Key considerations in choosing a community solar program
Last updated 3/6/2020
As solar photovoltaic (PV) systems become increasingly affordable and community solar-friendly policies are introduced in more states, more companies and utilities are beginning to offer community solar programs. As options like these become increasingly available, it's important that you, as a solar shopper, know what to look for in order to get the best deal.
“A solar installation at your property – roof-mount or ground-mount - is likely to offer you the best financial benefits, so you should consider that option before signing up for a community solar program. Nevertheless, we recommend that you comparison-shop the available options to ensure you’re getting the solution that offers you the best fit for your needs.”
Finding a community solar project
At this point in time, with community solar still a relativley new concept in many areas of the country, there may not be many community solar options available in your community.
However, as the name indicates, one of the things that makes community-owned solar interesting and unique is that they can be built in virtually every community. If you are interested in kick-starting a community solar project for your own community, reading through NREL’s report on the topic is a good place to start.
Key considerations in selecting a community solar program
How much money will you save?
Community-owned solar gardens are distinct from green power programs, which charge a premium price for switching a home or business’s electricity supply to renewable energy. The purpose of a community solar power project should ultimately be to save you money—whether you purchase a share of the solar panels or a stake in the project, or you subscribe to buy the electricity produced from the solar garden.
An increasing number of states are implementing policies to allow virtual net metering (VNM), which is a key policy that enables community solar programs. VNM ensures that participants receive on-bill solar credits for each unit of solar power that their share of the solar project produces—even if the panels are not located on their own property. Credit values depend on your state and the community solar program; typically, it's either a volumetric credit (i.e. a kilowatt-hour), or a monetary credit on your bill.
As time goes on, however, more and more project developers and utilities will find ways to make community-owned solar a viable option even without VNM, mainly by assigning alternative values to the solar power generated by the project—rates that are not connected to your electricity tariffs.
Purchase a share of a community solar project
If you have purchased a share in the community solar project, your panels will pay for themselves as the system produces power and decreases your monthly utility bills. As with rooftop solar, it is important to understand the return on your investment and how long it will take until you break even on your upfront investment, after which point all power produced will be ‘free’ for the remainder of the system’s life.
While the cost of building a large solar installation is significantly less than the cost of installing a small solar PV system at a home, the overhead cost may be higher if the land where panels are installed is rented or purchased. Additionally, the solar farm operator may still be responsible for maintaining the solar installation. They may either charge you upfront fees or annual fees to maintain the system. These costs can impact your savings and payback periods. A point to remember, you will still be able to benefit from the available tax credits.
If you do not own, but rather sign up for a subscription to a community-owned solar program, your savings may be lower. The upside, of course, is that you will not be required to purchase the system up-front, and can start saving from day one.
Subscription to a community solar farm may have similarities to a solar lease or PPA agreement: the project developer/administrator is responsible for the solar installation and maintenance costs, and sells the electricity to you at a rate that is lower than what the utility offers. Both you and the developer share the savings generated by the community solar project.
It is important for you to understand how much you will pay for the solar electricity from the solar farm and how much you will save every year. Solar power, being a fuel-free electricity source, is not subject to the price increases associated with electricity generated by power plants that run on gas or coal. The community solar program developer / administrator may choose to charge you a higher rate every year you subscribe to electricity from them. These increased prices more likely reflect an increase in their revenue than a need to cover increasing costs.
This is especially true in cases where the price you pay is linked to the electricity rates charged by the utility —for example, the community solar program may offer you a 5 percent or 10 percent discount on the rates from the utility. As the utility prices increase every year, the price you pay for electricity from the solar garden will also rise. Some programs may instead ‘lock in’ a set rate for solar over the duration of the contract, with or without gradual increases tied to an agreed-upon electricity price inflation rate. Of the available programs, fixed-rate arrangements are clearly the most beneficial for you.
How much of your electricity will come from solar?
Although a community-owned solar garden will not send the electricity it generates directly to your home or business through a cable, community solar-friendly policies ensure that, when everything is accounted for, this is effectively what happens: power produced from your share of the project is associated with your power bill, just as it would if the panels were on your roof or property. For this reason, it is reasonable to think of power from the solar garden as having been delivered directly to you.
Accordingly, your share in a community solar project can and should be sized to meet your electricity needs. The community solar company will most likely ask for a copy of your electricity bills from the last 12 months. The allowable size of your share in the project—regardless of whether you own or subscribe—will typically be limited under program rules so that your solar production does not grossly exceed your actual electricity needs.
“Your share in the solar garden will typically be limited to the amount of electricity you use annually.”
What happens if you sell your house or move?
If you relocate within the same utility area, you will be able to keep your share of the solar garden. But if you move away from the utility service area where the solar garden is located, you may have to sell your share in the solar project or pay an early exit fee if you have signed up for a subscription.
Does the program offer a performance monitoring option?
It is important that you are able to measure and track the amount of electricity your share of the community solar project is producing. This will provide you with a greater sense of satisfaction and certainty about the benefits. This is particularly important with community solar, where the flow of electricity and value is more abstract than with a rooftop system.
Who benefits from the sale of Solar Renewable Energy Certificates (SRECS)?
If you live in a state with an SREC market, you should inquire as to who gets the cash from the sale of these certificates. Depending on the pricing structure, they might be bundled into upfront costs associated with the solar garden, paid out to you on an ongoing basis, or retained by the solar company operating the solar garden.
Does the project encourage participation among low-income households?
State policies designed to facilitate community solar projects frequently mandate that a percentage of a project be carved out and allotted specifically for low-income households in order to make sure that the benefits of solar are shared by a broad section of the population.