What is the Difference Between FTM, BTM & Community Solar?May 9, 2023
Installing renewable energy systems on a property is more than just a great way to contribute to ESG goals – it can also provide your facilities with a competitive advantage for attracting high-value tenants and cutting down electricity costs. However, the specific advantages offered vary dramatically depending on the type of system installed.
One of the most common questions we are asked is the difference between Front-of-the-Meter (FTM), Behind-the-Meter (BTM), and Community Solar (CS) systems. Even though electricity follows the path of least resistance and will be physically used by the easiest load to reach from where it is generated, renewable energy is credited to end users based on utility meters and by issuing renewable energy certificates (RECs). As a result, the difference between the physical consumption of renewable energy and its accounting can be confusing as well as have fairly different economics. Below, we define each of these terms, distinguish the benefits and drawbacks of each, and help you decide which system works best for your property.
Defining FTM, BTM, and CS Systems
FTM, BTM, and Community Solar are all terms used to denote electrical grid infrastructure and its relationship to renewable energy sources. For FTM and BTM systems, the designation indicates the relationship between where energy is produced and how it is credited to the end user. Community Solar (CS) is a special designation because the electricity they produce is shared via a subscription model, but for all intents and purposes, CS systems behave in a similar manner to BTM systems.
All three systems can serve as part of an integrated renewable energy solution for property owners of all types.
What is a Front-of-the-Meter System?
A Front-of-the-Meter System, or FTM system, describes a configuration where energy is produced on-site but is credited as being used elsewhere . Energy is injected into the grid ahead (or upstream) of the customer’s meter, meaning the utility takes custody of it before it can be credited to that facility or building.
In a general example of an FTM system, a property owner might lease out a plot of land or rooftop space where a distributed energy company installs and maintains solar panels. All of the energy produced onsite will be sold to a utility company, and the owner will receive a site lease payment.
The scale of FTM systems is often large, allowing vast quantities of energy to be produced. However, because all of this energy is sold, the electricity produced cannot benefit the property owner or tenants directly. This usually results in proportionally less economic value to the host site because it cannot offset its utility charges–such as transmission, distribution and demand charges–in addition to its own energy consumption nor can the host site earn the renewable energy credits to support any ESG goals.
What is a Behind-the-Meter System?
A Behind-the-Meter System, or BTM system, describes a configuration where energy is produced and consumed on-site.
Like FTM systems, “Behind-the-Meter” describes the orientation of a utility meter and its relationship to the grid. In this configuration, the renewable energy system operates behind the utility’s meter, thus offsetting not only the host site’s energy usage but also reducing its use of the utility’s other charges such as transmission, distribution and demand, which often can be more than half the bill..
Often, property owners looking to install a BTM system will partner with a distributed energy company that finances, installs, and maintains rooftop solar panels and energy storage systems. Tenants can then directly benefit from the power that is captured and stored throughout the day.
In addition, BTM configurations can be bundled with EV charging stations to provide additional benefits to users. According to a report by the IEA, electric vehicles will represent 60% of total vehicle sales by 2030, with over 350 million vehicles projected to be on the market. Pairing a BTM system with EV charging stations offers a forward-thinking value add that will increase property value even further. Installing a BTM system not only can reduce utility system upgrades necessary to power the significant increase in load but also offset utility operational charges design to capture more value from EVs such as tailored time–of-use charges that increase rates when consumers return home and charge their vehicles or demand charges from the spike in load from when many people plug their cars in at once.
One challenge to BTM systems is specific to multi-tenant residential properties: unless there is a master meter on the property, it can be challenging to set up compared to properties designed for single-tenant use. Setting up BTM systems in these properties requires setting up submeters in each unit or using a “virtual net metering” system. Some states offer incentives to help cover the costs of these programs.
What is a Community Solar?
Community Solar (CS) serves as a third alternative to FTM and BTM configurations. CS systems are typically installed on large plots of land or rooftops, and are designed to be credited to multiple users in a specific utility area. They serve the needs of immediate subscribers, and any excess energy generated can be diverted to utility companies. What most distinguishes CS is that their energy is distributed via a subscription model that nearby residents or tenants can take advantage of to receive electrical cost savings.
Generally, CS systems are installed on a single property. The owner of the land can be designated as the anchor subscriber and can take advantage of up to 40% of the system’s annual energy production. The owner also benefits from the electrical savings accrued by community solar credits allocated from the project.
Residential or commercial customers in the same electric utility service area can subscribe and access the clean electricity produced by the solar panels and receive a discount on their utility bills through energy credits. There is no cost to participate, and those who opt-in gain savings of approximately 10%.
Community Solar provides tremendous economic and environmental benefits to communities. Because they don’t rely solely on rooftop installation, this can increase access to solar energy in areas that might normally not be able to take advantage of renewable energy, particularly low-to-moderate income households. Property owners benefit from site lease payments, access to the CS’s energy production, and providing a valuable tenant/amenity benefit.
FTM, BTM, or CS – Which is Right for Me?
From residential, commercial, and industrial properties, deploying renewable energy systems can offer tremendous benefits to owners ranging from site lease payments, cheaper energy bills, increased energy resiliency, lucrative and competitive property incentives, and meeting ESG and regulatory goals. However, the decision to opt for FTM, BTM, or CS often varies on the goals of a property owner and the layout of the property itself.
When determining which electrical grid infrastructure is most suitable for you, consider the property itself and the use case it offers. The most suitable system type depends first on the layout of a property and how much space is available.
- Residential Properties – Owners of residential owners can use solar to offset the common area load, and have the option of engaging tenants. This offers a competitive advantage for residential properties with multiple tenants who are looking to switch to renewable energy. In addition, these systems configure well with EV charging stations, which offer tenants additional incentives and can raise the value of your property. CS is suitable for areas with multiple residential or commercial properties and can benefit entire communities.
- Commercial & Industrial Properties – A building with a vast amount of flat rooftop space can often be an ideal setting for solar panels, and installation has been found to reduce HVAC expenses throughout the year. It can also result in higher lease payments, increasing the value of a property. BTM systems reduce overall energy costs while also providing a key asset: boosted energy resiliency. This protects businesses from experiencing the expensive fallout from blackouts and brownouts, reducing unplanned downtime and increasing efficiency over time.
While FTM systems provide value to property owners, integrated renewable energy solutions directly benefit ESG goals and offer benefits beyond selling energy back to utility companies. By connecting solar panels with the function of your property, you can leverage missed revenue opportunities, reduce energy costs, and increase net operating income and asset value.
Interested in taking the step towards renewable energy, but aren’t sure what option is suitable for you? We can help.
Catalyze develops, builds, finances, owns, and operates renewable energy assets on real estate, acting as long-term tenants on properties. Our ability to finance projects allows property owners to avoid costly upfront capital expenditures while capturing the immediate financial and operational benefits of onsite renewable energy. Contact us today to learn more about our services.