By JAY GREENE
Consumers Energy Co. has received conditional approval to begin a 10 megawatt community solar program —Michigan’s first — by the state Public Service Commission.
The commission’s approval of Consumers’ Solar Gardens program gives individual and business electric customers the opportunity to purchase subscriptions in 0.5 kilowatts blocks, which could cost $28 to $41 per block.
Participants then would receive a bill credit — estimated by Consumers to be about $9.25 per month in 2016 —over 25 years based on their investment and the amount of electricity generated by the solar installation.
The average Michigan electric residential customer uses about 700 kilowatt hours per month, or pays about $100 for their electricity.
DTE Energy Co. also said it is developing a large-scale community solar program to add to its blend of renewable energy projects. So far, DTE has invested more than $2 billion in renewable energy, including $50 million in solar energy.
Community solar is an alternative to popular rooftop solar panel systems and theoretically allows customers, investors and utilities —or a combination — to build large solar panel arrays on neutral sites to share power generation and cost savings.
But the commission’s approval of Consumers’ community solar plan does not allow investors to participate in the program, a criticism that several environmental and industry groups have expressed.
Since 2008, Consumers Energy generates about 850 megawatts of renewable energy power, the vast majority coming from wind turbines. DTE will produce about 950 megawatts of renewable energy by the end of 2015 also primarily from wind power.
Solar power represents a small amount of the total of renewable energy generated in Michigan. For example, DTE expects to produce about 2 percent of its state-mandated 10 percent renewable energy production through solar. Consumers projects less, about 1 percent renewable energy from solar.
State law approved in 2008 —PA 295, the Clean, Renewable Efficient Energy Act — requires DTE and Consumers to generate at least 10 percent of power from renewable energy by the end of 2015.
Michigan legislators are debating whether to continue or extend the renewable energy mandate another five years. However, Republican legislators appear more in favor of allowing utilities to voluntarily invest in renewable energy under a free market approach.
Under its order issued Thursday, the PSC called for creation of new solar working group to be formed within 30 days. The group will include representatives from the utilities and other interested parties.
The purpose of the workgroup will be to develop a fair price, or bill credit, for solar. The credit, which is called the “value of solar,” will take into consideration many factors, including costs of other types of energy and storage costs of solar.
By Sept. 30, PSC staff will file a report with recommendations for value of solar calculation method.
Doug Jester, a principal with Lansing-based 5 Lakes Energy LLC, said Consumers’ community solar program is a good start. He also suggested allowing investors or third-party organizations to develop another 10 megawatts of community solar.
Jester also said he continues to have reservations about the design of Consumers’ program, including the customer subscription fees “are excessively profitable for Consumers” beyond the return on investment they are normally allowed.
“We think the workgroup mandated by the commission to look at the value of solar and the amount of credit that community solar subscribers will receive can be productive,” said Jester, who also represents the Chicago-based Environmental Law & Policy Center.
“We look forward to participating. We also are pleased that the commission recognized that putting solar in the right places enhances its value and directed Consumers to give due attention to that issue,” Jester said in an email to Crain’s.
Last year, a commission workgroup said DTE and Consumers could easily increase their collective 28 megawatt solar power customer programs by at least another 50 megawatts by 2016.
The workgroup suggested DTE and Consumers could do so by expanding their customer-owned solar projects and add community solar for customers unable to participate in rooftop solar.
In a statement to Crain’s, Consumers Energy said it will be working with community partners to develop its 10-megawatt Solar Gardens program over the next several years.
“We will be selecting locations for Solar Gardens facilities and look forward to the opportunity to provide solar energy to our residential and commercial customers that are interested in participating,” the Jackson-based utility said.
Details of Consumers’ community solar program
Consumers’ three-year community solar pilot program will allow customers to build up to 10 megawatts of solar power. The solar arrays, which would be a minimum of 500 kilowatts in size, will be constructed in prominent geographical locations, company officials said.
While individual customers can invest in as many shares as desired, they are limited to the users’ net electricity usage. If they move outside of Consumers’ service area, they will receive a refund.
Here is a description of a typical community solar facility: For example, a 1 megawatt solar array – that would cover 7 acres and cost $2 million to $3 million – is expected to produce about 745 kilowatt hours per year per subscription. The average array would require 20,000 subscriptions.
Under the proposal, the average customer would be required to pay $28 to $41 per month over seven years in capital costs to build a community solar project, depending on the size of the project.
In its filing, Consumers said the value of solar credit would be 7.5 cents per kilowatt hour, but that amount could change from year to year. Consumers estimated that a 2016 bill credit would be approximately $9.25 per month, which could vary based on energy prices.
In other words, community solar participants would pay capital costs over the first seven years and receive a percentage discount based on their credits during that period. After their capital investments have ended, however, participants would receive the full credit, currently estimated at $9.25, off their bill for the next 18 years.
That estimated bill credit by Consumers, however, could change based on the workgroup and PSC staff recommendation for the value of solar.