A groundswell of grassroots support for “community solar” development in New Mexico could propel enabling legislation across the finish line in this year’s session, reversing years of failed legislative efforts.
If successful, it could have a major impact on solar production and consumption around the state, allowing many residential and commercial consumers to directly purchase solar-generated electricity for the first time.
Advocates call it “democratizing” solar power by providing renters, low-income households, and commercial and government buildings that lack capacity for rooftop installations to access solar systems built and operated by private developers for collective consumption.
That could extend the potential cost savings and environmental benefits of solar systems beyond the traditional focus on individual homeowners and businesses that have the income and roof space needed to install it. And it could ignite a new wave of local industry development, bringing significant economic impact as private companies aggressively market community solar throughout New Mexico.
But at least two of the state’s largest utilities — Public Service Co. of New Mexico and Xcel Energy subsidiary Southwestern Public Service — oppose the community solar bill now advancing in the state Senate. They say utility customers not connected to new solar installations could end up subsidizing those who are connected, because they take on more of the fixed costs for things like transmission and distribution as solar consumers reduce their payments to utility companies but still draw power from the grid.
And, given New Mexico’s steady march to carbon-free generation under the state’s new Energy Transition Act, the utilities themselves already plan to build a lot more renewable energy around the state over the next two decades. The utilities say they can do that at much lower cost than community solar developers — and with the benefits shared by all ratepayers equally — making community solar unnecessary.
Still, with green initiatives on the rise in New Mexico and nationally, plus more progressive, pro-renewable Democrats winning seats in the state Legislature in last year’s elections, community solar legislation is riding a fresh wave of energy.
Democratic Sens. Linda Lopez of Albuquerque and Liz Stefanics of Cerrillos introduced the Community Solar Act in the Senate this year. And Democratic Reps. Patricia Roybal Caballero of Albuquerque and Andrea Romero of Santa Fe are co-sponsoring a duplicate measure, House Bill 106.
The Senate measure, Senate Bill 84, passed its first hurdle Jan. 28 on a party-line vote in the Senate Conservation Committee, with seven Democrats in support and four Republicans opposed. It’s now in the Senate Tax, Business and Transportation Committee, its last stop before heading to the Senate floor.
“I believe the time is right,” said Lopez, who unsuccessfully sponsored community solar bills in two previous legislative sessions over the past four years. “The Energy Transition Act has brought the issue to the forefront as legislators think and talk about what to do with renewable energy. … It’s receiving a much more positive response than in the past, with definite interest and support from around the state.”
Three more senators have since signed on as co-sponsors of the senate bill, Stefanics said.
“The bill does have a lot of support,” she said. “… We’re hearing from the public that many people want to participate in community solar projects.”
Enabling legislation is needed, because only regulated utilities can directly sell electricity to groups of consumers under current state law.
How it works
Private developers are allowed to install individual solar systems that homeowners or businesses can own outright, or that the developers manage for sale of the electricity to a single customer. Thousands of residential, commercial and government consumers have taken advantage of that to install rooftop solar throughout the state.
Community solar, however, is based on the collective participation by groups of consumers who generally can’t install individual systems on their own because they rent homes or buildings, they lack the finances to pay for a system, or their facilities can’t accommodate an installation. To serve those markets, solar developers build facilities that usually generate between one and five megawatts of electricity, and then allow individual consumers to pay a monthly membership fee to become “subscribers” in the system.
Unlike individual rooftop solar installations where home or building owners directly consume the electricity they produce, electric output from community solar is not used by project participants. Rather, it’s sent to the local utility grid
for general distribution among all utility customers. The community solar subscribers themselves continue to receive electricity from the utility to power their homes and facilities.
But project participants receive a credit on their monthly utility bills for the solar energy generated from their portion of the community project. Even with the subscriber fee, that usually amounts to a 10% to 15% savings on their electric bills, according to solar industry representatives.
“That allows many consumers who can’t access solar on their own to participate in solar generation, including low-income households who otherwise couldn’t afford it,” said Kevin Cray, regional director with the Coalition for Community Solar Access, a trade group representing member companies in 17 states.
“It provides new options for customers who can participate with no upfront costs and immediate savings,” Cray said. “It’s something many consumers want. Many states have adopted enabling legislation because it can provide cost relief for low-income communities.”
To date, 19 states and Washington, D.C. have adopted enabling legislation. Nearly 2.6 gigawatts of community solar have been installed nationwide, according to the national Solar Energy Industries Association. That could climb to 3.4 GW over the next five years, or enough power for roughly 650,000 homes, the association says.
Opponents cite equity
New Mexico legislators have pursued enabling legislation since 2013, but utility opposition has weighed against it.
That’s largely because community solar systems are tied directly into utility grids, with the utilities forced to buy all the power generated, including any excess electric production that’s not directly assigned to project participants.
“Community solar developers can build projects anywhere they want on the grid, and the utility has to purchase that extra energy whether it needs it or not,” said PNM spokesman Ray Sandoval.
While the lower-priced solar generation may offset more expensive power the utility receives from other sources, the utility must still manage all transmission, distribution and other grid infrastructure to transport that solar electricity. And if any grid upgrades are needed to accommodate additional solar generation, it adds costs.
That creates “cross subsidization” by other utility ratepayers, because they pick up more of the expense for maintaining and operating the grid to make up for declining payments from community solar-connected customers who receive credit on their bills, Sandoval said.
“It’s a fairness issue,” he said. “Solar developers come in and build a two-to-five megawatt project on our system that benefits a small group of customers with huge infrastructure costs that other customers pay for…Community solar subscribers don’t pay their fair share of poles and wires, and they get a discount on their bills for the solar generation they consume that’s subsidized by other customers.”
Michael D’Antonio, Xcel Energy’s manager of regulatory administration in Santa Fe, said community solar is an outdated concept that began a decade ago to accelerate solar development when utilities were still moving slowly on renewable adoption. But today, clean energy development is rapidly advancing, especially in New Mexico, where the Energy Transition Act requires public utilities to convert their grids to 50% renewables by 2030, 80% by 2040, and 100% carbon-free generation by 2045.
“Under the ETA, when we add renewables to the system, all customers get a slice of it, and we can add it at very competitive prices,” D’Antonio said. “With utility-scale solar, we get the benefits of economies of scale, making it two-to-three times cheaper than community solar development. Utilities feel like this Community Solar Act is kind of old news now and not really relevant anymore, because under the ETA, all customers gain access.”
Community solar advocates say many of the utilities’ issues have been addressed in this year’s bill based on the efforts of a Community Solar Working Group that met bi-weekly from July-November of last year. The Legislative Council Service Convened the group in response to Senate Memorial 63, approved in last year’s session to encourage diverse stakeholders to examine ways to implement and scale a market-based community solar program in New Mexico.
Legislators, public utilities, rural electric cooperatives, renewable industry leaders, tribal representatives and community groups participated, culminating in a final report in December with recommendations on how to best balance utility and consumer interests.
As a result, SB 84 includes key safeguards to avoid cross subsidization by other ratepayers, said Beth Beloff, executive director of the Coalition of Sustainable Communities New Mexico, which unites the city and county of Santa Fe, Albuquerque and Las Cruces in joint efforts to develop government strategy, policies and action to fight climate change.
The bill requires the state Public Regulation Commission to develop rules to determine the credit rates that community solar customers will receive on their electric bills to ensure that utilities are held harmless for any costs associated with solar projects, Beloff said.
“The intent is for it not to be a burden on other ratepayers,” she said.
Community solar developers must also pay the full cost for grid interconnections, including any needed grid upgrades. And the amount of total community solar development will be capped at 100 MW annually for at least the first three years, with no more than 50 MW of community solar connected to PNM’s grid, 40 MW on Excel subsidiary SPS’ grid, and 10 MW on the El Paso Electric Co. grid.
“The 100 MW cap would represent a very small share, maybe 1%, of total electric retail consumption annually for those three utilities combined,” Beloff said. “It’s a very small carve out for private developers to come in and create community solar facilities.”
All solar projects will be limited to below 5 MW in size. And the bill provides specific carve outs for the amount of generation any individual consumer can buy from a community solar project to block large commercial or industrial customers from absorbing the majority of production, and to ensure that each project has a balanced mix of residential, commercial and government subscribers.
No single customer can consume more than 40% of generation capacity, and 30% will be reserved for low-income residential consumers.
As sovereign nations, all tribes will be exempt from those restrictions, allowing Native American communities to pursue more aggressive solar development if they want. And rural electric cooperatives will not be forced to participate in community solar projects, but instead be allowed to “opt-in,” which the cooperatives requested in the working group meetings.
Finally, the PRC will evaluate how the entire program is working after three years and make adjustments if needed.
If passed, advocates say the bill would create broad demand around the state, potentially generating thousands of new jobs and economic development opportunities, reducing electric bills for many low-income consumers, and helping the state meet its carbon-reduction goals.
Utilities say many of those things will be achieved anyway under the Energy Transition Act, and unlike with community solar, the benefits will be shared equally among all ratepayers.
Still, Native American and non-tribal communities alike are hoping to tap into community solar, said Kewa Pueblo member Mayane Barudin, regional director and tribal liaison for the national organization Vote Solar.
“Demand on the ground is pretty robust,” Barudin said. “I see myself as the perfect candidate for community solar, because I rent my home and my personal finances are limited. It appeals to a lot of people in neighborhoods around the state where there’s a strong sense of community and environmental awareness.”