The first step, not the last: Community solar after the IRA

By Bruce Stewart, president and CEO, Perch EnergyAfter 140 years of relying primarily on fossil fuels, the U.S. has made the most serious investment in our clean energy future to date. The Inflation Reduction Act (IRA) will accelerate the clean energy transition and it has the potential to revolutionize our energy system, but we’re a long way from the finish line. We’ve made some strides, but our lumbering jog must become a sprint if we are going to reverse the course of the climate crisis before its worse impacts hit.

The necessity of shifting from centralized fossil fuel-powered energy structures to a more equitable and distributed mix of renewable energy is no longer up for debate. The community solar model in particular is designed to provide clean, affordable energy to all — especially the large majority of consumers who can’t partake in rooftop solar. While there are many ways the IRA can potentially supercharge the community solar industry’s rapid growth, the passage of the IRA is only the start of the race, not the end, and there are countless more hurdles to jump.

To collect on the IRA’s promise, states must foster their own energy transitions while learning from other states who are ahead in the race. We also need policy clarity at both the state and federal levels. This will be a major challenge for governments, but policymakers and regulators must rise to the occasion if we are to avert the worst effects of the climate crisis and allow equitable access to clean energy.

States need to embrace distributed energy resources, open energy markets, and easy enrollment in community solar projects. States that have unfriendly solar policies will miss out entirely in terms of potential business, including clean energy jobs, and in providing cheap, clean energy to their citizens. Citizens in these states, especially those in economically disadvantaged communities, have the most to gain and need their legislators to push for community solar access so that they don’t miss out on access to the tax incentives that were designed for them in this legislation. States with pending or stalled legislation should look at the IRA as a ripe opportunity and a clear signal to move ahead – like Pennsylvania’s community solar bill that despite having 70% public support has failed to pass for a fifth time this legislative session, or Virginia’s high bill minimums that dissuade a maximum number of participants.

Even states with open energy markets are not in the clear, though they do stand to gain increased development and business opportunities from the IRA. These states, however, need to ensure they expand their community solar policy to ensure greater low- to moderate-income (LMI) household participation to make the most of what is available through the IRA. We can look to states like New Jersey which explicitly crafted their program so that every solar farm approved has qualified as an LMI-serving project with a minimum of 51% LMI households. Some states like Ohio that are still deliberating, have a real opportunity to take a step forward now to deliver value for their consumers and not miss the boat.

Yet, the largest responsibility for providing clarity lies not with states but with the federal government. There are a lot of rules that were left to be promulgated regarding the “bonus” investment tax credit (ITC) and community solar. Timing is crucial and companies cannot afford to wait. That’s why Perch is communicating with the U.S. Dept. of the Treasury to help impact both how the ITC bonus will be applied and who is eligible for the 50% LMI enrollment. Eligibility needs to be at least as broad as the broadest state policy and guidance must be clear so we don’t restrict the progress and momentum. Thankfully, many states are putting forward robust eligibility standards that should clear the eventual federal standard, but coordination is still necessary to avoid stumbling blocks.

Simply put, the IRA makes real progress on climate change possible, but it does not guarantee it. Independent studies report that the IRA’s $370 billion in climate and clean energy investments is poised to help cut U.S. greenhouse gas emissions up to 43% below 2005 levels by 2030. Additionally, the benefits to economically disadvantaged communities stand to positively impact a population of more than 120 million people who have traditionally not been able to easily get access to clean energy options.

Bad execution, however, could make it all for naught. Only by pushing against the status quo in our respective states and pushing regulators to ensure that no one is left behind will the full potential of this policy be realized. There’s still a lot of work to do and we must grab the reins to accelerate the clean energy transition for all.

Bruce Stewart is president and CEO of Perch Energy, a clean energy technology and services company helping project owners maximize their ROI while bringing the benefits of community solar to more consumers nationwide. Under Stewart’s guidance, Perch has become an industry leader in full-service customer acquisition and management for its clients. Throughout his 30+ year career, before joining Perch, Stewart served as president at Direct Energy Home and co-president of Centrica US Holdings, where he led the successful sale of Direct Energy for $3.6 billion in 2021. He has also held executive positions with GE Current and Constellation Energy and prior to that at Yahoo!.