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Community Solar

Evaluate Ways to Mitigate Subscription Contract Risks

Subscribing to a project should involve consideration of what future bill credit rates will be. A decrease in the utility rates in the future will change the value provided by the community solar project. As an anchor off-taker, it is important to plan for how you will hedge or protect against this uncertainty. Because local governments must be fiscally prudent, one approach is to negotiate for a fixed subscription price relative to the retail credit rate for the lifetime of the project. For example, instead of hedging against price uncertainty, Boulder, Colorado, negotiated a deal with a developer in which the subscription cost was 2% below the community solar utility bill credit rate. Because this rate provided a guaranteed savings with less uncertainty, it was easier to pitch to the city council.

Undersubscription is another important risk, especially if the city or local government is acting as a flexible subscriber. The city could minimize this risk by helping to facilitate the subscription process and by working to ensure a single bill gets sent to all subscribers. It is also important to understand whether there is potential for ownership of the project to be transferred during the lifetime of the project to decrease the likelihood of subscribers defaulting. While most state legislations require subscription transferability, it is a good idea to verify that subscription transferability and portability is allowed. This verification will lower the risk for customers to subscribe and improve the likelihood of overall project success.