Capitalizing early on a program’s storage incentives is necessary to maximize the return on the project’s investment, as illustrated in Figure 1 above. Similar to the community solar project as a whole, regulators are likely to revisit the rate incentives for adding storage as more systems come online, the grid’s needs change, and the relative value diminishes.
Sophisticated models visualize complex project benefits
As the regulatory value of project components shifts, so too will the actual financial value and resulting economic viability of a given project. Ensuring appropriate compensation over the course of a project’s lifetime requires complex, dynamic models that forecast revenue and rate restructuring.
As seen in Figure 2, a Maryland utility’s tariff rate components are projected to change over the next two decades to lower generation-side charges as a share of the total retail rate. That has implications for the overall value of a community solar project in post-program tenor, in markets where the new compensation rate may be influenced by the generation portion of the retail rate or the utility’s avoided cost of supply.
The incentives tied to community solar projects offer additional value to the grid, reflected in rates. Modeling different valuation scenarios is paramount to determining long-term project value—and will require complex predictive analysis to make decisive investments.
While community solar projects present a dynamic and evolving opportunity in the energy sector, developers must navigate these waters with agility and foresight. By seizing incentives early, incorporating energy storage, and employing sophisticated modeling to understand future revenue streams, developers can not only contribute to a sustainable energy future but also maximize their return on investments in this increasingly vital sector.