Community solar pricing models.

It’s hard to lose with community solar. You get to enjoy the benefits of solar energy without installing anything on your property and paying little to no upfront costs. It works like this: a large-scale solar array sends renewable energy to the local utility grid. As a community solar subscriber, you support a portion of the solar array and receive credits on your electricity bills. A community solar project creates savings for you, local jobs, and a cleaner environment for the whole community. But, some community solar projects may be better suited to meet your energy goals than others. 

Community solar options vary from state to state and utility to utility. As you consider joining a community solar project, it's essential to understand how and when it will deliver value to you. Let’s break down the two main types of pricing models – ownership and subscription – to help you decide.

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key takeaways

  • The two main types of community solar pricing models are ownership and subscription. 

  • Most community solar programs are subscription-based. 

  • Community solar options vary based on where you live and what project you participate in. 

  • Community solar subscribers typically aren’t eligible for incentives because they lack ownership of the solar panel system. 

A subscription is the most popular option for joining a community solar project. When you subscribe, you pay for your solar electricity monthly through a power purchase agreement (PPA) or a one-time upfront payment. 

Most subscription-based community solar programs promise immediate or eventual electricity bill savings. In contrast, others may sell a subscription to support clean electricity (and not necessarily as a money-saver).

Cost, savings, and size of share

In addition to the payments for solar electricity, you may have to pay the following fees under a subscription program:

  • Membership fees: Understand any applicable membership or sign-up fees and how they will affect your potential savings.

  • Early termination fees: Some programs charge fees if you exit before the term ends, but increasingly, you can cancel without a penalty if you give your provider advanced notice. 

Subscription-based pricing models

The table below provides an overview of the various subscription-based pricing models you may encounter as you shop around.

TYPE OF SUBSCRIPTION
DESCRIPTION
SAVINGS BEGIN...
Fixed discountYou lock in a set discount over your utility electricity rate, typically 5-20%. The actual rate you pay for solar will fluctuate with the utility rates but will always come at a discount.Immediately, unless they charge a membership/signup fee.
Escalating solar rateIn year one, you agree to pay a set rate for your solar bill credits. In all subsequent years, your solar rates will gradually increase by a fixed percentage (e.g., 2.5%). It’s reasonably assumed that your utility rates will escalate more quickly (e.g., 4.5%).Immediately or in a few years – depending on the price of solar electricity under the program.
Flat per-kilowatt hour (kWh) solar rateThe rate paid for solar electricity never increases throughout the duration of the program. Your initial rate may be higher or lower than your current utility rate.Immediately or in a few years – depending on the price of solar electricity under the program.
Flat monthly feeSolar energy production is chunked into 'blocks,' for which subscribers pay a flat monthly fee while receiving a set number of solar credits on their bill. You receive savings as utility rates rise and solar payments remain fixed.Immediately or in a few years – depending on the price of solar electricity under the program.
‘Lease to own’You pay regular, flat monthly payments for solar, which cease after a set number of years, after which point solar credits are 'free.'Immediately or in a few years – depending on the price of solar electricity under the program.
Partial up-front paymentYou prepay a one-time, flat fee to lock in a deeper discount on ongoing solar rates compared to utility rates.In a few years – once the upfront payment is recouped through monthly savings.
Full up-front paymentYou pay for all projected solar electricity generation over a set duration (e.g., 20 years) at a set rate per kWh. Some companies offer a discount for upfront payments vs. ongoing payments. Your utility applies solar credits to your bill over the duration of the contract.In a few years – this arrangement is akin to purchasing a system in that savings are deferred until the initial investment is recouped.

Unlike subscription-based community solar projects that are typically owned by the developer or another organization, ownership-based community solar projects are owned jointly by multiple participants. In this case, you pay a set price upfront for your share that is typically more expensive than the monthly payments of subscription-based models, but solar loans can make this initial investment more affordable. Subscription-based programs are the most popular option nationwide, so don't be surprised if you can't find any ownership-based community solar programs in your area.

Virtual net metering is the billing mechanism that enables you to receive solar bill credits (the credits you earn from the renewable energy you contribute to the grid). Virtual net metering kicks in once the solar project is operational, and your credits should be equivalent to your share of the community solar project's total electricity output (e.g., 2%). After you recoup your initial investment through these electricity bill savings, you’ll continue to receive free electricity in the form of solar bill credits until you sell your share of the project or the project is decommissioned (which can be after 25 years or more).

Typically, installing solar panels on your property saves you significantly more money than owning a share of a community solar project. However, owning a percentage of a community solar project is an excellent option if you can't install solar on your roof but want to take advantage of solar power's financial and environmental benefits.

But do you really “own” the panels?

As the owner of a community solar share, the important thing you 'own' is the rights to the electricity your share produces. Contracts restrict what you may physically do with 'your' solar panels (so, no – you can't take them home until the project is decommissioned).

This is a good thing: once you've bought your share, your panels are worth much more where they are than at home on your roof. In addition, a solar project is built with many commonly shared, non-divisible components, like inverters, allowing the panels to produce usable electricity for all owners efficiently.

Remember that 'your' individual panels are not directly linked to your power bill. Instead, the overall monthly electricity output of the solar project is always divided between all owners according to each one's share of ownership. It's in your and everyone else's interest for your panels to stay put.

Cost, savings, and size of share

Pay attention to your proposed share's total size or wattage (W or kW). Community solar companies market project shares with various terms, including the number of 'panels,' 'kilowatts,' or 'watts’ . Once you understand the size and cost of your share, you can start to compare your options by answering the following questions:

  • How much will you pay per watt? Wattage is the measure that is indicative of power output. Knowing the price per watt ($/W) will allow you to compare community solar ownership offers apples-to-apples.

  • How much electricity will your share produce? As you evaluate different offers, you may find that one promises more solar power per watt than another because it uses solar tracking equipment or receives more sun hours. How much value will this add to electricity savings over time?

  • What is the estimated payback period for your share? How much will you save each year?

  • The share cost includes panels and all the other equipment, administrative, operations, and maintenance costs that comprise the solar project. Does the offer take all of these into account?

Incentives

Although you may be eligible for state-based tax incentives, federal tax credits will generally go to the company developing the project. Additionally, your subscription costs might be lower in certain states where solar renewable energy certificates (SRECs) are available. 

Moving or selling your house

If you move within the same utility area, you can usually continue to receive the virtual net metering credits associated with your share. An early exit from the program will involve selling your stake or gifting it to someone with the same utility zone.

EnergySage is the nation's leading online solar marketplace. Using our Community Solar Marketplace, you can compare local options, get a quick community solar savings estimate, and seamlessly subscribe to an open project in your area. Over 10 million people visit EnergySage annually to learn about, shop for, and invest in solar. Compare your community solar options today to see how much solar can save you.

Get the benefits of solar without installing panels
Please enter a five-digit zip code.
  • 100% free to use, 100% online
  • Enjoy 5 - 20% off your annual electricity bill
  • Unbiased Energy Advisors ready to help
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