Piecing Together the Community Energy Puzzle

By Subin Varghese, Community Renewable Energy Director

What if you could use your consumer power and investment dollars to drive a fast and equitable transition to renewables? That’s part of the potential of community-owned renewable energy: to expand opportunities for ordinary citizens to put their money toward community-controlled energy facilities that share not just electricity among community members, but the economic benefits of the enterprise as well.

Community energy is a powerful idea, but one that turns out to be quite the puzzle because our current legal system favors centralized and for-profit ownership of energy infrastructure by the wealthiest sectors of society. It is illegal in most states to share electricity from solar panels with your neighbors, and it's almost impossible for renters, nonprofits, or cooperatives to benefit from the the tax incentives that exist to promote solar and wind energy projects.

Community-Owned Renewable Energy

At the Sustainable Economies Law Center, our Community Renewable Energy Program was formed to tackle this challenge because the stakes couldn't be higher. Frontline communities suffer the polluted air, water, and illness that come from extracting dirtier and more extreme fuels, and little time remains to prevent a climate change catastrophe that will hit disadvantaged communities first and worst. These same communities also deserve to benefit from the economic security, better jobs, and cleaner environment that a transition to renewables has the potential to create.

So how can we spread ownership of energy infrastructure, create community-owned projects that share the economic benefits equitably, and avoid re-creating a two-tiered society where wealthier people own all the energy infrastructure and the rest of the people are forever dependent on buying energy from them?

We call this the Community Renewable Energy Puzzle – and we're working to find, and put together, all the pieces! We're mapping the regulatory terrain of community energy to help communities navigate building their own projects and to collaborate with partners to reshape the regulatory landscape moving forward.

First, let's introduce some of what we've found so far and what we will be diving into further. Like with putting together any puzzle, we'll start with the border and major identifying pieces. In the context of our Community Energy Puzzle, that means outlining the big picture. So what are we trying to do? We're essentially working to develop models that regenerate, rather than extract, wealth from the local community – creating something like a collectively-owned solar garden.

Our Solar Cooperative

Sharing energy from one array of solar panels would allow people to get involved whether or not they can put solar on their roof or are renting. And creating a structure that allows each resident to own a share of the solar energy system would allow them to benefit economically, such as from a return on their investment or savings on their electricity bill.

Let me guess what you're thinking: "That sounds so exciting! But hmm, seems like there might be a lot more details to sort out to make it happen, right?" You'd be right on both counts. That's where inventorying all the pieces of this puzzle comes in! Here's a general outline of what you'd need to do as a community group to make this happen:

  1. Form a group
  2. Develop a business plan
  3. Organize investors and customers
  4. Build your project

Energy Puzzle 100 Pieces

Most of the uncharted territory that needs to be figured out is around Step #2 – Developing a business plan, which includes many legal questions and challenges. Since we are a Law Center, that's the area that we are focusing on first, while working with partners and collaborators working on different parts of the puzzle as well. And since forming a group and community participation is so fundamental, we also have been working to gather principles and best practices around community engagement.

Even just identifying the legal issues involved in developing a business model takes a bit of work, as the unique nature of a community energy project can touch very many different areas of law and regulation. So to start, we've been getting the pieces on the table and sorting them. We've looked through puzzle pieces related to subsidies, securities law and finance, entities structures, entity tax, governance, public utilities regulation, net metering, federal energy regulation ... and on and on.

All The Things

And while that can sound daunting, just like sorting puzzle pieces into piles of similar colors to make a puzzle easier to complete, we are doing the same with legal issues. We've come up with these three main buckets of law to navigate:

  1. Energy regulations
  2. Entity and project structure
  3. Financial laws and regulations

This Could Work

While we'll detail the specific pieces involved in each of these three buckets more in the future, here are some of the issues we are researching and analyzing:

Energy regulations

  1. State & federal energy laws and regulatory commission rules
  2. Municipal utilities or energy aggregation entities
  3. Net metering, community solar, or other procurement programs

Entity and project structure

  1. Business association formation
  2. Internal governance
  3. Land use regulatory compliance

Financial laws and regulations

  1. Tax law, credits, and subsidies
  2. Consumer protection and securities law

This list isn't exhaustive, but it covers the major issues we are aware of so far, and by working together with communities and supportive institutions across the state and country, we can aim to solve challenges and develop models and solutions for communities so that building community energy projects gets easier and easier with every facility built.

While there are a lot of pieces to the Community Energy Puzzle, the benefits of piecing together this giant puzzle are well worth the task. When we succeed in unlocking the potential of community energy, we will spur rapid and equitable growth in renewable energy – and we have no time to spare.


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