Community Solar Pros and Cons: Important Facts That You Need to Know

Community solar is a solar project or purchasing program within a geographical area that offers numerous advantages for multiple users such as individuals, businesses, non-profit organizations, and other groups, by sharing the output of a single solar installation.

In comparison to rooftop solar projects, community solar is carefully positioned on large-sized land space to gain maximum exposure to sunlight which makes them highly efficient in energy generation having a diverse range of users.

However, the renters and condo owners have found it the best option despite its limited availability, provided with flexible contract terms without having any maintenance or installation requirements. In addition to saving on electricity bills, this type of renewable energy solar project has a positive impact on the environment and enhances the local economy by creating multiple job opportunities.

To find out if community solar is worth it, it is important to understand its pros and cons in detail which helps you determine whether tax credits or rebates are offered to subscribers or not.

What Are The Pros of Community Solar?

There are several advantages to preferring community solar including:

1. Reduced electricity bills: As a subscriber, you will receive a part of the dollar value of a credit generated by a community solar subscription that will be applied to your monthly electricity bills.
2. Suitability for renters and condo owners: The best option for individuals who either rent or live in condos who do not have the feasibility of rooftop solar.
3. No requirement for installation or maintenance: Through community solar programs, residents need not have to invest in the installation or maintenance process as they can share the output generated by a single large solar installation.
4. Flexible contract terms: The contract tenure makes it convenient for customers to explore a plan that satisfies their requirements.
5. Positive impact on the environment: Reduces greenhouse gas emissions as well as dependence on fossil fuels.
6. Job creation, and boosting the local economy: As workers are required to prepare, source, build, and maintain solar farms, there is an increase in high-quality local jobs.

Lower electricity bills

One of the main financial benefits for participants subscribing through community solar is that they can help save 5% to 20% on their electricity bills per year. The monthly savings fluctuate based on the power generated by the solar panels and your usage.

Let’s assume you received a 10% discount on the total value of solar credits purchased through a company. Suppose you have used $200 worth of power in a particular billing month and your community solar generated $150 of electricity credits, then the cost on your utility bill is reduced by $50. This is because a 10% discount on the community solar credits reduces your cost to $135, and you would pay an amount of $185 on your utility bill gaining a total savings of $15 based on the the below explanation:

• Original Utility Bill: $200
• Credits Received from Community Solar: $150
• Remaining Bill After Credits: $50 ($200 -$150)
• Cost of $150 credit at 10% discount: $135 ($150 -$15)
• Utility Bill After Preferring Community Solar: Cost of Credits + Remaining Bill = $135+$50= $185
• Overall Savings on your Utility Bill: $15 ($200-$185)

These are the main factors that affect the savings on your electricity bills:

• Changes in Weather and Season: Electricity bills are higher in summer as people use fans and air conditioners to overcome the heat, as well as the usage of heating applications in winter with freezing temperatures.
• Number of people in the home: If the members in your home are more, then the energy usage is higher.
• Older Appliances and Devices: Compared to the latest technology in the newer models, the older appliances consume more power.
• Home Insulation: Due to poor insulation excess heat escapes in winter and gets trapped in summer forcing you to use more electrical appliances.

Best for renters and condo owners

If you’re a renter or condo owner sharing your roof, then community solar is the best choice as you won’t require ownership rights without having requirements of paying higher upfront costs or being worried about the maintenance of panels.

Installing solar panels on roofs can result in several issues such as:

• Possibility of leaks, broken tiles, and structural damages due to improper installation of panels.
• Can be visually unappealing that might not suit the design of your home.

Mainly community solar focuses on benefitting low-income households by providing easier access to clean energy and allowing them to subscribe to a shared system of panels rather than paying the high upfront costs linked with rooftop solar.

No installation or maintenance required

One of the main advantages of community solar is that there isn’t any requirement for the physical installation of solar panels on your property. Unlike rooftop solar installations, you won’t need to bear the upfront costs or possible damages.

Even if you have less than the required FICO score, the community solar offers easy accessibility for low to middle-income participants.

The maintenance of community solar panels is handled by the project operators or sponsors who control the subscriptions and interact with the utility company.

Flexible contract terms

The contract terms are prepared for people with different requirements such as:

1. Relocating Frequently: It is possible to update your subscription to your new utility account only if your new property is located in the same service area. Conversely, you might be required to find a new community solar program by canceling your subscription after shifting out of the service area.
2. Easy Cancellation and Transfer of Agreement without any penalties: You should review your contract to check that a company doesn’t charge any cancellation fee. Even if you’re charged a penalty, several community solar providers will exempt it under certain conditions by providing the necessary information if you’re either relocating or hiring someone to transfer your subscription.
3. Easy Transfer of Agreements: Several community solar programs allow the smooth transfer of your subscription to other persons in the same utility service area without imposing any penalties.
4. Minimum Notice Periods: Although few projects provide the flexibility of canceling at any time, others will require 60 to 90 days of minimum notice.

Positive environmental impact

Community solar has various environmental benefits such as:

1. Reduced Carbon emissions: Electricity generation from solar energy offers clean energy that eliminates the requirement of conventional fossil fuels. The reports provided by the U.S. Environmental Protection Agency (EPA) reveal that nearly 1000 pounds of CO2 emissions are reduced through community solar projects. Furthermore, the reductions in these emissions are amplified by the involvement of more individuals and businesses.

2. Improved Air Quality: Compared to traditional energy sources like coal and natural gas that cause increased air pollution, community solar aims for cleaner air and improves public health by reducing dependence on fossil fuels. This is because the increased pollutants such as nitrogen oxides, sulfur dioxide, and particulate matter severely affect human health. It not only causes issues related to respiration but also leads to smog and acid rain.

3. Protects Natural Resources: Unlike fossil fuels that get depleted over a certain time, community solar converts the harnessed energy from the sun into clean electricity and avoids causing the natural resources to deplete. As a result, the traditional energy sources get less drained which helps to preserve these finite resources for the forthcoming generations as well as promotes sustainability.

4. Conserving Water: In contrast to traditional power plants that require excess water to satisfy the cooling and electricity generation process, using community solar eliminates the need for water usage by producing electricity through a photovoltaic process. This prevents the depletion of water resources by offering an alternative method for an environmentally friendly future.

Creates jobs and boosts the local economy

There are several ways through which community solar creates multiple job opportunities such as:

1. Manufacturing Jobs that include the production of solar panels, inverters, and components.
2. Professional Installers to perform installations in suitable locations and available spaces.
3. Maintenance and repairs of solar power systems are performed by qualified technicians.
4. Project Management includes planning, coordinating, and supervising the projects from start to completion.
5. Sales and Marketing involves promoting and selling community solar subscriptions.
6. Designing the solar power systems to fulfill the technical requirements and meet safety standards.
7. The Financial Department manages projects’ funds and viability, whereas Customer Support assists subscribers by solving their queries and issues.

In addition, the local economy is boosted through community solar projects by frequently collaborating with local contractors, suppliers, and labor which leads to investing money into the community. As a result, this chain expands job openings by backing up the local economy and reducing unemployment.

What Are The Cons of Community Solar?

The limitations of community solar include:

1. Limited availability: Community solar isn’t available in all states in the U.S.
2. No tax incentives or rebates: The initial costs are higher for subscribers because community solar participants wouldn’t qualify for tax credits or incentives in comparison to rooftop solar.
3. Large land requirements for solar farms: An off-site community solar farm requires a huge land space with abundant sunlight.
4. Savings are fixed and limited: You might not see big reductions in electricity bills due to the limited savings preferring community solar.
5. Lack of control over output: Most often community solar subscribers won’t be able to control the output over the solar panels which restricts their ability to maximize savings and efficiency.
6. No renewable energy credits (RECs): One of the main reasons why community solar is less attractive compared to other options is the lack of renewable energy credits (RECs) that can be used to offset renewable energy costs.

Limited availability

As of 2024, there is at least a single community solar program active in Washington DC and 41 states in the US.

The reasons for the limited availability of community solar are:

• Many states aren’t able to offer clear policies that create uncertainty for developers and investors. Mainly, the local governments need to pass resolutions to build a community solar market in the state so that users are assisted in making use of generated solar energy privately.
• The higher upfront costs make it challenging for smaller developers and low-income individuals.
• Several individuals aren’t aware of the community solar programs and their benefits which limits their participation in these schemes.
• Particularly the highly populated areas make it challenging to find a larger land space for community solar.

No tax incentives or rebates

The tax incentives or rebates are not available for community solar subscribers who don’t own the panels. In reality, the direct investment made by the homeowners and company owners is encouraged with the tax incentives to reduce the upfront costs.

The main reason why community solar subscribers cannot claim the incentives is that they aren’t making the direct investment, unlike the owners of the rooftop panels.

The exception to the ownership model rule means that through the community solar ownership model you can purchase and own a certain share of the community solar farm. Even though the subscription plans are much more familiar and straightforward than ownership, individuals participating in ownership programs gain the eligibility to be a part of federal and state-level incentives.

The different ownership models for community solar projects vary such as:

• Third-Party-Led/Owned Model: The community solar projects are owned by the third-party developer who manages the installation, maintenance, and operation of the solar array. Subscribers pay a fee for generating electricity at a lower rate compared to the utility company. This helps to save money and gain solar benefits without any investment.
• Community-Led/Owned Model: The solar project’s share is owned and operated by the community member itself and involves small-scale municipal and cooperative utilities.
• Utility-Led/Owned Model: The large-scale utility company owns and operates the community solar to meet renewable energy standards.

No renewable energy credits (RECs)

Renewable Energy Credits (RECs) are green certificates or tags that represent the properties of generating electricity from renewable sources. One REC is a standard measurement of per megawatt-hour (mWh) of electricity produced and supplied to the grid.

As multiple users share the benefits of a single solar installation in community solar, RECs are not available for community users. There are a few regions where the governing system might not support the distribution of RECs to individuals involved in community solar programs.

These types of credits are retained by the entities that benefit the electricity generating owning renewable energy sources such as solar, wind, geothermal, and hydroelectric, or the utility company that sells electricity.

Large land requirements for solar farms

Known as the shared solar gardens, the community solar farms require 10 to 20 acres of land or even more depending upon the scale of the projects.

Despite offering several benefits for the environment, a large requirement of land can have a negative impact by leading to habitat destruction, increased soil erosion, and disruption of drainage channels. As a result, the ecological balance is destroyed due to the frequent displacement of the species.

The dual-use land strategies for community solar such as Agrivoltaics, Ecovoltaics, and Floatovoltaics offer the best solutions to enhance land usage efficiently and yield extra advantages in the following ways:

Agrivoltaics: Suitable for small-scale solar projects, the solar panels are co-located with agricultural activities such as crop cultivation or livestock grazing. As a result, these solar panels offer shade by lowering the heat stress on crops, modifying light conditions, and minimizing the water vapor evaporation from soil enhancing the overall land health.

Ecovoltaics: Ecosystem services-based solar combines solar panels with activities that provide ecosystem benefits such as the plantation of vegetative cover from native or other specialized sources that provide several services related to the ecosystem such as:

• Restoring the soil health
• Water management
• Controlling soil erosion
• Eliminates dust
• Protecting the habitat of wildlife species
• And many more…

Floatovoltaics: Popularly known as Floating solar, the solar panel systems are installed on natural water bodies such as ponds, lakes, reservoirs, and canals as well as artificial water bodies. By making use of the available water bodies, the presence of water beneath the panels not only reduces the shading effect but also increases efficiency compared to the traditional panels. Additionally, it is one of the best ways to maximize the usage of land as well as decrease the competition for land.

Savings are fixed and limited

As the community solar subscribers won’t be able to claim any incentives, the savings are limited, which means that you will get less returns on your investment (ROI). This is because the users through the subscription model wouldn’t gain many benefits than ownership.

In comparison, rooftop solar has a higher ROI that reduces huge amounts of your electricity bills and allows you to sell additional energy back to the grid as well as gain incentives if you’re the owner of the PV system.

Lack of control over output

One of the major drawbacks the community solar subscribers are facing is not being able to take control of the solar power operations. In reality, they aren’t in a better position to find out the exact output of solar energy production.

In situations where there is a natural calamity or system failure, the shared solar garden becomes offline which causes the electricity generation or supply of the grid to drop to nil.

Although these type of issues arises in rooftop solar arrays, users have complete supervision over the performance that helps to get the problem sorted out by hiring a technician so that they get the system fixed within a few hours.

Is community solar fully worth it?

Overall, community solar is a worthy option for low-income individuals, renters, and properties not having adequate space on the roof for solar panel installation. But the main drawback is that you wouldn’t gain maximum financial savings and rather prefer installing rooftop solar panels for your home.

Subscribing to community solar wouldn’t be a promising option for all, but only a few of them might benefit the most such as the renters, condo owners, individuals relocating frequently, homeowners with unsuitable solar roofs, and renewable energy supporters.

How much space does community solar require as compared to rooftop solar?

Community solar projects require several acres of land that are often carried out on unused or underutilized land such as agricultural fields or industrial areas. In comparison, rooftop solar panels are installed on the roof of your home and require 100 to 300 square feet approximately to generate enough electricity that satisfy your home’s energy requirements.

However, rooftop solar has a higher positive impact on the environment than community solar because it doesn’t require huge land space, thereby promoting biodiversity conservation and efficient land usage.

How are community solar projects financed?

Developers secure funding for community solar projects through a blend of equity investments and debt financing based on their role in the project.

Finally, these are the four common financing models used for community solar projects:

1. Utility-Owned Model: In this model, the local utility owns the solar panels and sells electricity to customers at a fixed price, sells or leases the panels. The developer of the community solar farm receives payment directly from the owner of the utility company.

2. Developer-Owned Model: The community solar is designed, built, owned, and operated by a solar developer who acquires funds directly from the solar subscribers.

3. Special Purpose Entity (SPE)-Owned Model: The business entity holds the ownership of the community solar projects and allows customers to purchase panels through initial payment or monthly subscription for the power output generated by the panels. The finances are set to increase the federal tax incentives through these three methods:

• Self-financing: The SPEs are permitted to invest funds into the project only if there are enough investors in the community.
• Flip Structure: The community SPEs are allowed to collaborate with tax motivator investors in new SPEs for smooth operations of the community solar project.
• Sales / Cashback: The community SPEs are eligible for solar power system installations and are allowed to lease back after selling to a tax investor.

4. Non-profit Model: A non-profit organization manages community-shared solar projects by receiving grants or donations from its supporters for the development and isn’t available for businesses.