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Community Solar Meets Requirements of California Solar Mandate

The California Energy Commission (CEC) has approved the first community solar program as a means of complying with California’s solar mandate. Specifically, on February 20, 2020, following a three-hour hearing with many speakers on both sides of the issue, the CEC unanimously approved the Sacramento Municipal Utility District’s (SMUD) proposal to allow homebuilders to use a community solar alternative to the California solar mandate, which went into effect on January 1, 2020. SMUD’s community solar plan, called Neighborhood SolarShares.

While the intention of the California solar mandate may have been to implement solar on every roof, the 2019 Building Efficiency Standards allowed for certain exceptions to these requirements. One such exception allowed for builders to build community solar projects, so long as these projects received approval from each of the CEC and the local utility. The 2019 standards provided the following six requirements for Commissioners to consider when approving a community solar program:

  1. Enforcement – The solar resource must exist at the time the home is permitted and the applicant must work in coordination with the building department for review and enforcement.

  2. Energy Performance – The energy savings must match that of rooftop solar.

  3. Dedicated Energy Savings – The generated solar must be dedicated to the building.

  4. Durability – Proposed facilities must be operational for 20 years.

  5. Additionality – Savings cannot be counted to meet other utility renewable requirements.

  6. Accountability and Recordkeeping – Applicant must keep records and make them accessible for 20 years.

In approval, Commissioner Karen Douglas described the SMUD program and the 2019 standards, “If it meets the criteria, we shall approve it.” Much of the CEC debate concerned consumer affordability, with proponents of the program arguing community solar would make home prices more affordable, but opponents arguing it would lead to higher energy bills. Commissioner J. Andrew McAllister explained that all parties were seemingly in agreement about the need to decarbonize, “Even though we are fighting about this issue, we’re on the same team.”

SMUD itself is currently building a 160-megawatt project at the site of the decommissioned Rancho Seco Nuclear Generating Station as well as working to develop a 15-megawatt array in conjunction with a developer.

With SMUD’s Neighborhood SolarShares program approved, other California utilities now have a roadmap in designing similar programs to take to the CEC for approval. Although some opponents of the decision claim it will reduce the adoption of rooftop solar, the CEC decision should provide a further encouragement for community solar developers in California, which to-date have had often struggled to conclude successful developments. Additionally, this provides one more tool for California as it works to achieve its 100% clean energy goals.

© 2022 McDermott Will & EmeryNational Law Review, Volume X, Number 63

About this Author

Lloyd J. MacNeil Partner Los Angeles Corporate & Transactional  Energy  Renewable Energy

Lloyd J. MacNeil represents developers, sponsors, investors and lenders of capital and infrastructure projects. His principal focus is on renewable energy and emerging energy technologies, where he has been a leading advisor since the emergence of wind energy as a competitor to fossil fuels as an energy source. He advises clients throughout the arc of development, construction, operation, financing, and purchase and sale. He also advises commercial and industrial clients on energy portfolio services and energy efficiency solutions.

Prior to joining McDermott, Lloyd served as general...

Seth B. Doughty Associate Los Angeles Corporate & Transactional  Energy  Renewable Energy

Seth Doughty focuses his practice on transactional matters in the energy industry. He has in-house experience at one of the largest Southern California utility companies. There, he gained experience drafting and negotiating a large variety of contracts, amendments and consents for supply and power procurement agreements.

In the power procurement area, Seth has drafted and negotiated a wide variety of power purchase agreements and other purchase and sale agreements, including for energy, capacity, energy efficiency and distribution deferral products. He is also experienced in...

Joel A. Hugenberger, McDermott Law Firm, Corporate Finance and Energy Attorney

Joel A. Hugenberger advises clients on tax equity, project finance, acquisition finance and corporate finance transactions in the energy and infrastructure sectors.

Joel represents tax equity investors, borrowers, lenders and arrangers in the financing of complex energy and infrastructure projects, domestically and internationally, and in the structuring and negotiation of various secured and unsecured loan facilities and tax equity investment structures.