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Community solar can help revitalize communities. Here’s how

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Monday, October 3, 2022

What does community solar mean for low-income and disadvantaged neighborhoods where residents are struggling to pay their electric bills or are looking to clean energy as a pathway to a good career? Government agencies, environmental-justice advocates and equity-focused solar developers all have their ideas for how to answer that question. Last week, the World Resources Institute brought together representatives of these groups to explain how they’re working to build community solar projects that can deliver not just carbon-free electrons but also community revitalization. “A number of years ago, when folks were talking about community solar, they were really talking about a premium product,” said Nicole Steele, senior advisor for equity and workforce at the U.S. Department of Energy’s Solar Energy Technologies Office. “They were saying, ‘I want to make sure my energy is coming from clean energy — I’m willing to pay more for that.’” “We’re trying to flip that script and say, actually, community solar can be like rooftop solar and reduce your overall utility bill on a monthly basis,” she said, “really ensuring there are greater household or business savings.” Steele runs DOE’s National Community Solar Partnership, the Biden administration’s chief conduit for achieving its goal for community solar to power the equivalent of 5 million households and create $1 billion in energy savings for subscribers by 2025. Hitting that target would require roughly 20 gigawatts of community solar deployment, compared to the approximately 5.1 gigawatts installed as of the third quarter of 2022. But the sheer scale of gigawatts deployed isn’t the only measure of success, Steele said. NCSP is also one of the Biden administration’s pilot programs for its Justice40 Initiative, its pledge to direct 40 percent of federal climate-related funds to historically disadvantaged communities. Meeting that goal will require the development of community solar projects that adhere to a number of tenets, Steele said. The first two are fairly obvious — “is it accessible by low- and moderate-income households?” and “is it ensuring household savings?” But it also means building projects that offer “equitable workforce development” and giving community organizations options to own solar projects themselves, as a way to cement the employment and wealth-building value of these multimillion-dollar investments in the communities they serve. Breaking the financial barriers The first challenge is designing community solar programs that are open to lower-income people who’ve largely been locked out of the option of installing solar on their own rooftops. The National Renewable Energy Laboratory has estimated that about half of U.S. households aren’t suited for cost-effective rooftop solar, either because they’re renters or because their roofs aren’t a good match for solar panels due to shading, orientation or construction type. But according to Solstice Power Technologies, a Cambridge, Massachusetts–based company that works with solar developers to connect them to customers in disadvantaged communities, the true number is much higher, approaching four-fifths of all U.S. households. That’s because the biggest factor barring households from getting rooftop solar is that they can’t afford it — or, more precisely, they lack the debt-to-income ratios or high credit ratings to meet borrowing criteria for most solar installers and lenders. A significant number of U.S. households earn less than $50,000 per year, but only 14 percent of the country’s rooftop solar owners come from this group. For the 40 percent of households that earn less than $40,000 a year, rooftop solar ownership is even rarer — only 5 percent of solar owners fall into this category. Solstice co-founder and COO Sandhya Murali noted that some of the same income and credit barriers to rooftop solar access have plagued community solar. When Solstice launched six years ago, “the community-solar products looked like rooftop-solar products,” she said. “You needed to sign a 20-year contract; you needed a really high FICO score to participate; there were sometimes four-digit cancellation fees.” While things are improving on that front, community solar developers still have trouble getting financiers to back projects that are targeting lower-income customers and customers with poor credit scores, she said. Solstice is working with its Solstice Initiative nonprofit arm on an alternative for the nearly half of Americans who either lack a credit score or have one in the subprime range. It’s called an EnergyScore, and it tracks not only credit history but also a customer’s history of paying their utility bills. Studies have shown that utility-bill history is an effective proxy for how likely customers are to stay current on their solar payments, and similar metrics are being used by solar developers such as PosiGen and some state and local green banks. While Solstice hasn’t yet put the EnergyScore to use with its community-solar developer partners, it’s hoping to start using it soon, Murali said. “Financing can always be a barrier,” she said. “If there are restrictions placed on the projects where they require a FICO credit requirement, or they require a certain offtake mix” of subscribers like commercial entities that limits participation from low or moderate-income customers, “that’s kind of defeating what we want to achieve in making community solar the most affordable and accessible form of solar out there.” To overcome that, “financiers have to change how they think about the risk of these projects,” she said. Lifting the energy burden Opening the door to lower-income community subscribers is just the first step, Steele said. For the Biden administration to hit its target of $1 billion in savings from community solar, savings for individual subscribers will have to fall from a current average of 10 percent compared to standard utility bills today to closer to 20 percent. Savings of about 20 percent on electrical bills are typical for people who have rooftop solar systems in states with supportive net-metering policies. State governments create the rules and regulations for community solar within their borders, and no two states have precisely the same approach. NREL reports that 22 states and Washington, D.C. have policies that support community solar, but the majority of the sector’s growth has come in a handful of states, including Colorado, Maryland, Massachusetts and New York. These states are among those with policies that incentivize or require community solar developers to seek out and enroll people in lower-income or disadvantaged communities. This NREL chart shows how different state policies have led to different rates of installations and projected deployments serving low- and moderate-income customers as of the end of 2020. “There is definitely a wave of [low- and moderate-income]-friendly policy in the states,” Murali said. The Inflation Reduction Act passed in August could help even more: It offers an additional 20 percent federal tax credit for community solar installations that provide at least half of their financial benefits to low- and moderate-income customers, she said, which will come on top of a 30 percent tax credit that’s offered for all solar projects. Structuring projects to help customers improve energy efficiency and access solar power can also help, said Mary Shearer, executive director of Kentucky Habitat for Humanity. Her state chapter of the nationwide homebuilding charity partnered with Louisville Gas and Electric and Kentucky Utilities to gift shares of a utility-developed community solar project to 10 low-income homeowners, with the target of cutting their electric bills by 30 percent per month. But even deeper savings were realized by a combination of utility-funded efficiency upgrades like LED light bulbs and insulation and Habitat for Humanity’s “deeper home repairs” such as new windows, doors and HVAC systems, she said. Altogether, these multilayered interventions reduced home energy costs by 50 percent per month — a “massive” help to those families, she said. Customer acquisition — the industry term for finding willing customers — can be a significant cost for community solar developers, and processes that make it easier for them to find, vet and approve low-income customers as subscribers are helpful, Murali noted. That’s the goal of a new federal digital platform that will help the more than 5 million recipients of federal Low Income Home Energy Assistance Program funds connect with community solar programs in their region, set to launch next year in Colorado, Illinois, New Jersey, New Mexico, New York and Washington, D.C. Community jobs and community ownership Jobs are another important part of the Biden administration’s community-solar goals, Steele said. As part of its Justice40 guidelines, NCSP is looking for partners that have plans for “the creation of a workforce that’s inclusive and intentional, and has a pathway for workers to unionize.” That’s one of the primary goals of Reactivate, a recently launched energy asset developer with $500 million in backing from impact investment firm Lafayette Square and independent power producer Invenergy. “We are really focusing on a holistic view,” said Utopia Hill, the company’s head of engineering, procurement and construction. Reactivate partners with local community and government groups to find workers and contractors for its projects, she said. It contracts with woman- and minority-owned businesses, and offers 16-week paid training programs that include “wraparound services” such as transportation to and from job sites. The company also plans to conduct follow-on interviews with workers for years after those projects are complete, she noted. “We’re looking at not just jobs, but sustainable careers, so that people have living wages so they can support their families.” These kinds of commitments help gain community buy-in for projects, Hill said. It’s also important to build trust in communities that may become the targets of less-than-scrupulous developers chasing federal and state incentives, she added. “Underrepresented communities may get this influx of people coming in and promising things that aren’t true,” she said. “They’ve been flat-out lied to before. If certain actors come in there and are not following through on what they say, they’re hurting the industry at large.” Then there’s the question of whether community groups ought to take on the role of owning community solar projects themselves, Steele said. The Inflation Reduction Act makes solar and other clean energy tax credits more easily accessible to municipalities, nonprofit groups and other tax-exempt entities. Previously those credits were available only to private companies because you had to have tax liability to defray in order to apply them, but now not-for-profit entities can receive the incentives in the form of direct payments from the federal government. That’s a major shift that could expand community ownership options in the years to come. Carla Walker, WRI’s director of environmental justice and equity, noted that community ownership can be an important way for communities that have suffered from generations of disinvestment to begin “building equity and rebuilding wealth.” “Ownership is a huge topic of conversation,” Steele said. “It’s the same with rooftop solar. Do you want to own the solar on your roof, or do you want to rent or lease it, enter into a power-purchase agreement? We want it to be the same with community solar. You have the choice of either owning and building wealth through that business model, or being a subscriber. Again, it’s about choice.”

What does community solar mean for low-income and disadvantaged neighborhoods where residents are struggling to pay their electric bills or are looking to clean energy as a pathway to a good career? Government agencies, environmental-justice advocates and equity-focused solar developers all have their ideas for…

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Is the future of energy ... pouring water on hot rocks in the ground?

Fervo’s test well in Nevada. | Fervo Energy Geothermal’s “breakthrough,” and the challenges ahead, explained. If you read about the energy industry in the ’00s and ’10s, you probably caught some excited, hopeful stories about geothermal, the renewable energy source that harnesses heat hundreds of meters below the earth’s surface. “Enhanced geothermal” — a novel approach in which fluids are poured deep underground, heat up, and then are recovered for their steam heat and used to generate electricity — got particular attention, because it promised a geothermal technique that could work most places on earth, not just in volcanic areas like Iceland or Indonesia.Enhanced geothermal is “increasingly being eyed as an enormous potential source of pollution-free energy,” science journalist David Biello wrote all the way back in 2008. Enhanced geothermal has “often been touted as the answer to the tepid growth of the geothermal industry,” reporter Megan Geuss wrote in Ars Technica in 2014, already with a bit of jaded weariness that the promises were yet unfulfilled. Startups like AltaRock Energy got press for their promises of a clean energy source, deployable in any geography, that still worked when the sun wasn’t shining and the wind wasn’t blowing.But as of 2022, a mere 0.4 percent of US electricity generation came from geothermal. That’s some eight times less than solar, 25 times less than wind, and 45 times less than nuclear. If that weren’t depressing enough, consider those numbers still meant the US produced more geothermal electricity than any other country that year, even surpassing heavily volcanic Indonesia.But some significant breakthroughs have recently earned geothermal renewed attention. Fervo Energy, an enhanced geothermal company, announced that it was able to build and run a well in Nevada for 30 days, generating 3.5 megawatts of power. That’s not a lot (a typical natural gas power block produces over 800 megawatts), and it’s still much more expensive to produce than solar or gas power, but it’s the furthest an enhanced geothermal project has gotten to date. Last year, Energy Secretary Jennifer Granholm announced a major initiative promising to slash the cost of geothermal generation by 90 percent by 2035. That announcement put the current cost at about $450 per megawatt-hour, compared to around $30 to $50 for onshore wind and solar. On one reading, geothermal is finally getting the private finance, the technical progress, and the government support it needs to thrive. But having read the old press, I had a more pessimistic reaction. Is this turning point for geothermal for real, or just more hype? And if it is for real, what took so long? We have known for decades that geothermal has the potential to provide carbon-free energy that, unlike rapidly growing wind and solar, is constantly available, which we desperately need. Why, then, is its market share still stuck at 0.4 percent? What went wrong, and how can we fix it?Why enhanced geothermal is promising, and why it hasn’t happened yetThe crust of the earth (the outer layer on top of which we all live) contains a lot of heat, ultimately generated by the radioactive decay of elements in the mantle, which sits below the crust. So beneath us, at all times, are deep rock formations with regular temperatures far hotter than those above ground. In certain locations, these rock formations also contain considerable amounts of fluid (mostly water with some salts in it). When these boiling fluid reservoirs burst through the surface, they appear as hot springs. Franco Origlia/Getty Images A geothermal plant in Larderello, Italy, the first place such a power plant was ever constructed. Those sources have provided heat for centuries, and in 1904 the first successful effort to use this liquid to spin a turbine for electrical generation occurred in Italy. A key limitation, though, is that most areas of the earth do not have easily accessible and/or sufficiently large reservoirs for this kind of “hydrothermal” system to work. Iceland runs largely on geothermal, but it’s very much the exception, and a beneficiary of an unusual geology that leads to a volcanic eruption every five years on average.This has provoked a search for geothermal methods that are not limited to places with existing, accessible reservoirs of water underground. Perhaps the most famous is “enhanced geothermal” (EGS), which Fervo and other companies are pursuing. The idea here is to drill deep into the earth, pour in a liquid to be heated by the hot rocks down there, and then provide a way for steam or very hot water to exit, either to use directly for heat or to spin a turbine.If successful, this approach would mean that geothermal plants could be built in a wide range of areas, with many different geologies. That would provide a useful source of low-carbon “base load” power: a source, like hydroelectric dams or nuclear plants or most coal plants, that produces a consistent electric output all the time. That would be invaluable in moments when intermittent sources like solar and wind are insufficient to meet energy demand. In the mid-’00s, experts believed that we had the technical tools to vastly scale up enhanced geothermal. A panel report released in 2006 by an MIT-led team concluded, “Most of the key technical requirements to make EGS work economically over a wide area of the country are in effect, with remaining goals easily within reach.” But in the 17 subsequent years, surprisingly little progress has been made.Jefferson Tester, then a professor at MIT and now at Cornell, chaired the panel behind that report. When I asked him what happened, he pointed me to the report’s recommendations: accelerated permitting and licensing for geothermal projects, loan guarantees for businesses, tax credits and portfolio standards like those that benefit wind and solar, large investment from the Department of Energy (DOE) in setting up demonstrations in a large number of locations. Very little of that actually happened — and the problem is that very little isn’t enough to get geothermal going.“The scale of geothermal is such you can’t do it just by putting up a solar collector or one wind turbine somewhere,” he explains. “You have to do it at a reasonably higher scale, which means there has to be more net money put in at the front end to drill holes and to evaluate that resource.” Compare geothermal to solar power. A solar plant is just an array of individual solar panels, each of which might cost a few thousand dollars. It’s totally doable for a small company without much capital to build out a single panel and show that it works — which is precisely what’s happened, as solar generation grew globally from around 1 TWh in 2000 to nearly 1,300 TWh in 2022.Geothermal drilling operations, by contrast, are massive, much more expensive endeavors. The largest federally supported demonstration, the FORGE project in Utah, has an initial budget of $220 million, with another $115 million in funding expected. That is well outside the budget of most energy startups, and the kind of thing where government support is usually necessary. Part of why Fervo’s breakthrough raised so many eyebrows is that, according to company claims, most of its funding is private. CEO Tim Latimer says the company has raised over $200 million to date, only a small share of it from DOE. Getting that level of funding for a geothermal endeavor is highly unusual.There have been occasional bursts of federal interest in supporting the technology, but they’ve been partial and abortive. The 2009 Obama stimulus included $368.2 million earmarked for the Geothermal Technologies Office at DOE, but negative headlines followed when some supported projects struggled. Although the loan guarantees actually wound up being profitable, they earned huge Republican opposition in Congress that prevented the program from continuing. Throughout the 2010s, the investment tax credit (ITC) included in the corporate income tax as a subsidy to clean energy offset 30 percent of the cost of solar and wind projects, but only 10 percent for geothermal.“By the early 2010s, natural gas prices got really cheap, solar prices got really cheap, and the market support for geothermal basically evaporated,” Latimer told me. “The irony is that tech for drilling got really good by the early 2010s,” as fracking transformed the oil and gas sector, helping drive those cheap natural gas prices. “But there was no investment or market demand for geothermal. It was this cool technology that just had nowhere to go.”The typical tools used for supporting renewable energy also might not work as well with geothermal. The loan guarantee program, for example, is primarily for projects ready for commercialization, with minimal technical progress needed — just add money. “What they fund meets a certain threshold of proven commercial viability,” Arnab Datta, a senior counsel at Employ America who has studied policy barriers to geothermal, tells me. That doesn’t describe most enhanced geothermal, where commercial viability hasn’t yet been shown.Equity investments — which provide more upside for investors if a project succeeds while minimizing risk for companies should they fail — might work well, but government accounting rules treat such investments as grants and assume they will never make back any money. Normally, government budgeting operates on a cash flow basis, and in an equity investment, the only cash flow at the time of investment is from the government to the firm in which the government bought equity. But the effect is that even government offices authorized to make such investments are hesitant to do so, knowing they will never be credited, either politically or in their future budgets, for any money earned.Is geothermal finally turning around? Dominika Zarzycka/NurPhoto via Getty Images A geothermal drill tower in Szaflary, Poland, which is aiming to make the deepest geothermal borehole in the world. Fervo’s bet is that progress in drilling technology due to the fracking revolution in oil and gas has changed the dynamics that have historically held geothermal back. Historically, geothermal projects have involved drilling vertically downward. But fracking has made horizontal drilling cheaper, which enabled a different approach Fervo is using: drilling vertical wells several hundred meters apart, and connecting them underground through horizontal drilling. They argue this lets them move fluid along a larger segment of rock underground, producing more steam and making the well more efficient.Fervo claims its system is ready for commercialization: It just needs to scale up the test well that it’s already shown works, and it’ll be in business.Still, there are hang-ups. Geothermal drilling, unlike some oil and gas projects, is subject to challenge under the National Environmental Policy Act (NEPA), which can lead to years-long regulatory delays in getting projects off the ground. (Yes, you’ve read that right — it’s legally easier to permit an oil or gas well that will add further greenhouse gases to the atmosphere than it is to drill geothermal wells that can provide near-zero-carbon electricity.) Adding in a “categorical exclusion” for geothermal, similar to that for oil and gas, could help a bit. So too would directing some of the resources in the Inflation Reduction Act and the 2022 infrastructure law toward geothermal projects in the stage between speculative R&D and full-scale commercialization.“Theoretically, the place that should be doing this is the Office of Clean Energy Demonstrations, which has about $25 billion,” Datta says. “But that doesn’t have the authority yet to fund exactly this type of thing.” It would need more direct authority from Congress to deploy that money for large-scale geothermal demonstrations. Even before that, though, it could offer the kinds of creative funding mechanisms it has used to promote the hydrogen industry, which are already authorized, to geothermal companies.Some critics are also worried that enhanced geothermal is not as ready for primetime as boosters like Latimer claim. “I think Fervo has done an incredible job of raising money, getting customers, raising awareness, etc.,” Austin Vernon, an engineer who writes extensively on geothermal, told me in an email. “But if you read their paper they were losing 10-20 percent of the fluid they circulated. The cost of that water would be more than the electricity is worth in most wholesale markets.”Worse, he claims, “if you are losing that much fluid in the granite you are almost certainly going to induce seismicity on longer time horizons.” This is not a theoretical concern. In 2017, a geothermal project in South Korea caused a 5.5 magnitude earthquake, which luckily did not kill anyone but did cause dozens of injuries. A sizable enough earthquake problem could not only doom specific geothermal pilots but also lead to a perception of the whole technology as dangerous.Fervo, naturally, disputes these critiques. The 10 to 20 percent figure, Fervo’s Latimer tells me, “is actually a positive result and good news for project viability as the number will only decline from there.” He disputes the notion that this “leakoff” will result in increased seismic risk, because Fervo’s projects “bring injected fluid back to the surface, limiting stress state changes.”Vernon is more optimistic about “closed loop” systems, like the one the company Eavor is building in Germany, in which horizontal drilling is used to place an enclosed pipe that runs from one well to another. That way, the fluid is never released directly into the rock, meaning you don’t need to worry about losing it or it causing earthquake problems; he notes that Fervo itself could easily pivot to this kind of system. Even without liquid concerns, Vernon argues that geothermal’s niche will be in providing hot water directly to heat buildings (like a massive underground radiator) or provide steam to factories, rather than producing electricity, given the efficiency losses involved in converting steam to electricity. Useful, but not exactly world-changing. The ultimate dream is “superhot rock energy.” wherein geothermal firms would drill 4 kilometers or even deeper into the earth’s crust, to the point where the surrounding rocks exceed 400 degrees Celsius (752º F). At this temperature, and sufficient pressures, water goes “supercritical”: Liquid water and steam become indistinguishable and hold more energy, which enables turbines to operate much more efficiently. That could make electricity generation much more viable. “Imagine if you could drill down next to a coal plant and get steam that’s hot enough to power that plant’s turbines,” the CEO of Quaise, a startup attempting to develop this technology, told the New York Times’s Brad Plumer. (The reason coal plants burn coal, after all, is to generate steam to power electric turbines, which is why coal and natural gas and, for that matter, nuclear plants are all known as thermal power plants.) “Replacing coal at thousands of coal plants around the world. That’s the level of geothermal we’re trying to unlock.” This vision is incredibly exciting, because it offers the promise of ultra-low-cost, ultra-abundant zero-carbon energy basically anywhere on earth, a form that could seamlessly fit into existing energy infrastructure. It would mean not just cleaner energy, but more energy. Vernon and analyst Eli Dourado wrote a report laying out what the economy could look like with ultra-abundant geothermal, nuclear, or solar power: It includes things like vertical farming (enabling massive food production on a tiny land footprint), intercontinental travel via rocket, and mass desalination to end water scarcity around the world. It’s all very sci-fi.For the time being, the “fi” part still applies: We simply do not have the technology to drill deep enough to access this geothermal resource right now at a reasonable cost. (The deepest hole ever drilled in the earth, the 7.6 mile/12.2km Kola Superdeep Borehole in the Russian Arctic, took decades before ultimately being abandoned.)What super-deep drilling, Fervo’s enhanced geothermal project, Eavor’s “closed loop” project, and every other next-gen geothermal project have in common is a need for patient capital investment, perhaps through government subsidy. There are major steps needed to make that happen, but they tend to be fairly technocratic: empowering more equity investments from the Energy Department, offering a categorical exclusion to geothermal projects, empowering the Office of Clean Energy Demonstration to spend big on geothermal. They seem, in other words, like the kinds of things that even a divided Congress might be able to make happen, not ridiculous pie-in-the-sky aspirations.If the economics can be made to work, geothermal would provide a renewable energy source that’s always on, and that employs plenty of ex-oil and gas workers, to boot. That has been its promise for decades. Maybe the 2020s will end up being the time that promise is finally fulfilled.

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