Getting Started with Community Solar

Many homeowners would love to invest in solar energy, but their locations or pocketbooks may not support it.

Nearly half the homes in the United States cannot host solar installations due to poor sites, shaded cover, and lack of roof space. If they rent, they usually have no access to solar energy. Cost is another factor, with installations averaging $11,000 to $14,000 after tax credits.

However, for homeowners and renters who want to support clean energy, an emerging opportunity exists in community solar gardens.

California, Illinois, Minnesota, Massachusetts, New York, and New Jersey are the top states for community solar, though at least three dozen more have at least one garden.

It’s becoming big business. Solar Energy Industries Association, the nation’s leading organization promoting solar, says the market could grow to 3 gigawatts over the next few years. (For context, one gigawatt is one billion watts and is enough to power about 725,000 homes).

The demand, say, state officials, and solar developers, is driven by residents who want to support clean energy and have options to do that outside of putting solar panels on their rooftops.

In many states, it gives consumers a slight break on their bills. The reduction in bills grows over time, with a 10 percent drop in bills commonly reported. Community solar is one of the fastest-growing segments within the solar industry, with a growth rate twice that of general residential solar products.

So how does community solar work?

Residential (and business) customers can offset their electricity costs through subscriptions or by leasing panels from their utilities or from private developers who own the gardens. Nonprofit charitable organizations have also created solar gardens.

To support community solar, homeowners generally have two options. The most popular one offers people a subscription for a percentage of power they consume that they want to offset with solar energy. Utilities give those customers bill credits for their subscriptions.

Subscriptions require little to no upfront costs for customers unless they prefer the “pay upfront” choice of writing a check for the entire cost at one time. This method represents the easiest way for a homeowner to support solar without installing panels on their roofs.

Subscribers do not own panels; they lease them. The “renewable energy credits” associated with solar production are not transferred to subscribers either but instead are held by utilities operating the program—or solar developers who run the gardens.

The other method involves utilities creating gardens and selling individual panels to customers. Individuals can purchase one panel or several and receive bill credits for how much energy those panels produce annually.

Chances are there is a budding community solar garden somewhere in your state. Solar Energy Industries Association reports 43 states had at least one community solar garden in 2018. But not every state operates the same—they may have different legislation regarding community solar, and utilities provide the service in a wide variety of ways.

Minnesota has the largest solar garden program in the country. The state’s leading investor-owned utility, Xcel Energy, since 2013, has been required by law to allow private developers to build gardens. Xcel pays a slight premium for the power generated by community solar, while subscribers begin saving money almost immediately.

The community subscription contracts last 25 years. (This can be a stumbling block for prospective buyers, as the contract length is quite long.) Subscribers may save $5 or $10 a month the first year, but the amount grows substantially as the contract ages. Community solar advocates report subscribers saving as much as 10 percent.

 The cost savings are a nice feature of community solar because as utility costs rise, subscribers can keep the increases flat by investing in community solar—kind of like a hedge against future price increases.

As utility bills increase, customers can see cost savings on their bills as their community solar contracts deliver more value.

In more rural parts of the state, cooperative-and-municipally owned electricity providers have opted, in some cases, to sell panels directly to customers. Though it’s a different model, utilities offering this option say they have seen solar gardens sell out in just a few months.

Minnesota today has more than 700 megawatts of community solar gardens, enough to power thousands of homes. The program has more than 10,000 subscribers, the majority of which are homeowners or people living in apartments. The biggest subscribers, however, take the largest amount of power. They include businesses, universities, and government agencies.

The community solar program has limitations. Buyers must choose a solar garden located in their county or an adjacent county. They can decide to buy 120 percent of the electricity they need, but no more. If subscribers move but stay in Xcel’s service territory, they can keep their subscriptions.

If they move out of Xcel’s area, garden operators have well-established policies that allow them to terminate contracts without expensive exit costs. Since community solar is so new, garden operators have extensive websites, as do some state agencies and organizations, to assist customers with issues that may arise.

With more experience than other states, Minnesota’s clean energy organizations offer plenty of tips to subscribers, universally applicable to community solar. Perhaps the best resource is Clean Energy Resource Teams (CERTS), which developed an extensive website devoted to helping consumers understand community solar.

Although the website focuses on Minnesota, much of the information is relevant to homeowners in any state considering community solar. Another great resource is the Residential Consumer Guide To Community Solar developed by SEIA (Solar Energy Industries Association®) and the Coalition for Community Solar Access.

Tips for Getting Started with Community Solar

1. Research before selecting a developer.

Look at developers’ track records and whether they have experience with solar installations and community solar gardens. Experience matters. Ask about their maintenance plan for solar gardens and if they have enough insurance to cover losses, as well as whether developers offer web portals where subscribers can see the power their subscription provides.

2. Understand finances.  

Make sure you comprehend the financial implications of the community solar contract. Many contracts have automatic escalators that increase the amount subscribers slightly will be charged for electricity.

In Minnesota, Xcel has increased rates at 3.5 percent annually; if the escalator is below that number, and nearly all are, you will be saving money. Look for community solar pricing calculators sponsored by state agencies or nonprofits.

3. Ask lots of questions.

Inquire if you will receive updates about the project, if you can check periodically on how much the subscription produces, and whom you can contact with questions. Also, ask about what happens if the garden begins underperforming if a garden closes and gets sold.

Community solar gardens are among the most exciting innovations of the last decade for consumers interested in supporting clean energy and a more distributed generation of power. Though still in their infancy in many states, community solar programs have grown rapidly as more states and utilities offer it to residents and ratepayers.

So, community solar is worth checking out if you are a homeowner who cannot have your solar panels on your roof—whether it’s because of your roof orientation, too much shade, or some other reason.

Article by:

Frank Jossi

Based in St. Paul, Frank Jossi is a journalist, editor and content strategist. He covers clean energy in Minnesota for Midwest Energy News and writes frequently for Finance & Commerce. His work has appeared in more than 70 local, national and international publications.