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Community Solar: Rules for Design & Participation

Rules for Design and Participation

The participation of multiple customers in a community solar project requires rules defining each subscriber’s rights and responsibilities.  This section links to some helpful guides on these issues and provisions, together with some model rules (that may be applicable depending on the state).  This information helps lawyers in the design phase for a community solar project and also in developing terms for participation (or subscription) agreements.  In some cases, state laws and regulations address many of the major issues. 

Securities Law Issues

Communities and developers require guidance with regard to the potential application of federal and state securities laws to solicitations and agreements for consumers' participation in community solar projects.

- D. Feldman, A. Brockway, E. Ulrich, and R. Margolis (U.S. Department of Energy, National Renewable Energy Laboratory), "Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation" (2015)

"One of the top concerns raised by shared solar stakeholders is uncertainty about the applicability of Securities and Exchange Commission (SEC) requirements for registration and disclosure of shared solar projects. Central to this issue is whether an interest in a shared solar project is a “security.” If it is, then it is regulated by the SEC (although its offer may qualify for an exemption) and has the potential to significantly impact the way a shared solar program operates Therefore, stakeholders should consider securities regulations carefully when structuring a shared solar program.

"One central question in determining whether participation in a shared solar project is considered a security appears to be the motivation of the participant and the perception of the participation. SEC Staff have provided some guidance on this issue through a no-action letter issued to the solar developer CommunitySun, LLC and through individual discussions with the authors of this paper. Based on this information, participation in a shared solar project likely will not be considered an investment contract and may not otherwise be a security when participants’ primary motivation for participating in the shared solar project is personal consumption (i.e., reducing a customer’s retail electricity bills)—not the expectation of profit—and the terms of participation include certain provisions to prevent the use of the agreement as a financial play."

- R. O'Connor, T. Cronin, and Andrew Sparks, "Securities Law 101 for Community Solar Market Participants -- Orange Groves, Country Clubs, and Solar Condos" (2017)

"Whether a particular community solar arrangement would be considered to involve the offer and sale of a security for federal and state securities law purposes will depend on the facts and circumstances of the arrangement at issue....

  • "For example, in order to reduce the likelihood that a community solar arrangement would involve the investment of money, community solar project developers may forego requiring customers to make any meaningful up-front payments that would be at risk (e.g., payment should be due only after electricity is being generated by the project).
  • "In order to reduce the likelihood that a community solar arrangement would involve a common enterprise, customer contracts should be crafted in a manner that is consistent with the purchase of a good or a service engagement and does not represent an interest in the profits and losses of the community solar project itself.
  • "In order to reduce the likelihood that customers in a community solar arrangement would participate with the expectation of profits, the customer contracts should be designed and the program marketed in such a way as to make it clear that the customer’s primary motivation is to purchase a subscription in the energy output of a solar energy project (even where that subscription is being effectuated through a bill credit mechanism)—not to make profits.
  • "In addition, restrictions on transferability in customer contracts should be drafted in such a manner that a customer could not reasonably expect to profit from the sale or transfer of their interest in the community solar offering." 

Shared Renewable Energy for Low- to Moderate-Income Consumers: Policy Guidelines and Model Provisions

Interstate Renewable Energy Council – 2016

Supplementing IREC's "Model Rules for Shared Renewable Energy Programs" with provisions addressing, among other issues:

  • Backup guarantees in the event of a participant's default 
  • Financial incentives to participants, including bill credits, subscription cost reductions, and REC supplements
  • Loan programs or credit enhancement for participants 
  • Marketing, education and outreach 
  • Consumer protection requirements 
  • Annual program assessment and public reports

Model Rules for Shared Renewable Energy Programs

Interstate Renewable Energy Council – 2013

General Provisions: 

  • Subscriptions may be transferred 
  • New participants may be added at the beginning of each billing cycle 
  • Electricity provider purchases the unsubscribed energy at a kWh reflecting the full value of the generation
  • Participant owns the RECs associated with the electricity allocated to its subscription

Bill Credit Provisions

  • Determining the quantity of bill credits available to a participant 
  • Carry over of any excess bill credits 
  • Embedded cost-based approach to bill credit valuation  
  • Value-based approach to bill credit valuation