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Community solar power is a straightforward concept: multiple consumers own a central solar system and subtract the electricity output from their utility bills. Participants split the energy credits based on their ownership share or subscription payment to the community solar project.
For example, say you purchase a 5% ownership stake in a community solar farm. If the project generates 10,000 kilowatt-hours (kWh) of energy in a month, you can claim 500 kWh toward your next energy bill.
This is the basic principle of community solar, but the exact rules may vary depending on the project. For example, some community solar programs managed by nonprofits are exclusively for low-income and moderate-income households.
Community solar works based on a principle called “virtual net metering,” also known as off-site net metering. The difference between traditional and virtual net metering is:
- With traditional net metering, you earn billing credits for the excess energy your solar system generates. You can then subtract those credits from your monthly electricity bills.
- With virtual net metering, you receive electric bill credits for solar energy generated by a system outside your property.
There is a considerable market opportunity for community solar projects in the U.S. According to the National Renewable Energy Laboratory (NREL), only 50% of residential and commercial roofs are suitable for on-site solar installations. Community solar can benefit renters, homeowners with inadequate roof conditions, or people who cannot install a system for financial reasons.
Benefits of Community Solar
Community solar projects offer financial and environmental benefits for homeowners, renters, apartment dwellers and businesses.
- Improved solar access: Community solar is an option for utility customers who cannot install their own panels due to space limitations or a lack of financing. These projects also allow renters to use solar energy without installing PV modules on landlord-owned properties.
- Going solar at a lower cost: Compared to home solar systems, community solar projects have a lower development cost per kilowatt of capacity. Community solar and other commercial installations cost around $1.84 per watt, compared to the cost of a home solar system at $2.85 per watt. Plus, you can avoid the upfront cost of system installation — which ranges anywhere from $15,000 to $25,000 or more — by opting for community solar.
- Environmental impact: Community solar subscribers use less electricity from traditional power plants that burn fossil fuels, lowering their indirect carbon emissions. Plus, many solar panels have a 25-year warranty and can last more than two decades with proper maintenance. When you join a community solar project, you gain access to clean electricity for years.
- Job creation: When community solar is allowed by law in a state, there is a larger market for professional solar installers. According to the Solar Energy Industries Association (SEIA), the solar industry added jobs five times faster than the economy as a whole between 2014 and 2019 — and job growth is expected to continue due to increases in installed solar capacity.
- Flexibility: If you decide to move after installing a solar system, you must uninstall your panels or sell them to the new homebuyer. But if you move while participating in a community solar project, you can simply assign your energy savings to your new address.
There are two main ways to join a community solar project. Some project developers only offer one option, while others let you choose:
- Purchasing an ownership share in the solar array
- Getting a community solar subscription
The amount of electricity subtracted from your monthly bills depends on your ownership share or subscription terms. In both cases, you save on power bills by using solar energy generated by a shared system.
Thanks to the 2022 Inflation Reduction Act, community solar projects are now eligible for the 30% federal tax credit. However, only the legal owner of a renewable energy system can claim the tax credit.
- If you have a direct ownership share in the solar project, you can claim 30% of your upfront costs as a federal tax credit.
- If you participate as a subscriber, the tax credit goes to the community solar developer. In other words, you cannot claim the credit.
Community solar projects may qualify for additional incentives, depending on where they are located. For example, New York offers solar rebates through the NY-Sun Program and community solar projects in certain locations get a bonus incentive of $70 per kilowatt (kW). In Massachusetts, the SMART Program offers incentives for community solar projects that benefit low-income communities.
Community solar is a growing market segment in the U.S. According to the March 2023 Solar Market Insight Report, the country installed 1,014 megawatts (MW) of community solar energy projects in 2022. New York represents 52% of the national market, with 532 MW installed.
Solar Gardens is one of the largest community solar programs in the country. The program is composed of three solar farms in Michigan, with a combined capacity of 4.5 MW or 4,500 kW.
The Solar Gardens program is managed by Consumers Energy, a public utility company with over 6.7 million customers in Michigan. Similar programs are offered in other states, including:
Community solar is a promising concept, but it requires approval from the local government and the electric utility company serving the project site. Electricity production is measured at the project site, but subtracted from multiple electric accounts in different locations. This collaboration is only possible with approval and participation from the local power company.
The Bottom Line
Community solar is a viable option if you cannot install a rooftop solar system. You can join a shared solar array as an investor or subscriber, and you can use a corresponding percentage of the electricity output toward your monthly energy bills.
In many cases, community solar is a more affordable option than installing a complete solar energy system on your property. The average cost of a home solar system is $2.85 per watt. For comparison, community solar and other commercial installations have a cost of around $1.84 per watt, according to the NREL. Note that the final price may vary depending on the community solar provider.
The best solar companies can determine the ideal PV system size for your home based on your electricity usage and site conditions. Reputable installers will let you know if your roof is not suitable for solar panels. In this case, you can look for community solar projects with a service territory that covers your home.
Leonardo David is an electromechanical engineer, MBA, energy consultant and technical writer. His energy-efficiency and solar consulting experience covers sectors including banking, textile manufacturing, plastics processing, pharmaceutics, education, food processing, real estate and retail. He has also been writing articles about energy and engineering topics since 2015.
Tori Addison is an editor who has worked in the digital marketing industry for over five years. Her experience includes communications and marketing work in the nonprofit, governmental and academic sectors. A journalist by trade, she started her career covering politics and news in New York’s Hudson Valley. Her work included coverage of local and state budgets, federal financial regulations and health care legislation.
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