward. They didn't have the credit score. Um, right there, their roofs face the wrong direction, right? You, it doesn't make a lot of sense to put solar on your roof. If you have a Northern facing slope, you're just not going to get enough sun exposure. And, um, so we started thinking about how can we solve this problem, right?
We have people that want to do the right thing that want to move forward. And, um, around 2016, I joined Arcadia to start our community solar business. And community solar really kind of solves that problem that I had discovered at a previous company, which is how do I get solar if I can't put the panels on my roof?
And so that's the idea behind community solar. It's let's open up access to renewable energy to everyone. It doesn't matter, you know, what kind of home you live in, if you're a renter, if you have a great credit score, it is a way to build solar farms, uh, separate from your property. Um, that can serve many people in the utility territory and enable, you know, uh, a community right of customers to share in the benefits of that, um, solar, right?
So that, that's kind of, uh, how I, how I got into the market. Um, and, and, you know, I've been, uh, with Arcadia now for about seven years building out this business. That's great.
[00:04:15] Dave Anderson:
Maybe a little bit more expanding on exactly what community solar is. So obviously you have community solar, which is, you have a large solar plant somewhere.
And then you have, are they actual asset owners or are they contracts for service for the, for, for the, the solar or for the electricity that the panels produce? Maybe you can kind of go into that a little bit. And I know it takes a couple of different shapes and forms, but maybe you can kind of help expand on that.
[00:04:39] Joel Gamoran:
Yeah, absolutely. So that's the right idea. So you have a. solar projects that will be much larger than a typical, you know, homeowner's solar project. Right. So think, you know, large enough to support. 500 to a thousand homes, right? So it could be, um, mounted on, uh, you know, the, on a ground site, um, could be on a large warehouse, rooftop shopping mall, rooftop could be on a, a capped landfill, right?
There are a variety of different, um, types of sites that these systems can be built. Um, and what happens is essentially there is a, you know, group both. Owner operators of the solar farm, um, who have invested in the solar farm and they now need to monetize the electricity that's being generated. So the energy is going to flow into the grid, um, right, flow into the utility system.
And then from there it effectively gets metered onto the individual electric bills of customers throughout the utility territory. And that is the role that Arcadia plays. We are going out and marketing these projects, sourcing customers that are interested in supporting solar, um, without having an installation on their roof can be residents, businesses, homeowners, renters, and so forth.
And, um, you, the mechanics, you can really think of it the same way as rooftop solar, right? When you have panels on your roof. You're not necessarily, you know, minute by minute using all of the energy that's produced, right? A lot of it's going into the grid, but you're still getting credit for that on your bill and community solar works the exact same way.
We are able to financially write meter credit for the solar energy that's being produced onto the utility bills of our customers. They in turn purchase the energy at a discount. Those payments flow back to the owner operator and that's how they earn their return. And so that's, that's really the way the market works.
[00:06:32] Dave Anderson:
So for every community solar project, you have a developer, someone that's building a project. You have to have investors and typically the investor side, it's a, it's one of those complex structures. We've talked a lot about on this podcast where you've got. Tax equity investors. Usually you've got sponsor equity investors.
Sometimes you have debt. That's part of that sponsor equity. Uh, what's Arcadia's role in that? Are you guys only working on the marketing and the sourcing of customers, or do you play a role in the development and the origination of the actual projects
[00:07:01] Joel Gamoran:
As well? Yeah, great question. So we do, um, a lot of advisory, um, to the developer and owner operators that we work with around.
What do the different markets look like in terms of, you know, demand, uh, right for community solar? Um, what are the applicable policies in place? Um, and certainly, you know, we provide a lot of support in undergoing financial diligence, right? That you have a reliable partner that will be able to subscribe and manage the asset over time.
So that's the role we play really on the development side. We are not ourselves a developer. Um, or an investor in the projects, um, similarly on the demand side, um, right, the end use customers who will ultimately be signing up to save on their power bills, we are aggregating marketing, educating those customers, um, and providing them with an experience over time.
So you can kind of think of us as a market maker in some ways. We like to think of the supply side as. Uh, right. The, the solar capacity and the demand side is the end users whose bills we're going to ultimately on save money.
[00:08:04] Dave Anderson:
Yeah. So let's talk about that then. So you've got obviously the project itself, you're building solar somewhere again, rooftop could be a large ground mount.
Um, but at the end of the day, you have to have someone that's purchasing that electricity and how is it different where instead of just getting the utility company to, to purchase that as a generation station, you're actually going to the end consumer. What, what are the market? economic of that and it different one place to the next.
Or is it typically the same everywhere?
[00:08:29] Joel Gamoran:
Yeah. So you're hitting on one of the key complexities of this market, right. Is that there's not really one market. There's actually, you know, 15 different markets cause we're in 15 different States. Um, and hopefully someday that will be 50 different markets, right.
And you know, in the U S energy policy is I'm sure audiences are familiar. It's, it's run at the state level. Right. Um, and so each state's going to operate a little differently. There can even be some variance by utility. Um, we have certainly, uh, worked very hard to standardize, um, from both the developer and the end use customer's experience so that you're getting a lot of consistency, um, even across states.
Um, but there are important nuances there. And I think when you're thinking about the economics, right, because I think that gets to the heart of your question, it is kind of important to think about, well, what are the origins of this market? Like, why does community solar exist, right? And ultimately. It really is to level the playing field.
And open access to customers who couldn't take advantage of a net metering program in their state, right? Um, you have net metering policy, which, you know, I don't get to forget the exact count, but something like 45 states, right, have net metering that basically says, if you invest in solar. And, you know, whether you own that yourself or it's a third party, if that's on your roof, you're getting credit for the retail rent of energy for everything that you produce.
And there's just no way without community solar for renters, um, you know, customers without the right credit score and so forth to take advantage of that policy. And so community solar, again, it, it's really about opening access, leveling the playing field and enabling everyone to participate. And so what that translates to from a financial perspective.
Is that community solar projects are getting essentially the full retail rate, um, in terms of how their energy is valued versus if you just, you know, strike up a PPA agreement with utility, you're really getting wholesale rate, right? And so when you start thinking about it with that lens of this is really net metering, it just so happens that the project isn't, you know, physically connected to the customer, you start to see why the economics make sense.
and why the programs are designed that way. And there are, of course, there are variations, right? Certain states have um, you know, more complicated tariffs, um, around exactly how the, the energy will be valued, but they're generally all build with that, um, you know, framework around let's level the playing fields so that the, you know, the, the sort of, Lucky people who happen to have the right, you know, roofs, um, to put solar panels on their roof.
They're not somehow advantaged over, you know, everyone else in the service territory. Yeah. So for
[00:11:13] Dave Anderson:
A typical project, what usually comes first, the customer base or the project? So what do you go and find the customers and then build a project? Or do you build a project and then go find the customers?
[00:11:22] Joel Gamoran:
Yeah, typically the project will come first.
And I would say the reason for that is if you think about the development lifecycle for these projects. Right. It can be anywhere from one to three years in the making, right? When you're starting to find your sites, um, working through the permitting process, interconnection, um, construction and so forth.
And so, um, there is investment that is happening, um, even before customers have been signed up. That's really the developer's role in the process, um, is placing those bets and starting to mature their projects. We are brought in before the project is actually built, and we do start lining up customers so that once it turns on, it is full.
Um, so, you know, that means we're typically coming in anywhere from, you know, six months to maybe out to about 18 months, um, before the project is expecting to turn on. And we'll start bringing on customers, and of course, set expectations of, you know, you're supporting a brand new solar projects, um, right, you get to kind of be involved along the journey.
Um, and once it turns on and starts operating, that's when you're going to actually see the savings hit your bill.
[00:12:26] Dave Anderson:
Are there any examples of community solar where it's more like a co op where the actual end users are the owners of the asset as well? Are there, they're investing in a community solar as part of a community and then they're also the beneficiaries of the electricity or does that ever happen?
[00:12:41] Joel Gamoran:
I would say you have seen select examples of that. Um, I, I'm familiar with some projects that work that way in Colorado, a handful of projects in Vermont, but I think you're talking about, you know, the, um, the sort of special snowflakes. Um, and that's not really how the market is scaling. Um, again, this is geared towards, um, opening clean energy to the masses.
Um, and that type of specialized structure where you're leveraging, you know, tax capacity of individuals, um, I, I would say that's definitely not the norm and, and not how, um, the market is scaling and really executing against, um, you know, the goals of, of the policies that are put into place.
[00:13:19] Dave Anderson:
I think most of us that are working in this industry are fairly impact driven.
And I think community solar plays a real critical role in the decarbonization of our, of our electrical system. Can you go into a little bit about the economics for the end user? Um, what, what, what are the typical economics that a person that would sign up for community solar? And then also what's the commitment that one of those end users
[00:13:42] Joel Gamoran:
Might have to make?
Yeah. So that's going to certainly vary depending on the customer type. Right. Um, and so we have You know, small business customers, larger corporations, individual, uh, residential customers. And interestingly, um, there is a strong policy focus on incorporating opportunities for low income customers to participate because You know, there are a lot of, um, low income customers who have historically been, you know, basically blocked out of, um, the rooftop solar opportunities.
Right. And so you'll see, you know, varying terms across those different segments. I would say the great thing about community solar is that unlike rooftop solar, if you have any kind of issue with a customer. they move, they stop paying, right? Um, you're not tied to that customer, right? They can leave and you can replace them.
And so it's, it's really fungible, which actually enables the terms to be more consumer friendly, especially when you're thinking about residential customers. And so, um, we have largely standardized our sort of terms across all the different markets we operate in. The economics will vary a little bit market to market, depending on.
Um, you know, the underlying economics of solar in that state, right? But, um, you know, a typical, uh, offer for a residential customer would be very flexible terms, right? You're signing up. If you want to exit, notify us. There's no penalties, no fees. You're going to pay for the value that you receive. Um, right.
It might take the utility a few billing cycles to implement your request to cancel. But. if you want to leave, that's okay. We've got others who would gladly, you know, come in and take your place. Um, and on top of that, it's a guaranteed savings product, right? So the way community solar works, if we want to get into the weeds of the mechanics, right?
Um, again, similar to net metering, but it is purely financial. It's not physical. So the solar farm is going to generate energy. You are going to be allocated onto your bill, a financial value that represents the value of that energy. Okay. That's gonna be essentially a negative line item on your bill. So you might see, okay, I owe the utility $120, but I have this new negative a hundred dollars line item, so now I only owe the utility 20.
And so the way we provide a guaranteed savings is by committing that whatever that value of solar energy that you received on your bill, that negative a hundred dollars, we're gonna charge you a percentage applied to that value. So we might charge you. 95 for the credit you received or 90 for the credit you received.
So that's how the guaranteed savings product works. So no matter what happens to utility rates, if you go out and explore the retail energy market, right. If you, you know, increase your load by adding a, an electric vehicle, your percentage discount that you're getting for the value of credits is going to remain the same over time.
And so that's how the discount product works, I would say for commercial customers, you know, who may be, uh, subscribing to a large percentage of the project, right? And so, um, and, you know, bring greater risk, uh, to the asset owner from any kind of disruption and, and, um, subscription levels, there will typically be more stringent terms around cancellation periods, right?
Um, early termination fees and, and credit requirements and so forth. But, um, that really doesn't apply to individuals, uh, who want to participate. I'd say
[00:17:11] Dave Anderson:
That, well, let's talk a little bit about that. The, the potential flexibility of community solar projects for the end user or the homeowner. One of the problems with solar is, is that you have to sort of guess how much electricity am I going to use for the next 20 years at some level, right?
I mean, of course you can expand the solar if it's installed on your roof, but for the most part, it's a use it or lose it proposition. If your system overproduces and you don't use that energy, you're not actually getting much Economic value. I mean, you're certainly producing electricity, but not much economic value for the consumer.
That's part of a community solar project. Let's just say that there's a certain load profile that that homeowner has, and then they add to electric vehicles and their kids grow up and these other sorts of things. What? What sort of expansion opportunities do they have? Are they limited to a certain percentage of that one project?
Or is it pretty? Is it? Is it pretty flexible for that end
[00:17:57] Joel Gamoran:
Consumer? Yeah, there's a lot of flexibility. And I would say this is one of the things where, you know, a company like Arcadia plays an important role, right? Because Um, that is our function on, on these projects, right, is to maintain subscription levels over time, provide good customer service, right, incorporate, um, you know, any sort of new, um, desires or demands of customers.
And, um, they're in general in community solar, there is a lot of opportunity to adjust sizing, right? Up or down you, you know, you add an EV, um, your load goes up, you can now, um, take more of the solar energy and, and increase your savings, you know, your kids move out of the house. Maybe you need to downsize, right?
Um, so I, I think, uh, that is an opportunity pretty much across the board in the market. I would say one of the unique things that we at Arcadia have brought to the table is, um, an ability to actually integrate with a customer's utility data so that we actually see that happening. We don't even need the customer to take action and we've got, you know, algorithms built in that say, Hey, you're using more, right?
We can increase your size. Um, so that you actually can kind of optimize your savings or, you know, it looks like, Oh, your, your shape has changed. Um, and you don't need as much anymore. Let's bring that down. So you're not paying for credits. You don't need it, right? So that's a really important role, um, that we play, uh, in terms of ensuring a good experience, both for the asset owners and for the, uh, the subscribers
[00:19:31] Dave Anderson:
And with community solar, our subscribers usually associate with just a single project, or are they actually beneficiaries across multiple projects, or does that.
[00:19:38] Joel Gamoran:
Yeah, I would say, you know, if you're talking about residential customers, um, it's, it's a one to one ratio, typically, right? Um, there, there wouldn't really be any, any need, um, to tap into multiple solar farms. They can get, you know, their slice of the project and there's more than enough, um, you know, there to cover their needs.
When you're talking about commercial customers, there are cases, um, that we've managed and I'm sure others have as well, where, You know, a commercial customer is actually too large, um, to receive all of the, uh, the benefits, um, that it could use from one solar farm. And so we'll actually aggregate up, you know, slices of multiple solar farms, um, and serve that, that commercial customer to try to.
Um, you know, cover more of their load and, and the rules there vary by state, right? That's that particular, um, model, right? It was subscribing to multiple environments isn't allowed in every state, but it is in others. And so again, you're kind of working with the customer, um, and trying to optimize for their needs across.
Uh, the solar farms.
[00:20:42] Dave Anderson:
Yeah. So you mentioned you're obviously trying to grow as everyone is in this industry, and we want to see again, more electrification, more decarbonization of the, of the grid. Uh, but in terms of, you know, we, we hear three to 4%, uh, penetration on the homeowner side for residential solar, what's the slice of the pie that community solar is currently taking for the, for the whole pie in terms of how big is community solar on the residential side, but also on the commercial, maybe
[00:21:07] Joel Gamoran:
Even utility side.
Yeah, we're, look, we're, we're in still in early days, um, of this market, right? So, um, I would say you have probably roughly 600, 000 residential customers participating in community solar across the 15 states that has, uh, or 14 states rather that That have community solar markets that operating today. So that's, that's a pretty small penetration rate.
I think you're, you know, you're probably in the, the one to 3 percent um, penetration rate. Um, I think the, there is massive opportunity to scale that up. I think all of the challenges that you have with rooftop solar, right. That we. Briefly shattered about, um, already, you don't have any of those challenges with community solar.
Really your limit is how, how much capacity can we build in this market? Right. And so, um, I, you know, I actually look to the parallel of the retail energy market where you see, you know, in 30 percent penetration rates, um, in most states actually think community solar should be able to beat. Um, eat that because you have, um, in, in my view, a much more attractive consumer product, right?
You have savings and you have supporting renewables. Uh, and so if we can reach, you know, 20 to 30 percent of the market, um, you know, that are willing to take an action around their energy, we should be able to far exceed that, uh, in community solar where, you know, you're also doing good for the world.
[00:22:39] Dave Anderson:
So solar in the United States has been criticized for being extremely expensive on the residential side compared to a lot of our like, uh, international competitors or, uh, you know, other countries. Australia is oftentimes noted as doing solar for, you know, a buck a watt where California is paying four bucks a watt on average.
Yes. Yeah. Um, and in terms of the community solar side of things, Um, how is the cost structure either better or worse than like typical residential solar? And, and in terms of the cost and economics benefits over time, what are you expecting to see with community solar in terms of that cost curve and it coming down for consumers?
[00:23:14] Joel Gamoran:
Yeah, so great question. So. You have a far better cost structure than you do when you're thinking about individual rooftop solar installations. So community solar, in a lot of ways, you're kind of getting the best of both worlds, right? You're installing at a larger scale. So you get some economies of scale there, um, often ground mounted, right?
Which is a more economical way to install. Um, but then you have the benefits flowing to, um, individuals, right? So you, you kind of have the best of both worlds there. Um, I would say, uh, community solar is operating at the distribution level, right? So we're talking typically up to about five megawatt, uh, solar projects.
So we're not talking utility scale economics, you know, so. I don't necessarily see us getting down to that, that buck a lot, um, anytime soon, but I think you can certainly be, um, you know, far more efficient than an individual, um, residential installation. And I think there are, you know, some green shoots that will help us, um, continue pushing costs down and, or finding creative ways to, um, to cover that cost, right?
A great example is in the Inflation Reduction Act. You have, um, allow us to consider interconnection costs in part of the cost basis for the project, right? Which I think is a really smart incentive program. Um, interconnection is, is one of the number one bottlenecks in the market today, right? Holding us back from deploying more renewables.
So, um, I think smart policy can definitely help, um, you know, soft costs coming down will also help as, you know, this market grows and awareness increases. Um, uh, but I think we're already starting from a much more efficient model than, you know, putting a power plant on everyone's house.
[00:24:57] Dave Anderson:
Yeah, we're seeing extremely disparate pricing, so I said California's average pricing, but one homeowner, uh, to the next homeowner is going to pay significantly different, and a lot of that has to do with, again, some, some probably, um, appropriate, uh, criticism around the acquisition costs of solar, um, certainly on the commission side of things for the residential solar space, um, what's the typical cost per acquiring a customer on the community side?
And, um, you know, obviously it's not a 20 year customer, but how do you guys sort of like think about that as an industry and maybe for Arcadia specifically?
[00:25:32] Joel Gamoran:
Yeah. So there's a high degree of variation there in community solar as well. And that largely comes down to what are the sort of rules and requirements, um, in each applicable market.
Right. And I think there's trade offs there, right? Because a lot of the, the rules and requirements that make customer acquisition more difficult and therefore more expensive are intentional, right? They have certain policy motives behind them, right? So I'll give you a specific example. Um, in the state of New Jersey, Okay.
Um, there was an RFP process to select, um, the first set of pilot projects, right? They got to participate in community solar and as part of the
[00:26:11] Dave Anderson:
RFP meaning request for proposals. Yes. Exactly. Our industry is laden with
[00:26:16] Joel Gamoran:
Acronyms. That's right. Yeah. It's also a bit soup here. Um, but that's right. A competitive solicitation, right?
And, and there were actually awards, right? Higher points, um, in the solicitation given to. Projects that made certain types of commitments. So for example, um, subscribing the project only within, um, a specific municipality where it's being built. Um, or serving only certain types of, you know, disadvantaged segments of the community.
Right. And so all those things I think are, again, intentional, you know, noble policy goals, but restricts the audience, um, that you can sell to and, and right. Make it more expensive. Um, and so. I would say there is a wide range, um, when it comes to acquisition costs, it's going to be far less than the rooftop solar, because again, you have a much larger audience that you can reach, but you know, it could be anywhere from 300 to about a thousand dollars per customer, the customer acquisition side.
[00:27:15] Dave Anderson:
And what's the typical life cycle or length of time that a community solar project is able to maintain and keep a customer? Yeah. So
[00:27:23] Joel Gamoran:
I think moving is the number one reason a customer leaves the project. Cause again, it's a, a very consumer friendly product, um, guaranteed savings model. You're, you're doing the right thing.
You're supporting solar in your community. So we don't see a lot of dissatisfaction. It's mostly moving, right? If you leave the utility territory, or even if you, you know, uh, move to a new address, you're going to have to go through setting up, um, your accounts again and documents and paperwork and all that good stuff.
So, yeah. That's the number one reason, um, I would say, you know, uh, if you average out what a customer lifespan will be based on, you know, the rates we see, it's probably in the five to six year range, um, so for a typical customer life, which. Largely tracks, you know, if you think about average, um, mover rates, um, in the U S so it's not surprising to kind of see that correlation.
[00:28:11] Dave Anderson:
Yeah. I think some recent policy changes, particularly relating to the inflation reduction act, um, are, are both very well for community. So for two reasons, first one, obviously is, is that, uh, it sort of reinvigorated investors to sort of put their money behind these renewable products because of the, the, the, the great incentives that, that exist there.
But furthermore, there's also these incentives that you alluded to at the beginning of the call where low income communities are able to sort of like get some additional benefits. How does community solar sort of like now reposition itself? Or are you targeting now new areas that can, you know, sort of like help serve those under, um, maybe first of all, talk about what those policies are.
And second of all, how community solar is trying to take advantage of those to pass those benefits onto the end consumer, the subscribers in those low
[00:28:55] Joel Gamoran:
Income areas. Yeah, absolutely. So exciting topic. Um, I think community solar is very well positioned to benefit from several of the prohibitions of the Inflation Reduction Act.
Right. So there's, I would say an overarching goal. Um, within some sections of the IRA around providing benefits through clean energy infrastructure to low income or underserved communities. And again, community solar already at the state level is doing a lot of that, right? We have state policies around serving, um, low income or disadvantaged communities already staying community solar, the IRA kind of, um, really further invigorates, um, those types of policies.
Thanks. And specifically, um, I'll talk about two pieces. So once you have, uh, a provision called the low income economic benefits, Um, I don't have an acronym for that one yet. Maybe we need one. Um, but, uh, what that does is basically says if you can show that you're providing 50 percent of the financial benefits that a project is generating, financial benefits is designed to mean essentially the customer utility bills on being offset or the savings being provided to customers.
You can show that you're providing 50 percent of those benefits to low income households. You can get a 20 percent adder. Um, on your solar ITC. And so that's a huge win for, um, the industry. Uh, but ultimately what it, what it's doing is ensuring that community solar projects that could theoretically serve any mix of customer base right across commercial, um, residential and so forth, they're, uh, specifically.
Targeting, uh, low income customers, um, and ensuring that that is the, the customer base that is benefiting from the front of these infrastructure investments. So that's really exciting. Um, now there is sort of something a little unusual about that tax credit, which is that there is a fixed, uh, sort of cap on how much credit, um, will be awarded in any given year.
So it's a 1. 8 gigawatt program of which there's. A carve out of about 700 megawatts a year, that's really tailored around the, the model that community solar perhaps, and so what that means is that there's an application process to write, sort of receive your, your award, um, for that tax credit. And so. We are seeing, you know, almost everyone in the market, uh, you know, all the developers we work with, certainly we were, we work with about 60 community solar developers, they're all sort of positioning and, and, uh, planning to apply for this credit.
And, um, we're expecting awards for the first year to be announced by the end of this year. Right. And then see sort of how the market develops and matures, uh, from there, but there is certainly a lot of interest. Um, and I think the, um, policy that is already in place in many states has created the comfort, right.
Among investor community. Um, and in, in terms of companies like Arcadia ability to fulfill, right. And execute against the goal of serving low income customers. So. That is a really exciting piece. And I think we're going to see, um, not only growth in the market, but also, um, uh, sort of diverting of where the savings are flowing from, you know, maybe, uh, you know, mass market customer type to more low income customers, um, which is a good thing.
Um, and then I think the second, the second piece of the IRA that's exciting for this market is the greenhouse gas reduction funds. Um, uh, I think it's been, um, sort of rebranded as solar for all, um, being administered by the EPA and, um, that program entails around a 7 billion fund that individual states can actually apply.
For a grant to create new energy programs, um, that serve low income customers with renewables. And so we're expecting, um, you know, a number of states will look to the community solar model as a way to, um, you know, launch these types of programs and bring some federal investment dollars into their state, um, through that program.
So that's something where the application period is open right now, where we're here in end of September, 2023. Um, I think applications are due in October. Um, and, you know, it'll, it'll be really fascinating to see what new state programs come out of that.
[00:33:30] Dave Anderson:
Yeah. Yes. And so solar adoption being 600, 000 ish on the resi side for, for community solar.
Uh, there's a lot of tailwinds on the federal side pushing these sorts of programs and their success. Um, what are the, what are the real sort of headwinds or obstacles that community solar faces in terms of why we're not seeing faster adoption and why we're not seeing more projects being built and why we're not seeing more subscribers?
[00:33:55] Joel Gamoran:
Yeah, that's literally the question that I wake up every morning trying to tackle. Um, and I, I think there's, there's a couple answers. So, um, number one, meeting solar really is a policy enabled market, just like you need net metering policy, um, for rooftop solar to proliferate. you need a similar policy to enable customers to receive the benefits without having the installation on their on their roof.
And so that's a big part of how you grow the community solar market is, um, right. We have, like I said, 14 states right now, we have legislation passed last year in California to open up a community solar programs that will be a 15 state. Um, and, uh, right, we have sort of implementation process underway.
California, but more states, passing laws to enable, right, citizens to participate in these types of projects, and expanding existing states, right. Some states have annual caps or in sort of a pilot phase and need to expand into a permanent program. Right. And, and we've seen a lot of success, um, in executing against, uh, those sort of policy needs.
Um, but it takes time, right? So that's one, that's one, uh, sort of way to continue growing the market. And then on the other side, I would say is there are, uh, again, you know, physical constraints on the system that we need to kind of power through as, as an industry. And that's really around interconnection.
Right. And some of that I think is, you know, something as simple as sassing, right. Having.
Um, right. And, and actually enable projects to move forward. Um, and then in other areas, there is, you know, more infrastructure investment needed to support, um, distributed generation. So I think those are, those are kind of the two key areas. I'll tell you what is not, um, an impediment. What is not an impediment is having the available demand, right?
Customers that want to participate in these programs. Um, like I said, we are only scratching the surface. Thanks. With, you know, that one to 3%, um, participation rate, I think we could get to, you know, 20 to 30 percent plus very easily if we have the supply to support it.
[00:36:07] Dave Anderson:
What's the typical customer acquisition strategy and how often are you able to work through the utilities to actually help?
Source these customers or are you ever able to work through the utilities to sort of like convert existing utility customers over to community solar and utility customers?
[00:36:25] Joel Gamoran:
Yeah, so we're not working with the utilities on that. The utilities are very involved in the program. So I think one one of the ways community solar I think is, uh, in some ways more utility friendly than rooftop solar is right.
The, the, um, customers participation is still flowing through the utility, right? We're not actually taking their load off of the grid, right? The utility is an active participant. Um, but they're not an active participant in terms of marketing the program, right? It is private investment that's coming into these markets.
Um, which again is a good thing, right? We're generating, you know, local jobs, local economic development, um, and, uh, and, um, just like rooftop solar companies, right? Or any, right? Like think of Netflix or what have you, right? Um, we are offering a competing products, um, in a lot of ways. And so there can be, um, somewhat of a friction there from a customer experience standpoint, um, or, or rather in terms of how the utilities view their relationship with customers.
Right. Um, so the way we get, you know, we have a variety of different channels that we use. Um, Uh, a lot of, you know, digital marketing, um, right. Uh, social media, uh, referrals, partnerships, right. We have partnerships with various, um, organizations that want to promote sustainability right into there. Networks of customers, um, and we do mail, right?
Um, believe it or not, right? A little old fashioned, but, um, it is effective. Um, and even direct sales, right? So events, um, or canvassing the community, um, knocking on doors, spreading the word. I mean, that this is a new program available in the service territory. Um, so wide variety of different channels. Um, you know, they're all, um, sort of effective, uh, for, for reaching different segments of the population.
[00:38:13] Dave Anderson:
Yeah, so that 300 to 1, 000 you kind of mentioned, really what it is, is it's just an awareness campaign. It's trying to make sure that people are aware that community solar is available, and that for those that participate, there should be a, they should be able to recognize guaranteed discounts on their, uh, electricity costs, is, is kind of the idea.
[00:38:30] Joel Gamoran:
That's exactly right. And then, of course, you know, there's a process the customer has to go through to actually sign up and, um, you'll get all the documents in place and all that. But we make that pretty simple through our, our online table.
[00:38:41] Dave Anderson:
Yeah. So a close cousin to the community, so that we've kind of talked about would be sort of like off grid.
Micro grids, um, or off the utility micro grids. Uh, what, if any role do you see these micro goods playing in the decarbonization of our overall sort of like, uh, electric, uh, electric electricity landscape in the future? And does Arcadia ever want to play in that space? It's not that far afield from what you're already doing,
[00:39:06] Joel Gamoran:
Yeah, it's, it's a great question. And, um, so I, I'm, I'm not, I wouldn't say I'm a micro grid expert, but I think where, uh, there are some interesting parallels, so a couple of thoughts. Um, so one, I think one thing a microgrid can do is it can help insulate, um, you know, sort of critical, uh, infrastructure from outages or, or service reliability issues, right?
And so you could certainly imagine, um, microgrid that has say, you know, fuel cell or, or battery backup systems that are charged by a solar array. Um, right. And then, um, can be relied on, right, either from a reliability standpoint or to help, you know, shave peak load and, and reduce costs, right? Um, I would say that is more of a physical infrastructure, um, play than, than really, um, tied to community solar in any way.
But, um, one of the interesting things that we're seeing, and this is definitely going to come up in California is depending on the rate design that community solar projects are being developed into, there's often, um, or in some cases even requirements to incorporate storage, right? So, solar plus storage installation.
And, um, what that essentially allows the owner operator to do is try to maximize the value that their energy is going to be worth, that they're producing, um, and align it with the needs of the grid. Right? So I talked earlier about some of these interconnection issues, you know, there's a concept of non wires alternatives right in the utility space.
And the idea there is. If you can reduce transmission congestion, if you can, um, you know, help to, uh, pull energy off the grid when demand is low and inject solar energy onto the grid, when demand is high, you can actually. Um, sort of play a positive role saying, uh, you know, distribution system perspective.
And so that is something that we're seeing that I think we'll continue to see is, um, solar and storage being paired together. Um, so not exactly a microgrid, but I think the same, same concept in a lot of ways. And you can make that structure work within a community solar market. At
[00:41:21] Dave Anderson:
Least trying to solve a similar sort of problem anyway.
[00:41:25] Joel Gamoran:
That's right. Could you,
[00:41:27] Dave Anderson:
Could you try to dive into a little bit like the economics in terms of what a net energy metering agreement might look like between a community solar project and the utility itself? Um, because again, I think a lot of people kind of incorrectly believe or understand utilities to make money by selling electricity.
Really what they are is they're, they're there in place to maintain, uh, the grid. Right. And so they have guaranteed their, their, their regulated monopolies. They have a guaranteed return that they make on the investment that they make, the capital investments that they make to make sure that the grid is stable and that they can transmit electricity from the generators to the end users and community solar then becomes a generation station as part of that larger grid.
So maybe you can kind of help us understand what are the economics that a community solar project might have with the utility company and how that shows up as savings at the end users, uh, at the subscribers electricity bill.
[00:42:20] Joel Gamoran:
Yeah. So, um, if you think about what's happening with the community solar farm, so essentially that energy is going into the grid and that is being, um, right, coming gold with the, uh, energy mix, um, you know, that that's on the utilities distribution system, right?
So the utility is essentially bringing in that energy into its overall resource mix. And so that actually reduces. Energy, it needs to go out and procure from other, other sources, right. Or other generators. Um, so that, that's sort of what the benefit is to the utility. Um, in terms of how does that energy get valued, right?
How does the utility actually have to not directly pay for, but, um, credit customers for, right. From interpret that metering, um, there, uh, it is through a tariff design, right. Um, and, you know, utility rate making is, is very complicated and probably not the most fun thing to talk about, but there are, you know, essentially three different ways that I've seen it work, um, depending on the market.
One is probably the most straightforward is you essentially design it exactly like net metering. So net metering typically means you take all the volumetric charges on a customer's bill. Um, and that's in, in place in a number of markets, um, Maryland is a, is a great example. Um, there's another sort of approach where, um, you Um, you create what is commonly called a value of solar or value of distributed energy resources tariff that tries to, um, you know, further, um, hone in on what is the true value that's being generated, right?
It's not just the value of the energy itself. It's also the other pieces we talked about, right? The capacity value that. Um, you know, transmission decongestant environmental value, and you sort of build up the value of the rate that way. Um, that's how New York works, for example. Um, and then I think the third way is you've, we've seen some markets where they basically say, um, we're not really going to give you credit for some of those other values.
You're just going to get the. Um, you know, the generation rate, um, right, right, like the, um, uh, standard offer service rate, um, in the state for electricity generation, but we will, um, create some sort of incentives, um, whether it's a REC or a performance based incentive concept. That tries to capture the environmental and other values that the energy is producing.
And so that's sort of separate from the utility, um, but, uh, you know, influences the overall economics of the project. So those are kind of the three different ways that we've seen a model, but you ultimately get to the same place in each one, which is there's a certain use value. That the utility is applying to the energy produced.
And that shows up in the form of a reduction in customer's bill.
[00:45:24] Dave Anderson:
I would imagine that for some, and probably a large percentage of community solar subscribers, there's some sort of satisfaction that's derived from the fact that they're getting their power from renewable sources, at least they're offsetting the power.
How often are consumers sort of disappointed to find out that the solar or the electricity is generated at the solar plant isn't necessarily the electricity that's being used at their homes.
[00:45:46] Joel Gamoran:
Yeah, it's a good question. I, I haven't seen that come up too often. I think people are typically, there's, there may be some confusion early on about like, if it's not on my, my roofs, right.
How can I be, what's happening here? Right. Um, But, you know, that, that isn't what we've seen people really focus in on. Um, I think, right, even when the panels are on your own roofs, right, I don't know that people are paying that much attention to, you know, how can I track, you know, when I turn my light switch on or are the solar panels powering it, right?
But I think. People have a, some understanding, right. That, that we're in this, this grid system. Yeah. I
[00:46:30] Dave Anderson:
Would say that on the residential side for the distributed, where you're actually installing the panels at the home, that's. Largely been true, although some percentage, maybe half of the power that your panels produce or is being consumed or used by the home.
But as we're moving into these new phases where batteries are becoming critical and peak shaving and really the interplay between your batteries and your solar panels. consumption monitoring as well as the production monitoring are both becoming increasingly important. And, and we, we as an industry are having to get more sophisticated about how do we sort of manage the electricity, not just how much do we produce and not how much do you use, but we really have to start to think about where do we direct each of these electrons?
How do we, how do we direct the flow of the electricity to both maximize the economic value, but also to maximize the value to the, the greater community into the grid, you know, to do things like. Peak shave and, and to try to help, help, help provide additional grid stability. But you're absolutely right. I think the truth is, is that solar panels produce electricity when the sun shines and, and, uh, we, we use power outside of those hours, generally speaking.
So, uh, I think that's
[00:47:33] Joel Gamoran:
True. What I would say, Dave is, you know, if we're doing this right. Those two goals should really be the same, right? We should, we should establish rates that incentivize the, you know, the sort of positive grid behavior that, that we want, right? So I think they, they haven't always historically been designed that way, but that really, uh, should be our goal.
[00:48:00] Dave Anderson:
All right. Well, well, Joel, as we're starting to wrap up here, what are the things that you're really excited about for community solar and the future of community solar and, and, uh, the role that community solar plays in the decarbonization of our utility system or of our electrical system?
[00:48:14] Joel Gamoran:
Yeah. Um, so it's always exciting to be in a rapidly growing market.
Right. And, and this certainly is one where we're really still early, um, in the market for community solar. Um, we, as an industry have a goal. Uh, to get to, um, 10 million households, um, served with community solar by 2030. Um, and if you look at the growth rate, uh, the market has been, um, expanding at, you know, we could, we could absolutely get there, right?
We see a path to get there. Um, so that, that's really exciting. And I think. Um, you know, the, the other really cool thing about community solar, that's maybe a little different from, um, utility scale is the way it can, um, you know, benefit the community in other ways, right? These are assets located within the distribution system.
There's a lot of sort of unique siting opportunities, right? Brownfield opportunities, um, where community development, um, and, and local economic development can really be a, a key part of the picture. So. Um, I think you're going to see, you know, continued political will, um, around these programs and. We're excited for more states to open and for more to come, uh, from the federal level as well.
Yeah. And what are the
[00:49:24] Dave Anderson:
Things that you think have to happen in order, order for you to make sure that you hit that 10 million number from a policy perspective and, and from the federal level, and even at the state level, I, you talked a lot about some of these, uh, um, important changes that are happening in terms of regulatory changes, but what are the things that, that, that are absolutely necessary in order to be able to hit that 10 million a person or 10 million subscriber goal?
[00:49:47] Joel Gamoran:
Yeah. So I, I'd love to see us get to 20 states, um, with community solar policies. Um, and I, I think that's absolutely achievable, right? We've got a number of states already with, you know, active, um, legislation under consideration. Um, and you know, we're, we're only in 2023 here. So a lot of time. Um, and then the other thing I would say that's really important as an industry is, um, that we really execute against, um, some of the objectives in the IRA where, you know, funding has been established.
Thank you. Um, you know, to use kind of a cliche, like we need to see steel in the ground, right? Um, not, you know, not tomorrow, like now, right? Like, like this year, next year, um, uh, because that is going to be the way that I think we demonstrate that these types of policies are effective. Um, and that, you know, individuals right across the country in many different markets, even ones that don't have community solar today will start seeing direct benefits from these programs, um, in the form of cost savings on their utility bills.
So I think to me, those are kind of the two things we need. We definitely need more. Um, you know, policy expansion at the state level, um, but at the federal level, I think we have a great, you know, starting point now, um, with the IRA and it's on, you know, us as an industry to execute against that, um, and make sure we're, uh, you know, not letting the perfect be the enemy of the good, um, let's execute against what we have in front of us and, um, you know, get, get some benefits flowing to individuals.
[00:51:14] Dave Anderson:
Not asking you to create any enemies here, but you said nine out of ten customers are probably better suited for community solar than for residential solar installed in their own homes. You still think that ratio is the same? Do you think that a one out of ten customers should probably install solar on their, on their own roof?
Or what do you think that ratio should really look like going forward?
[00:51:32] Joel Gamoran:
Yeah. You know, it's not even a matter of should, right? It's, it's more, it's, it's more could, right? It's, um, do you have the roofs that can generate enough energy for the investment to be worth it? Right. Do you have, um, do you own your roof in the first place?
Um, do you have, you know, the, the either financing or, or credit score to make it possible? Right. A lot of these are sort of binary issues. Um, and so, you know, I, I definitely, um, think there's a lot of growth yet to come in rooftop solar, but we just simply don't have nearly the, the restrictions and qualifications required, um, uh, for community solar that, that you have in rooftop.
And so I think our. Our addressable mark is just bigger, right? It just is. Yeah. Well,
[00:52:17] Dave Anderson:
At 10 million customers, I think that there's just plenty of space for everyone to really be successful. And the truth of matter is, is that, um, while, while the industry is probably, or the, the models compete against each other, at least a little bit, the truth of matter is they're more complimentary than they are competitive, I think.
And, and, and Joel, it's great to see Arcadia having the success it is on the community solar side. It's great to see community solar grow as quickly as it is. Uh, it's been absolutely fantastic to have someone that's actually an expert in this field come on and talk about the components of community solar and really help educate our base and our listeners and into understanding what it is.
And I think we're thinking about these things for the first time for a lot of us. Um, so it's been absolutely fantastic having you come on. Thanks so much, Joel, for your expertise in community solar and, and, and genuinely appreciate you coming on to talk about it with us.
[00:53:01] Joel Gamoran:
Thanks for having me.