Imagine an organic community garden sprouting carrots, broccoli, lettuce, and corn – a shared local resource that provides a wholesome source of energy for the neighborhood’s residents. Now replace those vegetables with solar panels churning out clean energy to power lights, ovens and computers at nearby houses.
Community solar programs are spreading throughout the United States. Nineteen states and counting have passed legislation to encourage their development and to connect multiple residential, commercial or industrial facilities to shared solar arrays. Instead of carrots, cabbage, and other vegetables, users of these “solar gardens” share panels collecting light from the sun and generating electricity to power their laptops and lights. If you want to be part of the clean energy revolution, but aren’t in a place to commit to your own solar array, community solar might be just right for you and your neighbors.
5 Ways Communities Share the Solar Love
It’s all about options with solar. From what it can power to how, solar is a flexible technology that can be developed and designed to fit a variety of power needs and pocketbooks. As solar becomes more mainstream, new business models are cropping up, allowing people to think beyond the traditional rooftop route. An individual now has the opportunity to reap the benefits of solar without having to be a wealthy homeowner in California. Depending on where you live in the country, you can now share an array with your neighbors; lease an array from a third-party; join a solar co-op – the choice can now be yours.
1 Community/Shared Solar
A community solar project – sometimes referred to as a solar garden, farm, or shared solar – is a solar power plant whose electricity is shared by more than one household or business.
Through a community solar project, participants benefit from one shared system usually located on a piece of land that is not necessarily owned by any of the users. The electricity generated generally costs less than the price participants would ordinarily pay to their utility. Community solar allows people to go solar even if they do not own property. There are a number of different ways that shared renewable energy can operate, each falling under one of two categories: ownership or subscription. Both are explored in further detail below.
The billing system that makes much of this possible is Virtual Net Metering (VNM). What Net Metering is to rooftop solar, VNM is to community solar. Through this system, which is currently operating in a number of states, consumers can receive the Net Metering credits associated with a renewable energy project even if they are not connected to its electricity meter.
These credits then offset their electricity usage as the credits are often worth equal or nearly equal to the cost of electricity from the utility company. This means that, if a participant’s share of a community solar farm is 10 kWh of electricity, it will reduce his or her power bill on a one-for-one basis by 10 kWh. VNM is a powerful system that encourages the use of these projects, but other models are emerging that allow both consumers and developers to get involved in community solar without it.
Certain rules apply to community solar projects and participants. For example, project developers and administrators work to ensure that users are geographically located within the same city, town or utility service area. Also, households can only source enough power to meet their annual needs but not more. These rules are followed in an effort to avoid the taxation associated with projects seen as investments for participants. This way any energy savings earned through community solar is not considered income.
Community solar works well for businesses and residents who wish to enjoy the financial and environmental benefits without maintaining or monitoring their own array. It also provides a solution for individuals whose homes are unsuitable for solar with rooftops that are shaded, small, have ill-suited orientation or require re-roofing. It can also work well for renters and condominium owners. However, not everyone has access to shared solar. States with the most community solar projects have had strong legislation that has opened up the market. These states include Colorado (a pioneering state in the industry), Minnesota, Massachusetts, Vermont and of course, California, the leading solar state.
Costs vary depending on whether you want to use the ownership or subscription model. In addition to on-bill credits provided via VNM, other benefits vary by state, but federal and state government incentives – including the Federal Investment Tax Credit (ITC) – serve to incentivize companies to finance the development of solar. In turn, these incentives help lower the cost of installing a system, making the electricity generated by these systems less costly.
Also depending on where you live, some community solar structures allow you to sell Renewable Energy Certificates (RECs). As this type of renewable energy is projected to increase rapidly over the coming years, so is the number of companies that will begin to offer these projects. It is critical to do your homework regarding each option in addition to researching each state’s regulations, unique incentives, and any associated taxes and fees.
Recent reports show that power generated by U.S. community solar projects has more than doubled from 347 MWs at the end of 2016, to 1,523 MWs in 2018. Nevertheless, as Erica Etelson notes, this still represents only a small slice of solar installations considering there are more than 70 GWs of solar capacity installed in the U.S. in 2019.
2 Ownership Model
Through the ownership-model, participants own a portion of a system by purchasing a certain number of panels or kilowatt-hour blocks of renewable energy generation.
Participants may purchase panels up-front or finance them through a loan. The participant then owns a set number of panels in the array or a certain number of kilowatts (e.g. 10kW) out of the solar plant’s total capacity. It is common and sometimes required for community solar gardens to be jointly owned by participants. Examples of models that are ownership-based include:
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Non-Profit: Donors contribute to a shared renewable farm owned by a charitable non-profit organization, essentially purchasing the output of one or more panels.
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Special Purpose Entity (SPE): Individuals join in a business endeavor to develop a shared renewables project. This is often done in an effort to take advantage of the tax incentives available to commercial solar projects.
This model is good for anyone who is interested in purchasing solar electricity but is unable or unwilling to install a solar array on their own rooftop or land. It’s also good for individuals who have enough capital to spend on a one-time or monthly payment.
Under state VNM programs, once the shared solar array is operational participants will begin to receive credits on their monthly power bills equivalent to their share of the solar garden’s total electricity output. Also, depending on where you live and what type of project you choose, community solar participants may also be able to claim tax credits.
Approximately 50 percent of the solar market cannot access rooftop systems due to a variety of factors. By opening the market to these customers, community solar could represent 32 to 49 percent of the solar market in 2020. In 2018, there were 1,523 MWs worth of community solar projects in 40 states.
3 Subscription Model
Through the subscription model, a third-party or utility company builds its own solar project and offers service area members the opportunity to participate. The utility typically manages participant enrollments and billing. Each program is different but most require no upfront fees to join. Participants then pay a lower price for the solar electricity.
The utility company provides customers with the option to purchase renewable energy from a shared facility that is either owned by the utility or a third-party. Customers can participate by contributing through a one-time or ongoing payment. Through some models, consumers can purchase a set amount of electricity at a fixed rate for a long term, such as 20 years. Other models allow customers to receive a payment or credit on their electric bills that corresponds to:
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1) their contribution
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2) how much electricity the solar projects produce.
Participants have no ownership over the solar system. They are instead buying the benefits of the energy produced by the system.
Depending on the structure of the utilities subscription model, this system can be very attractive to individuals who are interested in avoiding all of the fluctuating costs associated with electricity bills. It is also good for individuals who do not wish to purchase solar for the long-term but enjoy the flexibility of being able to cancel their subscriptions as needed.
Each utility company using this model charges and credits at different rates. For example, Rocky Mountain Power, Utah’s largest electric utility, plans to launch a sustainable energy program in 2016 where residential customers will lock-in a generation rate of approximately $0.117 per kWh. A typical Utah customer would pay an additional $1.95 each month on average for each solar block.
The Rocky Mountain Power Solar Program has been fully subscribed since 2017. Because of the economic and environmental benefits, more people are requesting that their local utilities provide this program as a source of renewable energy. In the past five years, community solar has grown from a few small projects to serving thousands of customers across the nation. Yet given the nearly unlimited nature of solar, more can be done.
4 Solar cooperative (co-op)
This is an ownership-based model that operates under the principles of a cooperative. Much like food co-ops, solar cooperatives are voluntary organizations controlled by their members who participate in setting policies and making decisions. Elected representatives are accountable to the membership. In primary cooperatives, members have voting rights (one member equals one vote) and cooperatives at other levels are organized in a democratic manner. Members contribute to, and democratically control, the capital of their cooperative. Part of that capital is usually the common property of the cooperative.
This model is often a community-driven project available to anyone who wishes to become a member. Members who participate pre-pay for a certain amount of their energy needs to be generated at the local solar facility by purchasing the output of a certain number of panels. These payments are then put toward constructing a solar facility on the cooperative’s property. Participating members receive a credit on their electric bills for their share of energy produced by the facility for a certain amount of years. Participants must live within the service area of the co-op.
Aside from the most common consumer-owned co-ops, which serve the needs of community members who want solar energy but are unable or unwilling to deal with designing, permitting, building, maintaining and insuring their own residential solar array, there are worker-owned and purchasing co-ops. Purchasing co-ops are for individual businesses (in this case solar installation companies) that band together to increase their purchasing power, bolster camaraderie, and share expertise. Worker cooperatives are owned and operated by the workers and the members and serve to benefit both. However, solar co-ops are not available in every state.
Each member-owned co-op has a different cost structure. Sometimes they will offer the option of one-time or monthly payment plans. Credits on electric bills also vary by state.
According to Etelson, solar cooperatives can be the most difficult model to implement. One committed individual has to start it, recruit members, and each time it’s like reinventing the wheel with each state’s different regulations and legislation.
5 Green Power Programs
Green power is considered a subset of renewable energy. Green Power Programs do not technically qualify as community solar, but instead allow customer choice for clean energy sources to be reflected in the utility market.
Green power constitutes renewable energy resources that deliver the highest environmental benefit. This power can come from a variety of sources including solar, wind, geothermal, biogas, eligible biomass, and low-impact small hydroelectric sources. Customers often buy green power from utilities that offer Green Power Programs. The cost is added to the utility bill.
This program is typically good for individuals or organizations that wish to offset their environmental impacts. Buying green power can:
- Reduce your organization’s carbon footprint associated with purchased electricity
- Secure a set electricity price (although this price can often be at a premium)
- Promote your corporate responsibility and improve your public image
- Demonstrate your role as a community leader
If looking to save money, Green Power Programs are typically not the best avenue. This program is designed for individuals who are committed to reducing greenhouse gas emissions, even if they have to pay a little extra for it.
There are more than 1,700 EPA Green Power Partners who collectively use more than 45 billion kWh of green power annually, equivalent to the electricity use of more than four million average American homes. More than 850 utilities across the nation, including investor-owned, municipal utilities, and cooperatives, offer a green pricing option, according to the U.S. Department of Energy.
Solar-Friendly Communities
Not all states are equal when it comes to community solar. Some states have worked to encourage and embrace these projects, while others have essentially squashed solar through policies and legislation. Colorado and Minnesota are two states where community solar has flourished due to supportive legislation that makes shared solar economically feasible. In fact, Colorado was the first to introduce the bill-credit model that allows utility customers to receive credits on their electric bills from participation in shared solar. Colorado leads the charge for community-owned solar power, with nearly 70 existing solar gardens generating more than 50 MW. The state has also established exchange programs with power companies that can be modeled elsewhere. According to the Solar Energy Industries Association, 19 states are encouraging shared renewables through policy and programs and over the next five years, 3.5 MW of community solar are projected to be added.
10 Tips to a Solar-Friendly Community
Grassroots advocacy cannot be underestimated. Meet with your legislators and remind Congress that the solar industry provides jobs and energy security in their states and districts.
Advocate for policies encouraging community solar projects and arrays on multifamily buildings, making solar available to low-income residents and those unable to have rooftop arrays.
Get educated about community solar options in your state. You may be living in an area that is ripe with (or completely lacking) solar co-ops, solar gardens, utility-sponsored solar, and more.
Cities or states can track community solar development and create user-friendly tools to show solar access. Tools can be publicized through communication channels including websites.
Communities can provide educational community outreach programs that explore financing options and community solar programs that are available through state, utility or regional initiatives.
Cities can work to offer electronic or over-the-counter submittal and review options for standard systems, streamlining the often time-consuming process of permit approvals.
Cities or states can cap total permit costs at a flat fee of $250 or less for standard residential systems. Denver caps fees at $50.
Communities can develop and provide clear and simple checklists of all requirements for solar installation and post them on their website.
Communities can designate a solar coordinator, a community representative who is charged with outreach and internal coordination among departments.
Replace community-specific solar licenses, if required, with nationally accredited certification for installers. It’s simpler and establishes a clear standard of competency for the solar industry.
Solar-Ready Communities
Concerns about greenhouse gas emissions and fluctuating utility bills have led a growing number of U.S. consumers to seek improvements upon conventional electricity generation. Many communities recognize solar energy as a viable source for clean energy that minimizes environmental impacts. Unfortunately, with any new and emerging system that requires a host of policies and mechanisms to properly implement, local governments across the nation are often frustrated in their efforts to increase the use of solar energy.
The Solar Ready Community Recognition Program is trying to ease that frustration and encourage the growth of solar power. The program was developed as part of the U.S. Department of Energy (DOE) SunShot Initiative Rooftop Solar Challenge II Solar Ready II project. It’s working to make the installation of solar panels quicker and easier with the goal of reducing solar energy costs. In order to achieve these goals, participating jurisdictions can align their goals with solar Best Management Practices (BMPs). This program also recognizes and rewards local governments working to create strong regulatory frameworks for solar energy adoption.
Expert Q&A: Erica Etelson
The aspect of community solar that I appreciate the most is that it theoretically increases access to solar (and its benefits) in a more egalitarian way to a greater number of people. It’s nice to see middle and low-income people benefitting from solar.
The next big thing is going to be what becomes possible when the Virtual Net Metering (VNM) regulations become finalized. That is the arrangement by which people can subscribe to a solar array on some other roof and then get a bill credit generated by that system. VNM is where the biggest opportunity is and we are all waiting to see how it all will work. I think we are going to see a whole flurry of start-ups once it’s completed.
It’s really a marketing challenge. For example, Solar Mosaic is probably the easiest way for people to access solar, but even then it’s very difficult to attract investors. From a marketing perspective, it’s astonishing how many eyeballs you have to get for one to follow through. A lot of people walk away from it mostly from inertia. People aren’t sitting down and really thinking about it. They get distracted and move on. Just like any product, the challenge is having people follow through and invest.
Yes. There are two main reasons people would want to join community solar. If they care at all about the environment, it’s a no-brainer. I encourage people to participate, even if they are going to just break even or at a small premium. Ask how much you spend on coffee or lunch and then ask yourself if the environment is worth that much to you. Of course, there are also financial benefits but these are based on individual determination and I recommend people find out what is available in their communities.
With everything in such an early stage, all of the terms like solar garden, solar farm, community solar, etc., are really just a reflection of the newness of this concept. So far, there is no correct, standardized term.
Resources: Helping Communities Go Solar
For those interested in becoming local advocates for community solar, there are many online resources to help you get informed, up-to-date, and prepared with the information and tools you need to make a difference.
- Community Solar Hub charts the progress of community solar projects and provides resources, information, and customized toolkits to simplify the process of developing shared solar projects.
- Solar Friendly Communities recognizes and rewards communities that make an effort to streamline their solar energy permitting system. The website provides the “12 Best Practices: Roadmap to a Solar Friendly Community.”
- The Community Power Network (CPN), a network of grassroots, local, state, and national organizations that provides resources and tools to help build, and promote locally-based renewable energy projects and policies.
- The National Renewable Energy Laboratory website provides a database with publications from 1977 to the present on subjects related to renewable energy and energy-efficient technologies.
- Focusing in part on renewable energy, Energy.gov is a reliable source that provides educational and interactive maps and quizzes, information on recent solar innovations, and guides on how to buy and make electricity.
- Solar Gardens offers an introduction to solar gardens along with a number of videos and presentations on various shared solar topics including how to work with your local utility.
- The Solar Outreach Partnership accelerates solar energy adoption on the local level by providing timely and actionable information. Discover their mix of educational workshops, peer-to-peer sharing opportunities, research-based reports, and online resources.