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Community Solar

Community solar, also known as shared solar or solar gardens, is a distributed solar energy deployment model that allows customers to buy or lease part of a larger, offsite shared solar photovoltaic (PV) system.

Community solar arrangements allow customers to enjoy advantages of solar energy without having to install their own solar energy system. Community solar projects provide an alternative to rooftop PV systems for customers who:

  • Have insufficient solar resources or roof conditions to support a rooftop PV system (due to shading, roof size, or other factors)
  • Do not own their homes or buildings
  • Are unable or unwilling to install an onsite solar PV system for financial or other reasons.

Community solar subscribers typically receive a monthly bill credit for electricity generated by their share of the solar PV system, as if the system were located on their premises.

Background

As of July 2018, 19 states and Washington D.C. have enacted policies that support community solar. Shared solar projects are located in 42 states, plus Washington D.C., and represent 1,023 MW of total installed capacity, as of October 2018.

A 2015 NREL and U.S. Department of Energy analysis estimates that 50% of residential and commercial rooftops are suitable for onsite distributed PV systems. Community solar is one model for addressing the lack of solar PV access that many U.S. customers face.

Implementation Issues

Other clean energy policies interact with community solar.

  • Net metering is a commonly used mechanism that credits distributed generation owners for the power that their systems contribute to the grid. Community solar participants can be credited through net metering or alternative arrangements such as value of solar tariffs; group billing; or joint ownership. Eligibility depends on utility and state-level requirements.
      • Virtual net metering (VNM), also referred to as "remote" net metering, allows customers to receive bill credits for generation from an offsite solar energy system. Some form of VNM must exist for community solar to work properly so that multiple customers can offset their electricity loads from a system located elsewhere.
  • Tax credits, like the federal investment tax credit (ITC) for solar PV systems, may apply differently to community solar participants depending on the structure of the community solar program. Variables include whether the participant owns the panels or output ( in kilowatt-hours) and if a participant claims an individual or commercial tax credit. There is still uncertainty regarding the exact circumstances in which a community solar participant can claim the ITC.
  • Depending on their design, some community solar projects may have to comply with U.S. Security and Exchange Commission regulations.

Benefits

Based on design details, community solar projects can benefit customers, utilities, and third-party entities, such as providing:

  • Greater electricity rate stability and potential bill savings for program participants
  • Wider solar accessibility for different electricity customer classes, especially if portions of projects are set aside for low-income customers
  • Grid benefits by siting projects in specific locations
  • Renewable Portfolio Standard compliance through increased renewable energy generated from community solar projects (To do so, utilities must retain ownership of the renewable energy credits, which represent the environment components of this energy generation.)
  • The possibility for utilities to recover a larger portion of program costs from participating customers rather than nonparticipating ratepayers, compared to other incentive programs. This recovery will depend on the pricing structure employed.

Design Best Practices

Community solar projects can be owned by utilities or third-party developers and can be located on public buildings, private land, brownfields, and other suitable areas. There are many program designs that vary by type of bill credit (usually kilowatt-hours or dollars), contract length, cost of participation and financing options, eligibility, number of participants allowed, and products offered (e.g., panels or generation). 

Common ownership arrangements include:

  • Utility-sponsored model, utility owns or operates a community solar array and utility customers may voluntarily participate.
  • Special purpose entity (SPE) model, individuals come together to form a business enterprise to develop a community solar project, which allows the business entity to take advantage of state and federal tax incentives.
  • Non-profit model, a non-profit entity administers a community solar project to benefit members or donors.

Typically, program participants who move within the same utility service territory or county can retain their community solar share, or options for selling or donating program subscriptions may be available. Community solar projects and programs can also be designed with set-asides for low-income customers in order to expand solar PV accessibility.

Sources

Cook, Jeffrey J. and Monisha Shah. 2018. Focusing the Sun: State Considerations for Designing Community Solar Policy. Golden, CO: National Renewable Energy Laboratory. NREL/TP-6A20-70663. www.nrel.gov/docs/fy18osti/70663.pdf.

Denholm, Paul. and Robert Margolis. "Supply Curves for Rooftop Solar PV-Generated Electricity for the United States." NREL/TP- 6A0-44073. Golden, CO: National Renewable Energy Laboratory, 2008. Accessed 2014: www.nrel.gov/docs/fy09osti/44073.pdf

Feldman, David, Anna M. Brockway, Elaine Ulrich, and Robert Margolis. 2015. Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation. National Renewable Energy Laboratory and U.S. Department of Energy. Accessed July 30, 2015. www.nrel.gov/docs/fy15osti/63892.pdf

National Renewable Energy Laboratory. 2015. Community Shared Solar: Policy and Regulatory Considerations. Accessed July 30, 2015. www.nrel.gov/docs/fy14osti/62367.pdf.
Shared Renewables HQ. 2015. "Community Energy by State." Accessed July 30, 2015. www.sharedrenewables.org

U.S. Department of Energy. 2015. "Community Renewable Energy." Green Power Network. Accessed July 30, 2015. http://apps3.eere.energy.gov/greenpower/community_development/community_solar_faq.html

Additional Resources

The following tools and resources about community solar may be helpful.