Community Solar: An Alternative to Owning or Leasing Residential Solar Energy Systems
Published on 12 May, 2018 by Andrew Sendy
5 minutes read
Ready to go solar and start using a residential solar energy system? Great! The next question is probably, "How do I get started?" Right here at SolarReviews. When consumers think about residential solar, they often think about owning or leasing. There is another alternative that may not be as well-known: community solar.
A 2008 National Renewable Energy Labs (NREL) study noted that only 22 to 27 percent of residential rooftops in the United States are suitable for solar energy systems.
Whilst this number is quite pessimistic because it only considered roofs that had almost dead south facing, unshaded roof space (whereas nowadays it is common to use east and west facing roof spaces as well) it does highlight a very real issue, that a significant portion of Americans do not have a roof of their own that is suitable for installation of solar panels.
Reasons for this could be that your roof doesn't face south or is too shaded. You might also be a renter instead of a homeowner or live in an apartment building or condo where there isn't enough roof space for solar. For those with roofs unsuitable for solar, community solar presents a viable alternative.
Whether you ultimately decide to be part of a community solar system, own the system outright, or lease a system, know that all of these options save money and the planet. Each has advantages and disadvantages. This article gives a short overview and introduction to community solar and SolarReviews, the best online guide to solar energy for consumers, and our user-friendly solar cost calculator Solar-Estimate.org.
What is community solar?
Community solar is defined by the Solar Energy Industries Association (SEIA) in its Residential Consumer Guide to Community Solar as a solar photovoltaic (PV) project with multiple subscribers that receive credits on their energy bill for the portion of energy produced by the community solar system.
In other words as a community solar subscriber, your home is not the host - the solar system is not on your rooftop. Solar energy is generated offsite and distributed to your home much like traditional electricity. There are different models for how community solar systems are owned such as by traditional utilities and non-profit entities but under most models you "subscribe" and receive a portion of the power generated along with others while paying a monthly subscriber fee.
How many kW of solar panels in the community solar do I need to buy?
It is very important to be informed about your own energy use when considering community solar. Some community solar providers will allow you to buy a block of energy in kWh to meet your annual usage. To determine how much you should buy, you need to know your annual power usage in kWh. Annual usage may be calculated by reviewing your monthly electric bill and adding the monthly totals. This article shows the average annual electricity use in each state and the average amount of power that each kW of solar panels produce per year in each state.
When using the first article above keep in mind this is based on Energy Information Administration data for all residences and so it usually underestimates the actual power use of single-family homes. The average power use numbers are dragged down by multi-family buildings and so you may need more kilowatts of community solar that what average numbers suggest.
Typically, you will receive a credit on your electric bill for community solar usage. Under your subscriber agreement, you should understand how much that credit will be. Savings will be determined based on the difference between your monthly subscription fee and the credit on your electric bill. Fees may be fixed or escalating over the term of the contract. Optimally, the fixed rate will be less than the traditional utility rate and the escalation rate will be less than the Department of Energy projected rate increase of approximately 3 percent a year for traditional electricity.
How many kW of solar panels in the community solar do I need to buy?
How do I know if there is a community solar project I can subscribe to?
While subscription rules vary from state to state, you typically have to be in the same utility service territory, sometimes in the same county, or adjacent county to the system you would like to subscribe to. To determine the community solar providers in your area, head over to Community Solar Hub.
SEIA's Residential Consumer Guide to Community Solar offers additional tips on how to be an informed consumer and questions to ask before entering into a subscription agreement.
What are the pros and cons of community solar?
Source: Community Solar Hub
As stated earlier, community solar offers the most benefits to those who are renters and/or have shading issues on their roofs preventing installation of a solar system. In addition, those who want to avoid the up-front costs of purchasing a solar system can benefit from community solar, too.
Community engagement provides yet another reason for choosing community solar: you are with a group of people who want to reduce carbon emissions and save the planet.
In its Guide to Community Shared Solar, the Department of Energy notes these additional benefits to Community Solar:
- Improved economies of scale
- Optimal project siting
- Increased public understanding of solar
- Local job generation
Opportunity to test new models of marketing, project finance and service delivery.
What are the cons (disadvantages) of community solar?
The good news is that as a community solar subscriber you won't have any up-front cost. The not-so-good news is that you won't own the system. That also means you won't benefit from any federal or state subsidies. Greatest lifetime savings are obtained through the ownership option. Unfortunately, as a community solar subscriber, this is not one of the benefits you will receive.
Please see the chart below for community solar, own and lease alternatives in a side-by-side comparison. While it is impossible to generalize on the many community solar models offered in different states, the chart should serve as a rough guide.
Community Solar, Own & Lease Alternatives for Residential Solar
|Reduce carbon emissions||YES||YES||YES|
|Available to renters||YES||NO||NO|
|Ok for shaded roofs||YES||NO||NO|
|Able to own the system||NO||YES||NO|
|Benefit from incentives and subsidies||NO||YES||NO|
|High up-front costs||NO||YES||NO|
|Highest lifetime savings||NO||YES||NO|
|Simplicity of transaction||YES||NO||YES|
What are some examples of community solar projects?
SEIA notes that 26 states have at least one community solar project with California, Colorado, Massachusetts and Minnesota expected to install the most community solar over the next few years.
In June of last year, the town of Grand Island, New York approved permitting for a 4.4 MW community solar project, which is ten times larger than any other existing community solar project.
Don't Forget About Owning and Leasing Alternatives
If your home is suitable for solar but you are also considering community solar, you should definitely look at owning and leasing alternatives.
Under the ownership model, you will receive any available federal and state incentives and subsidies. The 30% federal Investment Tax Credit (ITC) reduces the solar system cost by almost one-third. That's huge and is, by far, the biggest currently available federal or state subsidy but it will decrease at the end of 2019. The ITC is in addition to any subsidies your state offers.
You will also benefit from the greatest lifetime savings of the three alternatives. Remember that after the typical 5-7 year payback period consumers receive pure electricity savings over what will be a 25-year useful life of their solar panels - the investment return is greater than the other alternatives.
If you choose ownership, you will have the up-front cost either out-of-pocket or through solar financing. Finally, the transaction will likely be more complex - there are more moving pieces and things to think about. Check out SolarReviews discussion of the pros and cons of owning here.
If you choose to lease there are several advantages. Most notably, you can avoid the up-front cost that comes with ownership. As a former sales guy with an installer in Maryland, I found that the primary obstacle to ownership was up-front cost. Your lessee may provide maintenance, so it's nice to avoid that hassle. Finally, the transaction will likely be less complex than buying the system outright.
However, there are also disadvantages to leasing. Like a car lease, solar leasing often sounds better than it is. According to Consumer Reports, a universally respected source among consumers: People who lease their solar systems save far less than those who buy them outright or with a loan. Here are a few reasons why.
Under a leasing arrangement, the homeowner doesn't own the system, the leasing company does. Consumers will miss out on any incentives like the federal ITC or available state subsidies. A solar lease is a long-term contract, typically 15-20 years. Savings are limited to the difference between the monthly leasing fee and the cost of electricity per kWh. As noted above, after the 5-7 year payback period under the ownership model, consumers receive pure electricity savings over the next approximately eighteen years.
Finally, if you move out before the end of the solar lease you will be forced to buy out the lease if the new owners don't assume it and that isn't a given. The LA Times reports that "solar leasing can complicate or kill a home sale."
Have Fun with Your Decision on Going Solar
Most importantly, have fun when considering the community solar, ownership or leasing alternatives and try not to get overwhelmed. This is where SolarReviews comes in handy. SolarReviews provides user-friendly tools so all your due diligence can be done in one place. Head over to the solar estimator tool to find out more about the pros and cons of owning v. leasing and also here. Study this article on community solar and use the links for further research.
Have fun when going solar!