The most common gripe when discussing community solar is the requirement of a second bill for subscription payments. On average, consumers spend less than 8 minutes thinking about their utility bill each year, so they certainly are not going to enjoy spending twice that amount of time to pay two separate invoices from their utility and community solar provider. The logic then follows that two bills lead subscribers to miss payments or encourage them to exit their contracts completely. Since late payments and churn are the leading areas of risk for a project, a single consolidated utility bill would surely de-risk community solar projects!
What if late payments and churn are just an inherent feature of community solar? Consolidated billing, particularly the net crediting model in New York, resolves the first issue, the second falls to the asset owner or community solar manager. Consolidating subscription payments with the utility bill creates additional scope for community solar management providers by requiring greater collaboration between utilities, asset managers, and management providers in order to deliver stable cash flows. Here are a few new operational considerations to keep in mind as you seek to enroll projects in consolidated billing.
We outlined the subscriber servicing functions of today’s community solar management provider in our previous post:
These customer experience functions could easily be replaced by a utility that already has a trusted relationship for marketing, is used to providing complex billing, and has access to a captive audience of potential subscribers to replace churn.
Community solar management involves so much more than just marketing and engaging subscribers as its functions, and the subscriber data can link customer service, asset management, and accounting. In the context of community solar, the management functions and data generated offer valuable operational insights which in turn help maintain momentum for consistent cash flows and customer experience. Some of the nuanced management functions include:
The utility is simply leveraging their existing infrastructure to support DERs. Utilities only intend to flow subscription payments through their billing and will not (cannot) provide other value-added services to ensure project profitability. When payments are collected, funds enter the utility’s accounts payable system, creating delays if payout cadences do not match asset owner expectations. Challenges related to funds tracking and reporting compound if utilities cannot respond to crediting issues in a timely manner. Finally, the utility has no obligation or incentive to balance subscriber allocations, and in many states, utilities are not permitted to perform subscriber churn replacement.
Even with utility consolidated billing, asset owners still need an advocate for their interests to ensure the most pressing risks are addressed through the life of the project. The divided, or collaborative, scope of work may generally resemble this:
As you can see, while consolidated billing improves one key aspect of community solar subscription management, the scope of the entire management effort has not dramatically changed.
Will leveraging the existing utility billing infrastructure to assign credits and collect payments at scale to reduce operating costs? Time will tell, but utilities only touch one aspect of community solar management, and we have yet to see their infrastructure truly leveraged at scale for CDG.
Operating a community solar project requires three functional groups – accounting, asset management, and customer service – to work in tandem, and the utility only touches one of these areas. There is a real cost to performing project oversight and optimization. The promise of significant project operational savings becomes less clear when the utility only performs payment remittance, and third parties must collaborate with utilities to track, report, and optimize subscriptions.
However, utilities offer a unique service in allowing asset owners to “bank” against the utility for revenue collection. Utility stability encourages financiers to look beyond financial qualifications (e.g., FICO scores or historical tax statements) for subscriber eligibility. Removing these requirements expands the addressable market for acquisition and churn replacement. The result is an acquisition that is faster, cheaper, and more accessible.
The promise of consolidated billing stands to enhance community solar by reducing the friction experienced by subscribers and provide asset owners with the infrastructure to produce stable cash flows. Consolidated billing on its own does not offer a sophisticated management strategy that would optimize the cash flowing through that infrastructure. In fact, it does not address all the baseline functions required to manage these types of assets. As we stand at the beginning of implementing utility consolidated billing, asset owners have the opportunity to influence the development of infrastructure that could scale community solar more quickly. Collaborating with experienced community solar management providers is their best opportunity to do so.