Community solar is any solar project that flows to multiple customers.
These could be individuals, businesses, nonprofits, or other groups that share the solar energy and benefits of a solar system.
If you’re interested in the benefits of solar but are worried about the space and financial means that are required to install a solar system, then community solar could be for you.
Here’s everything you should know before getting started.
1. What is community solar?
Community solar is also known as shared solar.
It’s a system in which the energy generated from a local solar system or facility is shared among community members.
These solar systems are typically built on public or jointly-owned land.
The energy is then made available to the community through either an ownership or subscription model.
2. What is the ownership model of community solar?
If you’re in a community solar system that uses an ownership model, community members purchase a portion of the panels in the system.
The number of panels that they purchase will depend on their annual energy usage.
They can purchase enough to cover up to 100 percent of their annual energy usage.
A benefit of this model is that the owners of the panels will still receive SRECs and a 26% Federal Tax Credit (or 30% starting in 2022) since they own a portion of the system.
However, ownership models are often more difficult to organize and maintain.
They can also be a barrier to entry for those who aren’t able to afford the upfront cost.
3. What is the subscription model of community solar?
The community solar subscription model relies on a third party to develop and own the system itself.
As a community, you’ll purchase the power from them at an agreed-upon rate for the power plus administrative fees.
They’ll handle all the enrollment and electric billing.
This can greatly simplify the setup of the panels and daily maintenance.
However, some community members don’t like to cede this much control to a third party.
Subscribing to a community solar project is much like subscribing to anything else in your life.
However, instead of paying a premium for a service, community solar subscribers often pay less for their electricity.
Some states or utility companies require subscribers to live within a certain distance from the community solar project to participate.
Often, this distance is the utility’s coverage area.
Many companies will also place a limit on how much electricity you can receive from the project.
For example, no more than 120 percent of your average monthly usage.
4. Is community solar a good idea?
Community solar can be a good idea, but it’s not an ideal fit for everyone.
One of the best parts about this type of solar is that it makes clean energy available for many who may not otherwise be able to go solar (either for financial or space reasons).
Here’s when it makes the most sense to go solar.
Your property has obstacles that make a solar system less than optimal (Ex: shade, spacing, roof orientation, etc.)
You don’t own your home or building
A move is in your near future
You live in a townhouse or multi-tenant facility
You can’t afford your own solar system
5. How does a community solar setup work?
Here are the steps for a typical community solar setup:
A group of people or a third-party builder decides to build a community solar system to serve a centralized purpose
The builder of the system seeks out subscribers or owners depending on the model they want to pursue
The subscriber or owner gets a portion of the system’s production allocated to them
This electric production goes directly to the utility company, and it’s credited to community members via Virtual Net Metering (see below)
Community members turn on their lights and use up the electricity that’s credited to them
6. How do you get your energy bill credits?
The power produced in both community solar models (ownership or subscription) is credited to you through Virtual Net Metering.
This is also called virtual meter aggregation.
It’s a billing mechanism that allows a customer to credit kWhs from one meter to another.
The policies and availability of VNM vary by state and utility.
While some states have laws that regulate this, others do not.
Make sure you do research on how VNM works in your state for solar!
7. How many states have community solar programs?
The EPA states that shared renewables legislation — specifically community solar legislation — has been enacted in 22 states.
California
Colorado
Connecticut
Delaware
Hawaii
Illinois
Massachusetts
Maryland
Maine
Minnesota
North Carolina
New Hampshire
New Jersey
Nevada
New York Oregon
Rhode Island
South Carolina
Virginia
Vermont
Washington
The District of Columbia
Additionally, other states voluntarily participate in community solar, and these states comprise over one-third of the total installed capacity by states.
The voluntary market has seen a big boom in recent years.
8. What are the advantages of community solar?
If you’re in an area talking about a community solar option, you may wonder what the benefits are.
Here’s what you need to know.
When there’s a community solar system, many of the benefits of owning solar panels are available to you.
Depending on whether it’s an ownership or subscription model, it can make it easier for you to get your energy needs covered without having to front the entire cost.
Subscription models, in particular, are often much cheaper and the kWh price is lower than the other available rates.
Residents can opt in and out of a community solar subscription much more easily than they can with an ownership plan.
Another huge benefit is the impact you’re making on the environment.
Solar energy serves an important role in reducing greenhouse gas emissions and mitigating climate change.
It’s essential to protect humans, wildlife, and ecosystems so that we can maintain our climate for the foreseeable further.
Additionally, solar energy improves air quality and reduces water use from energy production.
9. What are the disadvantages?
Community solar isn’t always the best option for every group.
The ownership model can be difficult to organize and maintain depending on the setup.
However, a subscription method can help mitigate some of these issues.
Community solar can also be expensive, which means it isn’t attainable for everyone.
Not to mention it isn’t available in all areas.
That said, if you opt for a community solar subscription plan then you’ll need enrollment and billing to be handled by a third party or involved utility.
This can become complex and will result in fees being incurred.
On the other hand, subscription models are a cheaper way to take advantage of solar’s benefits.
Of course, you also won’t own anything, and you’ll give up your access to any solar tax benefits.
10. Where are community solar farms located?
Many community solar installations are built on fields, open fields, or roof warehouses.
You can find a map of U.S. Community Solar here.
11. What happens if you move?
It depends on where you’re moving and what type of community solar model you’ve been using.
If you’re subscribing to community solar and you move within the same utility service territory or county, then you can often continue to benefit.
However, if you’re using an ownership model or you’re relocating to a different area, then some programs have options for selling or donating subscriptions.
12. Is community solar a better option than solar ownership?
As noted above, community solar doesn’t fit everyone’s goals and objectives.
It may not be the right fit for you depending on your property.
You may want to own or lease a personal solar system instead of subscribing to community solar.
Solar ownership is when the system itself is completely paid for by the property owner.
The property owner will own the system outright and perform all maintenance and repairs on the system as needed (outside of warranties).
A big benefit of solar ownership is the financial incentives that the government provides for solar, such as the Federal Tax Credit and cost reductions.
Solar leasing is when a third party installs a solar system on your property with no upfront cost to the property owner.
The property owner can then purchase the electricity from the system at an agreed-upon rate.
In this scenario, the property owner doesn’t receive any of the tax benefits.
Those all belong to the company that owns the system.
Here’s a quick pro/con list if you’re weighing solar ownership vs. community solar.
Pros of Solar Ownership
- You receive all the financial benefits of going solar, like tax credits, SREC income, and free electricity
- You own a tangible asset that increases your property value
- It’s possible to install a personal solar system just about anywhere, which isn’t the case with community solar
Cons of Solar Ownership
- You must pay for the initial installation costs
- You must maintain your system yourself (or pay for a service tech to do it)
- You need to own the property that you’re installing solar on
- You must have a suitable yard or rooftop to install the solar panels
Final Thoughts
Community solar is a great way to reduce your energy bills if you can’t install a personal system on your land.
It allows people who never believed it was possible to enter the market to do so and reap the rewards of saving the planet while saving money.
Additional Resources
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Disclaimer: we are not lawyers, accountants, or financial advisors and the information in this article is for informational purposes only. This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment decisions.
Prior to starting Gokce Capital, Erika received a Bachelor of Architecture from the University of Southern California and a graduate degree in Urban Policy from Columbia University. She worked as both an architectural designer and engineer in New York before joining the New York City Department of Housing Preservation and Development.
Erika currently lives in the New York Metropolitan area with her spouse, daughter and cat. She is originally from Chicago and still considers herself a midwesterner at heart.
Erika also loves to read, write and travel (fun fact, she has visited all 50 states and more than 30 countries!). Her new book, Land Investing Mistakes: 11 True Stories You Need To Know Before Buying Land, is now available on Amazon.