What is community solar?

Written by Emily Walker

Going solar can be a great way to reduce your reliance on fossil fuels, combat climate change, reduce your own carbon emissions, and save on your utility bill.  But for anybody who can’t install solar panels on their property, or homeowners who would prefer not to, community solar provides a way to receive the benefits of solar. Community solar is also a great option for low- and moderate-income Americans, as well as renters.

How does community solar work?

A community solar project is a large, central solar power plant, whose electricity is shared by more than a single property. While the size of a residential solar installation is measured in kilowatts, community solar projects are measured in megawatts, meaning that a single community solar project can power hundreds or even thousands of homes. Community solar is also often referred to as roofless solar, solar gardens, or shared solar.

Since you don’t need to have a suitable rooftop for solar to participate in a community solar project, it’s a great option for renters and people who live in shared housing. By purchasing a share of or subscribing to a community solar project, everybody can benefit from solar while paying less for electricity.

Differences between community solar and other programs

Community solar is similar to, and often confused with, other types of clean energy electricity rates and incentives, such as:

• Group purchasing: group purchasing deals allow a large number of households or businesses to purchase their own individual solar systems at bulk rates through enrollment negotiations with a solar installation company, for instance, Philadelphia’s Solarize program. Unlike a community solar project, in which all participants benefit from one central system, in a group purchasing program, each participant purchases their own individual solar projects.
• Green power: green power rates allow a utility’s customers to purchase electricity from renewable energy generation sources—mainly large-scale hydro, wind, and solar. Those who sign up for green power programs generally do so to ‘do the right thing,’ rather than to save money on their energy bills, since these options often come at a price premium. Importantly, participation in a green power plan does not necessarily result in the build-out of additional renewable power plants, as the electricity may be sourced from pre-existing facilities. Most community solar projects, on the other hand, are developed with a primary aim of saving participants money on their power bills.
• Crowdfunding / online solar investment platforms: some companies have opened up renewable energy investment through online platforms that allow you to invest in new solar installations. These types of projects are purely an investment: you don’t receive the electricity from any of these projects to offset your bill. Note: the gains from these projects are typically taxable (as investments), whereas electricity bill savings from a community solar project are not taxable.

What model of community solar is right for you?

At a high level, when you join a community solar farm, you either are given access to the electricity from a certain number of panels in the array, or you purchase a specific amount of electricity, usually at a discount compared to your normal utility rate.

Community solar projects and programs are typically offered in two formats:

1. Ownership: This model allows participants to purchase a select number of the panels or a portion of the community solar project. When you buy into a community solar project, you’ll get electric bill credits/savings from all of the power produced by the solar panels you own.
2. Subscription: This model allows participants to become subscribers and pay a lower price on your electric bill each month. Instead of owning panels or a share of the project, you are just purchasing electricity at a lower rate than you would pay to purchase electricity from your utility.

Ownership-based community solar models are very similar to purchasing a rooftop panel system—except, of course, that no system will be installed on your roof or property. Instead, you own a set number of panels in the array or a certain number of kilowatts (e.g. 5kW) out of the solar project’s total capacity.

For these types of projects, you can only purchase enough shares to meet your annual electricity usage, and no more. The project’s actual output will be credited to you on your electricity bill.

Subscription based community solar projects are the most common, and the most popular option for stakeholders on the EnergySage Community Solar Marketplace. 

Program details vary from project to project, but most require no upfront fees to join and offer bill savings right away. In this case, subscribing to a community solar project is like signing up for a green power program, except that instead of paying a premium for clean electricity, community solar subscribers typically pay a lower price for their electricity.

Depending on your state or utility company, you may need to live a certain distance from the community solar project (i.e., within your utility's coverage area) in order to participate in the community solar program and receive energy generated off-site. Many community solar companies also place a limit on how much electricity you can receive from the project (i.e., no more than 120 percent of your average monthly usage).

Most subscription-based programs are easy to sign up for, and easy to cancel. See if there are open projects in your area with the EnergySage Community Solar Marketplace.

What are the benefits of community solar?

There are two primary benefits of community shared solar for participants: first, community solar makes it possible for more people to access the benefits of solar power; and, second, participants in community solar projects lock in savings on their electricity bills every month. Additionally, community solar even benefits the utility companies with projects in their territories! It is important to mention, however, that community solar subscribers will not be able to reap the same benefits as rooftop solar owners such as the solar income tax credit (ITC). 

Financial benefits of community solar

Community solar access is made possible by a policy called “virtual net metering” (VNM). Like net metering for rooftop solar power, virtual net metering policies allow households, businesses, or nonprofits to receive the net metering credits associated with a renewable energy project installed at a remote location. 

The same way net metering allows you to use the solar produced on your roof to offset any electricity you pull from the electric grid when the sun isn’t shining, virtual net metering allows you to use solar energy produced at a remote location to offset electricity you pull from the power grid, hence “virtual.” 

The end result of virtual net metering is that community solar participants are able to reduce the amount they pay for electricity every month, locking in savings for years to come. 

Utility benefits of community solar

In addition to helping program participants save money on electricity, there are a few ways community solar also benefits electric utilities.

For one, utilities can strategically site roofless solar gardens on the grid in areas with fewer generators connected. This helps stabilize the grid overall, which in the long term saves the utility money and time on costly grid maintenance and repairs.

And second, community solar farms are one way for utilities to meet the requirements of any renewable portfolio standards their state may have in place. Community solar on the grid counts as renewable solar energy, which is becoming required in certain percentages in more places every year.