june 2017Consumer Protection forCommunity SolarA Guide for StatesSustainable Solar Education ProjectDiana Chace and Nate HausmanClean Energy States Alliance

Sustainable Solar Education ProjectAbout this Guide and the Sustainable Solar Education ProjectConsumer Protection for Community Solar: A Guide for States is one of six guidesproduced by the Clean Energy States Alliance (CESA) as part of its Sustainable SolarEducation Project. The project aims to provide information and educational resourcesto help states and municipalities ensure that distributed solar electricity remainsconsumer friendly and benefits low- and moderate-income households. In additionto publishing program guides, the Sustainable Solar Education Project is producingwebinars, an online course, a monthly newsletter, and in-person training on topicsrelated to strengthening solar accessibility and affordability, improving consumerinformation, and implementing consumer protection measures regarding solarphotovoltaic (PV) systems. More information about the project, including a linkto sign up to receive notices about the project’s activities, can be found the U.S. Department of Energy SunShot InitiativeThe U.S. Department of Energy SunShot Initiative is a national effort to drive downthe cost of solar electricity and support solar adoption. SunShot aims to make solarenergy a low cost electricity source for all Americans through research and development efforts in collaboration with public and private partners. Learn more authors would like to thank the following individuals and organizations for theirreview of and contributions to this guide: Coalition for Community Solar Access and itsmember companies; Isabelle Hazlewood, Ben Healey, and Selya Price at ConnecticutGreen Bank; Sara Baldwin Auck and Erica Schroeder McConnell at the Interstate RenewableEnergy Council; Hampton Newsome at the Federal Trade Commission; Jenny Heeter at theNational Renewable Energy Laboratory; Amir Yazdi at Solar Energy Industries Association;Sandhya Murali and Kelly Roache at Solstice; Lon Huber and Randy Fish at Strategen; DavidFeldman at the U.S. Department of Energy; and Maria Blais Costello, Samantha Donalds,Dana Drugmand, Warren Leon, and John Wadleigh at the Clean Energy States Alliance.DisclaimerThis material is based upon work supported by the U.S. Department of Energy SunShot Initiative under AwardNumber DE-EE0007321. This report was prepared as an account of work sponsored by an agency of the UnitedStates Government. Neither the United States Government nor any agency thereof, nor any of their employees,makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use wouldnot infringe privately owned rights. Reference herein to any specific commercial product, process, or service bytrade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement,recommendation, or favoring by the United States Government or any agency thereof. The views and opinionsof authors expressed herein do not necessarily state or reflect those of the United States Government or anyagency thereof.Cover photo: Samantha Donalds/CESA2C l e a n E n e r g y S tat e s A l l i a n c e

ContentsSECTION 1Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56What is Community Solar?6 Consumer Protection in the Community Solar ContextSECTION 2Why States Should Consider Consumer Protectionfor Community Solar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Community Solar is Growing8 Consumers Need to Understand What They Are Signing Up For8 Some States Have Policy Goals to Expand Solar8 Some States Are Specifically Advocating for or Mandating the Availabilityof Community Solar8 Information and Protections Must be Specific to a StateSECTION 3An Overview of Community Solar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 The Purposes of Community SolarRenewable Energy ParticipationConsumer FlexibilityLower Cost Solar10 Differences between Community Solar ModelsWho owns the array?Who do consumers interact with?How do consumers buy community solar?Do consumers benefit financially from community solar?What is the rate of compensation?How easy is it to adjust the amount of the subscription or to cancel?How does it compare to rooftop solar?12 Box 1: Rooftop AggregationConsumer Protection for Community Solar3

Sustainable Solar Education ProjectSECTION 4Community Solar Consumer Protection Issues . . . . . . . . . . . . . . . . . . .1314 Product Confusion14 Contract Provisions16 Solar Tax Credit15 Box 2: What Consumers Need to Know16 Renewable Energy Certificates (RECs)16 Box 3: Consumer Access and Interconnection17 Box 4: Securities RegulationSECTION 5Existing Consumer Protections for Community Solar . . . . . . . . . . . . . 1819 State Community Solar Contract Disclosure Requirements20 State Community Solar Consumer Education21 Community Solar Consumer Protection ResourcesSECTION 6State Considerations for Developing ConsumerProtections for Community Solar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2222 How Big is the Community Solar Market in Your State and How Quickly is it Growing?.22 What Consumer Protections Already Exist?23 How do Consumers Benefit from Community Solar?23 How Easy Is It for Consumers to Withdraw from a Community Solar Subscription?23 What are the Goals for Community Solar in Your State?SECTION 7Tools to Address Consumer Protection for Community Solar . . . . . . . . 2424 Consumer Education26 Regulations and Guidelines26 Enforcement and Consumer Grievance ProceduresSECTION 827 Appendix A—Additional Solar Consumer Protection andConsumer Information Resources29 Appendix B—State Community Solar Disclosure Requirements35 Appendix C—Federal Securities Regulation4C l e a n E n e r g y S tat e s A l l i a n c e

Section 1IntroductionCommunity solar is a rapidly expanding model for increasing solar access and solardeployment in the U.S. It can enable broader participation in the solar economy byallowing renters, as well as homeowners whose roofs are unsuitable for solar, to benefit from solar power. The economies of scale and relative simplicity of constructionof community solar projects can help to accelerate the widespread adoption of solar andprovide economic, environmental, and energy security benefits to individual participantsand the larger community.Because participation in community solar projects can be a complex and complicatedundertaking for residential customers, this paper explores consumer protection issues thatmay arise, as well as considers the role states can take to ensure appropriate consumerprotection measures are provided to the community solar customer.What Is Community Solar?Community solar, also called shared solar, is a purchasing arrangement in which multiplecustomers share the electicity or the economic benefits of solar power from a single solar array.Warren Gretz/NRELConsumer Protection for Community Solar5

Sustainable Solar Education ProjectAn array large enough to serve two to more than 1,000 customers is built in a single location,and individual customers sign up to own or lease parts of the array, or to purchase (or becredited for) some portion of the electricity generated by the array.Community solar customers have voluntary contracts or subscriptions to participate inthe project. Individuals can choose to participate, and other customers of the same utility canchoose not to participate. This definition excludes a utility—even a small municipal utility ora rural electric cooperative—that owns or contracts with a solar array, and then includes theelectricity from the array in the general mix of electricity that it delivers to its customers.Within the broad definition, “community solar” can mean very different things in differentstates, and sometimes even within the same state. This creates challenges for officials trying tounderstand the risks and benefits of community solar for consumers. It also creates possibilitiesfor misunderstandings between consumers and those selling community solar.Consumer Protection in the Community Solar ContextAs community solar expands rapidly in some parts of the country, state and local officials willneed to decide what, if any, specific consumer protections to provide for residential communitysolar consumers beyond the general consumer protections that already exist.Community solar consumers’ relationship with their solar systems is relatively abstract,compared to traditional solar consumers who put panels on their own roofs. In communitysolar, consumers may never see “their” panels, nor know exactly where the panels actually are.It might be easy for consumers to sign up for community solar without understanding its risksand benefits.In addition to the consumer protection issues that can occasionally arise with traditionalrooftop solar installations, community solar raises some new issues. Among these are: unresolved questions about the applicability of securities laws; questions about how much flexibilityis or should be built into community solar contracts; and questions about applicability of thesolar investment tax credit.Community solar may be more accessible to low-income consumers than rooftop solar, inpart because it can be marketed to consumers who rent, and to homeowners whose roofs areunsuitable for solar or who may not be able to finance or own a rooftop system. It can alsosometimes be marketed in small increments of less than 1 kW, which would be impracticalfor rooftop solar.Some states are developing community solar programs and projects targeted towards lowto moderate-income participants. For example, they may require community solar developersto reserve a certain percentage of a community solar project’s total capacity for low-incomeconsumers. But this can increase consumer protection concerns. Any investment in solar,whether rooftop solar or community solar, includes some risk that savings won’t materialize, orthat costs will be higher than expected.1 This risk is more important for low-income consumersbecause they have less of a financial cushion, and so the impacts of a bad deal can be especiallydevastating to them. For these and other reasons, products that are specifically marketed tolow-income consumers may require additional consumer protections.6C l e a n E n e r g y S tat e s A l l i a n c e

Section 2Why States Should Consider ConsumerProtection for Community SolarThere are a number of reasons why states should consider consumer protection for communitysolar. Below, several key reasons are explored.Community Solar is GrowingCommunity solar capacity nationwide increased from 125 MW at the end of 2015 to 331MW at the end of 2016.2 Additionally, some states, including New York, Massachusetts, andMinnesota, have community solar interconnection queues that dwarf currently installedcommunity solar capacity.3States may want to reconsider solar consumer protection issues not just because communitysolar raises some different issues than rooftop solar, but also because growth in communitysolar can contribute to overall rapid growth in the distributed solar market, which could callfor revisiting consumer protection measures that might make sense for rooftop solar as well.A significant number of the early solar adopters were technology enthusiasts who enjoyedNate Hausman/CESAConsumer Protection for Community Solar7

Sustainable Solar Education Projectlearning about how their systems worked. As solar power continues to expand into the generalpopulation, consumers who are less versed in solar technology or products might be wellserved by more consumer protections.Consumers need to Understand What They Are Signing Up ForConsumers who sign up for community solar may not have a clear understanding of exactlywhat they’re buying. The products offered through community solar are abstract, and oftentied up in precise legal delineations. Rarely is it as simple as saying, “I’m buying solar panels,”or even “I’m buying solar electricity.”Because community solar consumers have a more abstract relationship with their systemsthan rooftop solar consumers, it may be even more important to emphasize that signing upfor community solar can be a major financial decision. Many people are accustomed to signing user agreements for various products without reading all of the terms of the agreements,but community solar agreements deserve careful scrutiny. Solar contracts can be more complicated than other contracts because they often involve more money and longer contractperiods, possibly 20 years or more.Some States Have Policy Goals to Expand SolarMany states have goals to expand renewable energy, including Renewable Portfolio Standardsand Solar Renewable Energy Certificate (SREC) programs. In order to expand the marketfor solar, as these states hope to do, it may be necessary to ensure that appropriate consumerprotections are in place. While a less regulated industry might grow faster in the short run,medium- to long-term growth requires clear and appropriate safeguards to ensure satisfiedconsumers and a good public image for the industry.Some States Are Specifically Advocating for or Mandatingthe Availability of Community SolarSixteen states had community solar policies by the end of 2016,4 and in many others, utilitiesare voluntarily offering community solar. To the extent that these states are encouragingcommunity solar, they have a responsibility to help make sure that consumers have a genuineopportunity to benefit and understand exactly what the benefits are.Information and Protections must be specific to a stateBecause community solar programs vary between states, it is not possible to develop genericconsumer information that will cover all problems for every state. If a state wants consumersto have the most accurate, useful community solar consumer information, then it needs todevelop its own consumer information. The same consumer protection regulations won’twork in all states.8C l e a n E n e r g y S tat e s A l l i a n c e

Section 3An Overview of Community SolarThe Goals for Community SolarIn different locations, and for different stakeholders, community solar can have different goals.Sometimes, it can help meet multiple goals simultaneously. Below are several examples.Renewable Energy ParticipationOne goal can be to enable people who can’t put solar panels on their own homes to go solar.Many people rent their homes. Others have roofs that are unsuitable for solar, due to roofcondition, shading, roof orientation, or other issues. Community solar can be a way forpeople who are unable to put panels on their homes to experience the benefits, includingfinancial benefits, of solar.Consumer FlexibilityAnother goal for community solar might be to provide solar customers with more flexibilitythan rooftop solar. The fact that the panels are not physically connected to consumers’ homesraises new possibilities. In some cases, a consumer can increase the amount of a solar subscription six months after signing up, decrease the amount of the subscription two years afterthat, increase it again six years later, and finally cancel the subscription altogether a year laterwhen moving to a new home. It also may be possible for a consumer who is moving awayto transfer the subscription to someone else. This flexibility might make community solarappealing even to consumers who would otherwise have installed solar on their own roofs.But this flexibility can also contribute to consumer confusion, as not all community solarprograms offer the same levels of flexibility.Lower Cost SolarAnother goal for community solar might be to lower the cost of solar power througheconomies of scale, more accessible building sites, and lower customer acquisition costsfor those selling the product.Consumer Protection for Community Solar9

Sustainable Solar Education ProjectDifferences between Community Solar ModelsThere is a lot of variation in how community solar operates in different states, and sometimeseven within a single state.5,6 In some places, community solar is a utility program in whichconsumers can choose to pay extra for solar power. In other places, participation in community solar is an opportunity for consumers to save money by receiving utility credit for solarpower at the retail electric rate. For consumers whose interest in community solar stemsprimarily from its potential to save them money, it’s critical to understand whether a particular community solar program or community solar offering will actually achieve this goal.Another variation in community solar is the contract term. In some cases, consumerssign twenty-year contracts and can’t withdraw without a significant penalty. In other cases,consumers commit to only a year, or a month, at a time.Some community solar programs are legislatively mandated, while others are undertakenvoluntarily by utilities. Legislatively mandated programs may come with their own rules andmay include consumer protection measures; and both legislatively mandated and voluntaryprograms may have consumer protections created by state public utility commissions.Programs at co-ops or municipal utilities may not be subject to any state oversight, butare approved by their elected utility boards.In essence, community solar is a broad concept that can be applied in countless ways indifferent places and different situations. The specifics of each program depend on the goals,interests, and creativity of those who design the program.From a program design standpoint, the flexibility of the community solar concept is anasset. Each state, or each utility, is free to adapt the concept to its own needs and its ownpriorities. But from a consumer protection standpoint, the numerous differences betweenprograms can make it confusing and hard to design effective consumer protections. Whileit is important to establish a strong baseline for consumer protection at the beginning ofany community solar program, stakeholders must also commit to establishing and updatingthe rules to reflect evolving community solar business models and programs.When trying to understand a specific community solar program, some importantquestions must be answered.Who owns the array?In some cases, utilities own community solar arrays. In other cases, private developers ownarrays. Community solar arrays may also be owned by nonprofits and other communitygroups, or by a group of consumers who have joined together specifically for the purposeof building or sharing a solar array. There are also some complicated arrangements in whichownership flips over time from tax investors to consumers. Not all of these options arepossible in every state that has community solar.10C l e a n E n e r g y S tat e s A l l i a n c e

Who do consumers interact with?In some places, utilities recruit consumers to participate in community solar. This canhappen if the utility owns the arrays or in circumstances where utilities serve as matchmakersbetween private developers and consumers. In other places, private developers who own thearray are responsible for their own customer acquisition.Billing is also handled differently in different places. In some places, all of a communitysolar customer’s fees and credits are included in the utility bill, and the consumer receivesno other bill for community solar. In other cases, consumers pay a monthly fee directly tothe community solar developer, while receiving credits on their utility bills for the electricitygenerated. It is also possible for both the monthly fee and the monthly credits to be containedin a separate bill, and for the actual utility bill to not reflect the community solar arrangement in any way.How do consumers buy community solar?Depending on the arrangement, consumers may either pay upfront or pay a monthly fee.Terms to describe how consumers participate in community solar are not used consistently.The term “lease” may be used by a developer, utility, advocacy group, or state agency todescribe an upfront payment,7 and to differentiate from a “subscription” that involves amonthly payment. In other cases, both of those options are referred to as subscriptions.In some states, consumers are limited to signing up for only the amount of power thatthey use in their own homes. In other states, consumers may sign up for more than theyuse, but for any generation that exceeds consumption at the end of the year they arecompensated at only the utility’s wholesale rate.Do consumers benefit financially from community solar?All community solar participants can receive satisfaction from knowing that they arehelping to advance the use of renewable energy. In many cases, they also benefit financially.In some states, consumers pay a premium in order to participate in community solarand have no expectation of financial gain from their decision to support renewable energy.In other cases in which consumers start off paying a premium, their price may be locked infor as long as 20 years, with the hope that they will ultimately save money on their electricbills as utility retail rates increase. In other states, consumers save money from the start byparticipating in community solar. Understanding whether a consumer benefits financiallyin a particular community solar contract requires considering all the costs, including thosepaid to the utility and those paid to a third party, as well as all of the financial benefitsthat accrue to the customer.Consumer Protection for Community Solar11

Sustainable Solar Education ProjectWhat is the rate of compensation?Many states have policies that require utilities tobox 1compensate rooftop solar consumers through an onRooftop Aggregationbill crediting mechanism known as net metering. Innet metering, solar consumers receive the same rateAnother model that is closely related tofor the electricity they produce and send to the gridcommunity solar is rooftop they pay for the electricity they purchase from theWhile community solar involves consumersutility. At the end of each month, they pay for theirparticipating in one particular array, roofnet energy use, or the difference between what theytop aggregation involves a solar developerproduced and what they used. This is also sometimesinstalling arrays on multiple rooftops, andknown as “retail-rate net metering.”then treating the entire pool of solar panelsSome states also use net metering to compensateas one resource. The rooftop aggregationcommunity solar consumers. Other states use otherresource can then be marketed just likecompensation rates. One option is a “value of solar”community solar.rate, which is calculated to include all of the benefitsand costs of solar power. Value of solar is calculatedin different ways in different states, and may be more or less than retail rate. Another optionis for consumers to be compensated at the utility’s wholesale rate, also known as “avoidedcost.” Some states may use still other methods of setting compensation rates. States may alsooffer additional payments to some community solar projects, based on where the project islocated, whether it serves low-income consumers, and other variables.How easy is it to adjust the amount of the subscription or to cancel?Community solar may provide opportunities for subscription flexibility that rooftop solardoes not. In some cases, participants can alter the amount of their subscriptions or canceltheir contract entirely with little or no penalty. In other cases, they can’t.How does it compare to rooftop solar?In some states, community solar functions as an extension of rooftop solar, with similarfinancing options and ownership structures. The compensation mechanisms and customervalue proposition are the same as for rooftop solar, and the same net metering rules apply.The primary difference is the location of the panels.In other states, community solar operates very differently from rooftop solar, and may bemore similar to a green power or green pricing program. In a green power or green pricingprogram, utilities offer customers the option of paying extra to get renewable energy. Similarly,community solar programs may be designed so that consumers pay extra on their utility billsto get solar power from a particular array. (Unlike green power programs, however, this typeof community solar program generally involves a price that’s locked in over time, so thatconsumers may save money in the long run as utility retail rates rise.)It’s also possible for a state to choose an option somewhere in between. For instance,a state might choose to offer a program in which consumers can own or lease panels in acommunity solar array, but the compensation rate they receive is different than it is forrooftop solar.12C l e a n E n e r g y S tat e s A l l i a n c e

Section 4Community Solar ConsumerProtection IssuesSome of the consumer protection issues that arise for community solar also come up inother contexts, including rooftop solar. For example, false advertising or high-pressuresales tactics may be issues that occur regardless of whether the solar product beingmarketed is located onsite or offsite. These issues can arise for all kinds of consumerproducts, and there are often existing state laws that attempt to address them.Other consumer protection issues that crop up in the residential solar market can beparticularly pronounced in the community solar context. An example of this is RenewableEnergy Certificates (RECs) and who owns the solar array’s renewable attributes (see page 16).Community solar customers who aren’t informed about RECs may not understand whatthey’re buying.Other consumer protection issues are unique to community solar. Questions have arisenabout whether community solar contracts qualify as “securities,” just like stocks and bonds. Marmion/BigstockConsumer Protection for Community Solar13

Sustainable Solar Education ProjectThat’s because community solar involves multiple consumers buying into a solar aray andin turn being credited for their investment. Community solar interests don’t necessarilyconstitute investment contracts under the law, but if they are classified as such, they qualifyas securities and may be regulated under the federal Securities Act or state blue-sky lawsdesigned to protect investors. The issue is complicated, and is addressed at more lengthon p. 17 (Box 4) and in Appendix C.The possibility of increased subscription flexibility,Community solar involvessuch as the option for consumers to cancel their conmultiple consumers buying into tracts or change the amount of their subscriptions, alsocreates consumer protection questions. First, it createsvariations between community solar programs, providingand in turn being credited foroptions for program designers but possibly creating contheir investment.fusion for consumers and consumer advocates. Second,regulators will need to decide whether subscriptionflexbility options are something that consumers are entitled to, or whether they are extrasthat developers may choose to offer in order to attract customers. And these decisions willlikely affect other program design choices. If developers are required to offer consumersthe option of cancelling their contracts at any time, that might lead them toward monthlypayment options and away from up-front payment options.Several specific community solar protection issues are discussed below.Product ConfusionBecause community solar involves complex ownership structures that can include multipleparties and the arrays are generally constructed away from the consumer’s home, the subscriptions or contracts can be abstract and hard to understand. Furthermore, communitysolar structures and products differ considerably. This can make it hard for the consumer tounderstand exactly what’s being purchased. When buying into a community solar array,it’s not always clear if the benefits are the ownership of a portion of electricity output froman offsite array, the net metering credits stemming from the production of an array, orsimply the satisfaction of supporting clean energy production.Contract ProvisionsCommunity solar contracts can be complex. In some cases, they are structured as anupfront payment, granting ownership (or a lease) over a share of an array or certain panels inan array. In other cases, they are scheduled subscription payments due over time. Sometimesa community solar array will offer consumers two payment options to choose between. It’simportant for consumers to understand how their agreement is arranged and that differentcommunity solar quotes may reflect different products, assumptions, and payment structures.Box 2 lists some community solar contract provisions that consumers should look for.States can require solar companies to provide specific disclosures on these contract provisions.See Appendix B for examples of community solar disclosure requirements from three states.14C l e a n E n e r g y S tat e s A l l i a n c e

box 2What Consumers Need to KnowBefore signing a community solar contract,consumers should understand: What is the compensation rate for electricitygenerated from the project? What is the duration or term of their contract? Is the consumer assuming “regulatory risk”that compensation rates may change, basedon actions of the Public Utility Commissionor other regulatory body? What happens to their contract if theymove to a different home? Do they have a right to terminate thecontract without penalty, either within acertain period of time or at any time? Is a sign-up fee or deposit required?– Is the sign-u

Community solar, also called shared solar, is a purchasing arrangement in which multiple . Massachusetts, and Minnesota, have community solar interconnection queues that dwarf currently installed community solar capacity.3 States may want to reconsider solar consumer prot