New York has over 1 gigawatt of community solar, more than any other state, with another 700 projects in the pipeline that will add another 2 gigawatts of solar capacity. Yet few of these projects are in the state’s most iconic city, home to more than 8 million people.

“It’s not because they don’t pencil out” economically, Russell Wilcox, co-founder and CEO of Urban Energy, said of siting urban community-solar projects in New York City and its surroundings. ​“It’s the complexity of the market.”

But despite this market complexity, rooftop community solar is garnering more attention, and not just in New York state, which has a goal of 10 gigawatts of distributed solar. A number of affordable housing agencies, including the New York City Housing Authority, are investing in rooftop community solar projects. In Washington, D.C., the Solar for All program installed more than 160 community solar rooftop projects from 2019 to 2021 that provided utility bill credits to 6,000 income-qualified families.

These rooftop solar arrays are similar to other community solar projects, which are midsize solar projects (usually 100 kilowatts to 1 megawatt for rooftop arrays) that allow customers including individuals, organizations and companies to subscribe to or jointly own them. However, most community solar built installed to date has been built on land, not on rooftops.

“Siting projects in population centers, rather than in remote fields, may not seem to be as cost-effective upfront. However, by leveraging community-solar subscription models, projects won’t be constrained by a specific building’s consumption, and they’ll be able to serve more consumers and types of consumers in denser areas,” according to a new report, Community Solar+, from decarbonization think tank RMI. (Canary Media is an independent affiliate of RMI.)

In Yonkers, the third-largest city in New York, located just north of the Bronx, Urban Energy is developing a 620-kilowatt rooftop community solar system and providing a new roof for the Westgate Park Condominium. It is the first project in a sizable development portfolio that pairs a new financing partner, Scale Microgrids, with Urban Energy’s vertically integrated approach to community solar development.

For the Yonkers project, in addition to covering construction costs for a warrantied new roof, the property owners will receive a 10 percent discount on their common-area electric bills. Residents will be eligible to sign up for a subscription to the community solar project as well to receive the 10 percent discount on their electricity bills.

That discount is determined by a complex calculation that is part of New York’s value of distributed energy resources, or VDER, program, which creates a value stack for solar and other distributed energy resources based on market conditions and other considerations. In utility Con Edison’s territory, where Yonkers is located, the VDER rates are relatively high, said Wilcox, due to adders that can be earned by building community solar projects.

VDER compensation is a crucial factor when assessing the economic feasibility of projects in the area, as other costs in downstate New York, including insurance, construction and equipment, are some of the highest in the country. Even the issue of transporting materials to the site when they’re needed (but not before, as there is rarely excess space to store them) can drive up costs.

A partner with modeling know-how

To better navigate the unique parameters of rooftop community solar, Urban Energy has partnered with Scale Microgrids, which is funding the construction of and then purchasing the Yonkers project and 11 more rooftop community solar projects in New York City.

“There is a lot of value in this building class that’s underserved,” said Wilcox. A key provision is that the costs of constructing a new roof are baked into most of these deals. ​“Saying you’ll get a new roof — that alone sells the project.”

Scale developed a bespoke modeling platform for Urban Energy, with inputs including the tax equity and capital needed to finance the development, construction and acquisition of these projects. The development facility was finalized before the passage of the Inflation Reduction Act, which has a 20 percent adder on the Investment Tax Credit for projects that serve multifamily, low-income buildings or provide at least half the project benefits to qualified low-income households.

Wilcox noted that Scale’s model is flexible and sophisticated enough to incorporate that adder for other projects that are part of the development facility; it also has the tax-equity savvy needed to tweak the model in order to be able to cover the costs of offering a free-to-owners roof replacement as part of the deal.

“There was a transparency to building a model together,” Wilcox said of working with Scale. ​“A bank or general financier wouldn’t have been as flexible.” The result of the collaboration? A $50 million facility to deploy over three years, rather than Scale providing financing for one portfolio at a time.

“This acquisition marks the first of many for Urban Energy and Scale as we partner to provide the simplest path for building owners to participate in clean energy projects,” Julian Torres, chief investment officer at Scale Microgrids, said in a statement.

Urban Energy has also improved efficiency by having an in-house construction crew and utilizing semi-custom racking that works well on the older multistory buildings they are targeting for rooftop community solar arrays.

For now, Urban Energy sees plenty of opportunity just in the greater New York City region. But Scale Microgrid works across the entire U.S., and there are opportunities to replicate this development facility in other markets, such as Washington, D.C. and California. The latter also has new rules around valuing and building community solar, including a requirement that at least 51 percent of subscribers to a project must be in a lower-income category, which may spur development in some of the state’s more densely populated urban areas.

“With Scale’s flexible and stable capital solutions, it gives us confidence to not only invest in a sustainable approach to growing our offering in New York City and Westchester County, but also hopefully open up new markets with compelling community solar economics,” Wilcox said.