Deep Dive # 2: Why do Community Solar Programs Exist?
Overview: Community solar makes clean energy more accessible by allowing businesses and households that may not be suited for onsite solar, whether due to location constraints or financial limitations, to still generate savings from renewable energy. At the same time, these programs help states and utilities meet renewable energy goals while also supporting local economic development by creating new markets for solar farm owners to invest in.
At first glance, Community Solar might seem “too good to be true” for businesses with a promise of guaranteed savings. But there’s more to this story. These programs create shared value, not just for businesses, but also for electric utilities, solar project owners, and the wider community as a whole. This Deep Dive unpacks how everyone can benefit from a community solar program.
To understand the origin of community solar opportunities, it helps to start by knowing that it’s not available everywhere. Community solar programs only exist in states that have put specific rules in place. If you look at a map of these markets, you’ll notice they often line up with states that require a certain percentage of electricity to come from a renewable source, a type of regulation called a Renewable Portfolio Standard. Electric utilities don’t always love community solar because it adds complexity to managing the grid, but they do see benefits in many cases because it helps them meet their renewable energy requirements and avoid potential penalties for not complying with the Renewable Portfolio Standard.
Figure 1: Community Solar Program Maturity Map: the darker the state, the more likely a community solar project will be available for your business to partner with in the near future.
Another major reason community solar programs were created was to bridge the gap for electricity users who want the savings and benefits of renewable energy but can’t install solar onsite, either because of facility limitations or the upfront costs. These programs provide a way for more people to access clean energy, and they’re especially popular when a portion of the savings is required to be sent to Low to Moderate Income households, helping those who could benefit most from subscribing.
Lastly, lets consider the solar project owner’s, where community solar programs open the door to developing small-scale power plants in markets that might not have been accessible previously for investing. The process again works by generating bill credits, directing those bill credits to a subscriber’s electricity account and then charging subscribers a portion of those credits back. You might wonder “Why do the credits have to go to subscribers at all? Why not just sell the energy directly to the utility and get all the revenue?” The reason is that selling straight to the utility wouldn’t qualify as a community solar project and would result in much lower revenue per unit of energy generated. The percentage charged back is what makes the project financially viable, while the rest of the savings, usually between 10-20% of the bill credit’s total value, goes to businesses and homeowners to reduce their electricity bills.
As we look again at community solar programs now, we no longer see a system set up to solely let businesses get savings, but instead a complex and interdependent process that helps advance a state towards its clean energy goals while simultaneously supporting local economic development and steering benefits to those who may not have another way of tapping into solar.
With a better understanding of community solar as a whole, our next Deep Dive will focus more on the specific contract structures that your business can expect to take advantage of when preparing for a community solar partnership.
