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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.

Market Status

As of July 2019:

  • Community solar projects are located in 40 states, plus Washington, D.C.
  • 16 states, plus Washington, D.C., have policies that support community solar.
  • Community solar projects represent more than 1.3 gigawatts alternating-current (GW-AC) of total installed capacity.
  • More than half of the total market is concentrated in just two states: Minnesota, with more than 500 megawatts (MW-AC) installed, and Massachusetts, with more than 250 MW-AC installed.

NREL's list of community solar projects provides details on project sizes and locations.

A 2015 NREL and U.S. Department of Energy analysis estimated 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, and depending on their design, some projects may have to comply with U.S. Security and Exchange Commission regulations.

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.

Benefits

Based on design details, community solar projects can benefit customers, utilities, and third-party entities, by 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.

Publications

Up to the Challenge: Communities Deploy Solar in Underserved Markets, NREL Technical Report (2019)

Design and Implementation of Community Solar Programs for Low- and Moderate-Income Customers, NREL Technical Report (2018) 

Modeling the Cost of LMI Community Solar Participation: Preliminary Results, NREL Technical Report (2018)

Low-Income Community Solar: Utility Return Considerations for Electric Cooperatives, NREL Technical Report (2018)

Status and Trends in the U.S. Voluntary Green Power Market (2017 Data), NREL Technical Report (2018)

Focusing the Sun: State Considerations for Designing Community Solar Policy, NREL Technical Report (2018)

Project Summary: Community Solar Stakeholder Impacts in Cook County, Illinois, NREL Technical Report (2017)

Virginia Solar Pathways Project. Economic Study of Utility-Administered Solar Programs: Soft Costs, Community Solar, and Tax Normalization Considerations, NREL Technical Report (2016)

Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation, NREL Technical Report (2015)

Community Shared Solar: Policy and Regulatory Considerations, NREL Technical Report (2015)

Additional Resources

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

Community Solar Business Case Tool

A Guide to Community Shared Solar: Utility, Private, and Nonprofit Project Development, a report published by the U.S. Department of Energy's Sunshot initiative

Model Rules for Shared Renewable Energy Programs, a website published by the Interstate Renewable Energy Council (IREC)

Shared Solar Program Catalog, an online IREC tool

Community Solar Scenario Tool, a recorded webinar presented by NREL's Solar Technical Assistance Team

Community and Shared Solar, a website published by the U.S. Department of Energy's Office of Energy Efficiency & Renewable Energy

Utility Community Solar Handbook, published by the Solar Electric Power Association

Community Solar: NREL's Working Group on Community Solar Gardens meeting transcript, March 5, 2015

Community Solar: NREL Decision-Makers Working Group meeting transcript, Feb. 17, 2015

Shared Renewables HQ: Community Energy by State