If you have been looking into the renewable energy market, you have likely heard of community solar. Despite solar energy’s transition from a niche interest to a mainstream energy source in recent years, rooftop and utility-scale solar farm installations are only the first steps in a complex energy transition. While large solar installations funded by utilities and private businesses are already providing a significant and growing amount of renewable energy to various grids around the world, there are millions of individuals who have the interest and desire to invest in solar but whose homes are not able to accommodate an individual, engineered solar system.
Whether they live in rented homes, apartments, condos, or houses without sufficient space or solar exposure, community solar projects can provide those residents with renewable energy opportunities. Here’s everything you need to know about these projects and why you should make the energy switch.
What is Community Solar?
According to the United States Department of Energy, community solar is a project or program through which solar energy flows to several customers. These customers include residents, small– to medium-sized businesses, corporations, non-profit organizations, and other institutions. In most cases, consumers who participate in community projects benefit from the energy generated by solar panels at a farm.
Consumers can either buy or lease a portion of the solar panels in a solar farm. They usually receive electric bill credits for the power generated by their share of the community solar project. A solar farm’s solar panels work exactly like the ones installed on homes. The only difference is that solar farm panels are bigger, and the energy generated is distributed among stakeholders.
Unlike residential and commercial solar panels, community solar panels are generally installed on leased land. Consumers, therefore, have many reasons for joining these programs. Their motives vary, just like community solar models. Each comes with a unique set of costs and rewards.
Models for a Community Solar Project
- Utility-Sponsored Model – Owned by a utility and open to voluntary ratepayer participation.
- Special Purpose Entity (SPE) Model – Individual investors participate in an enterprise to create and develop a community solar project.
- Non-Profit “Buy a Brick” Model – Donors contribute to a community solar program owned by a non-profit organization.
The Growing Community Solar Market
The Biden administration set a goal of powering five million American homes using community solar projects by 2025. This goal requires a 700% growth of the country’s current capacity, pushing the federal government to fast-track its solar efforts.
According to the National Renewable Energy Laboratory (NREL), approximately 3,253 MW-AC community solar capacity was installed in the country by the end of 2020. This capacity can power 600,000 homes. The collective installed capacity of these projects across the U.S. has doubled yearly since 2010.
Experts from NREL and the University of Minnesota revealed a recent report showing the monumental growth of community solar over the past ten years. The report also revealed that the U.S. has 1,600 projects with a total capacity of over 3.2 gigawatts. Furthermore, the report features the financial value the projects bring to stakeholders. That value can lead to enormous bill savings of up to 25%.
The most recent status of the community solar market is as follows:
- 39 states plus Washington, D.C. have community solar projects.
- Four states hold approximately 74% of the total community solar market namely Minnesota, Florida, Massachusetts, and New York.
- Community solar projects in the U.S. have a total installed capacity of 3,005 megawatts alternating current.
- During the last half of 2020 and the first half of 2021, 11 states generated over 5% of their electricity from solar energy. California led the way at 24.3%.
Where Did It Come From?
As solar photovoltaic (PV) technology started to show promise in the early 21st century, some early projects in California attempted to solve the issue of the limitations against the full implementation of rooftop solar. Around 2007, a program called SolarShares allowed California residents to invest in community solar who couldn’t afford or accommodate solar PV systems. Small-scale, grassroots community solar projects in California ― many serving under 100 people ― were developed. However, the legal and accounting consultations required to develop the new model of solar generation were costly and complicated.
In 2010, Senator Mark Udall introduced the SUN (Solar Uniting Neighborhoods) Act. It extended an existing 30% tax credit for the projects and enabled homeowner associations and groups of individuals to receive credits from their utility for community solar investments.
With those initial efforts showing the potential of community solar, some states began pointed efforts to flesh out specific policies to encourage local solar gardens and enable more flexible solar investment. Colorado was an early leader in the space. Their act HB10-1342 in 2010 enacted virtual net metering and a host of specific requirements for the projects, which created a framework for utilities to rebate community solar investors.
As time passed, states like Florida, Maryland, Utah, and Vermont also started their own investment and policy outlines. After some initial experiments around different communities leading up to 2010, the floodgates started to open and jurisdictions around the U.S. enabled the projects. Now, as costs per watt reach a bottom and solar’s viability and market access grow, there will be even more reasons for states and countries to encourage community solar investment.
Where Are Things Headed?
While 39 states plus the District of Columbia have some form of community solar in place, and of those, 22 states have specific policies which support that model, more than 70% of the projects in those 39 states are installed in just four states: Massachusetts, New York, Minnesota, and Florida. In order to achieve their high levels of community solar deployment, those states and others have implemented some form of net metering legislation, sometimes in the form of virtual net metering, as well as implementing targeted programs like Solar For All in Washington, D.C., or the SMART program in Massachusetts.
The federal investment tax credit (ITC) can also be applied to community solar projects in many cases. Electricity generated from local solar investments will be credited without exceeding an investor’s home’s electricity consumption. As explained by EnergySage, there is also an IRS section 25D tax credit that can apply to community solar investors.
As available rooftops get filled, the percentage of people who can’t host their own generation system due to cost or logistics will become a greater share of the solar market, and jurisdictions that can give those people investment channels will create more jobs and clean energy.
10 Compelling Reasons Why People Should Choose Community Solar Projects
From saving money to saving the environment, here are ten reasons to choose community solar projects:
1. Reducing Electricity Bills
One of the most common reasons why people join community solar projects is to reduce their electricity bills. Nowadays, generating solar energy is more competitive or more affordable than generating other forms of energy. Switching to renewable energy, therefore, helps local governments save taxpayer money.
Community solar can also significantly decrease your electricity bill. When you join a project, the corresponding value of the power generated by the project is deducted from your bill. If you consume more than the assigned value, you’re only charged for the electricity you consumed above that level.
2. More Jobs
The renewable energy market, which includes community solar projects, generates jobs 12 times faster than the rest of the economy. Several utilities and states are also setting completely clean energy goals. Their actions create new demand for workers to build solar panels. In 2018 alone, the United States increased clean energy jobs by 110,000, outnumbering jobs generated from fossil fuel plants by approximately three to one.
3. Access to the Masses
Less than 50% of community solar projects in the U.S. have participation from low-income households. Of the projects that involve lower-income households, only approximately 5% involve a sizable share (over 10% share) according to a recent survey. However, states, non-profit organizations, and experts have been working hard to change those statistics.
Twelve states and the District of Columbia are developing or have developed various mandates, programs, and financial incentives to make it easier for low-income households to access community solar projects. As a result, solar energy is becoming more accessible to the masses.
By allowing individuals and small-to-medium-sized enterprises to purchase a part of a local solar farm, many people reap the benefits of solar energy without having to install costly solar panels themselves. Community solar projects also allow those without suitable rooftops for generation to get access to solar energy. These projects make clean energy accessible to all, one step at a time.
4. Local Resiliency
Another reason why people should choose community solar is local resiliency. There are three key features that make local solar projects assets for increasing community resilience.
First, solar energy can be distributed, not centralized. Pairing solar energy with microgrids or storage facilities can reduce communities’ dependence on the regular grid in times of disasters such as storms, earthquakes, and hurricanes.
Second, solar energy can be stored and distributed without the need for conventional fuel delivery systems. Unlike conventional generators ― the most popular source of backup power ― subscribers to community solar can continue getting power through the night.
And third, the projects generate tax credits, which can be used for the development of a community or town. Communities can even sponsor more solar projects if they generate enough tax credits.
5. Financial Incentives for Communities
Solar energy generation is becoming more popular. With this comes the tax payments generated by communities. These payments can then be used to fund developments for a community or town. Installing community solar farms also allows towns to decrease their expensive electricity bills by generating their own electricity. By exporting less of their electricity payments to out-of-state companies, towns can also locally keep those funds.
6. Flexibility for Renters
Since mobility in the United States is common, community solar programs give renters the chance to choose clean energy. Renters usually need permission from their landlords for a new subscription or the installation of solar panels. Fortunately, joining local solar projects does not require the permission of landlords.
If you want to be a part of a local solar farm near your rental home, you do not have to check in with your landlord beforehand. You can start saving money right away. Some local communities even offer you solar energy simply because you are a member. Various community solar programs also allow renters to cancel their subscriptions anytime, taking away the hassle of doing tedious paperwork.
7. No Installation Needed
You cannot easily install solar panels on your roof. Finding the right contractors to do it for you can be expensive and time-consuming. As a community solar subscriber, you do not need to install solar panels on your roof or build a facility to obtain solar energy. You also do not have to pay for maintenance. The responsibility falls on the operator of the local solar project, not you. You never have to worry about installation and maintenance, just paying your electric bill.
8. No Upfront Costs
A community solar project won’t just lower your electricity bills; it also includes no upfront costs. As we mentioned above, you don’t have to purchase any panels. Instead, you subscribe to the electricity produced by your project at a lower price relative to a regular utility company. Most projects also do not have membership, enrollment, or hidden fees. You also won’t be charged until the solar farm is completely constructed and activated.
9. More Choices for People Who Want to Use Solar Energy
Approximately half of the United States population — about 164 million people — cannot benefit from solar energy because they don’t have enough rooftop space or they rent. Millions of those who have adequate rooftop space can’t afford to spend thousands of dollars to install solar panels. Community solar projects offer a way for these people to access solar energy without breaking the bank.
10. Excellent Way to Save the Environment
A reliable power source is much needed for living nowadays. Of equal concern, however, is the impact the growing consumption of energy has on the environment. Science clearly states it― fossil-fueled emissions are causing the Earth to warm up at an alarmingly fast rate. From extreme weather to rising sea levels, man-made climate change threatens our way of life.
It’s not only good for the environment, but it also saves businesses money too. Generating renewable energy becomes more affordable than running existing coal plants each year. According to research, operating the majority of existing U.S. coal plants will become more expensive than creating replacement solar and wind plants by 2025. It’s a win-win for consumers and energy companies. Joining a community solar project lets you use renewable energy. This then allows you to help reduce pollution and slow down man-made climate change.
How Can Sales Focus Help?
Non-profits, special purpose entities (SPE), and utilities must deal with complex regulation hurdles and specialized systems to execute a community solar project and bring unserved solar investors into the market. Sales Focus Inc. can manage the sales and promotion of the project itself. Meanwhile, the utility or nonprofit can focus on the internal complexities required to move the project ahead.
By outsourcing the sales of the solar shares for community solar, the cost of the sales portion of the business model is fixed. SFI’s S.O.L.D.™ process is a proven model that onboards the Sales Focus team assigned to a project quickly and allows us to customize a sales, recruiting, and training plan. We can launch a dedicated, industry-specific sales team of any size in any market in 45 days or less.
Community solar projects benefit from the Sales Focus model because it frees up internal resources to deal with sensitive state and federal tax, legal, and energy regulations. The cost of spreading the word and bringing people on board with community solar is then fixed and predictable. As the project moves forward, Sales Focus can always transition a project’s sales back to its internal team when the resources are available.