What Is Community Solar?

A Solar Farm In Western Colorado Near Sunset With The Sun, Blue Sky And Clouds Reflecting Down On The Solar Panels
A solar farm in western Colorado. grandriver / Getty Images

Community solar, also known as solar farms or solar gardens, allows electricity customers to enjoy the benefits of solar energy without having to install solar panels on their property. In community solar, customers either own or lease a portion of a solar installation shared by multiple parties. The energy generated by the panels is fed into the electricity grid, and customers receive credit for the amount of energy produced by their share of the solar farm (a system called virtual net metering).

Depending on state regulations, solar farm participants can range from fewer than 10 to more than 100. Currently, 39 states have community solar programs, according to the U.S. Department of Energy's National Renewable Energy Laboratory (NREL). States with the most robust net metering programs tend to be the states with the greatest amount of solar development, as industry experts consider net metering to be an essential tool in solar development, without which solar investors would see lower cost benefits and longer time-frames for a return on their investment.

What Is Virtual Net Metering?

Virtual net metering is a system that provides credit for community solar participants. While net metering gives solar customers credit for the energy they produce using their own solar panels, virtual net metering is exclusive to energy produced offsite, not on a homeowner's roof.

How Community Solar Works

As its name suggests, community solar involves participation in a shared installation of multiple solar panels to suit the combined electricity needs of all the participants. A solar farm is built on third-party property, often on land not suitable for other purposes such as industrial wasteland, marginal farmland, brownfields, or landfills. In net metering programs, if customers produce more electricity than they consume, the credit they earn will roll over to the next month. For example, if they heat their home with electric heat during the winter (when days are shorter), they are likely to consume more energy than they produce. During the longer days of summer, they may do just the opposite. Over the course of the year, it all balances out. 

Distinguishing Terms

Community solar differs from group purchasing solar equipment that is installed separately on private homes or businesses. It is also not the same as “green power” programs set up by utility companies that allow customers to purchase electricity produced from renewable energy sources of all types, such as wind, solar, or hydroelectric power.

Benefits of Community Solar

Community solar is a way for energy customers to reduce their carbon footprint without installing panels on their roof. This is especially suited for people who do not own their own roof, are limited by housing covenants, or live in a home without adequate sunshine — according to NREL, only 50% of residential and commercial rooftops in the United States are suitable for onsite solar energy systems. Because multiple customers pool their financial resources in a community solar farm, the startup costs per customer are significantly lower. Other financial benefits can include the fact that solar customers with net metering programs pay their utility bills in electrons rather than in dollars, so they are more likely to be protected from utility rate hikes.

Community solar benefits not only people participating in a solar farm but the wider community as well. Community solar adds power and stability to the grid, allowing utilities to provide more reliable electricity to their customers without the utility incurring the cost of development of new energy sources. And because they are often closer to customers than far-away power plants, community solar projects save utilities (and their customers) the "line-loss" cost of sending power over long distances.

How to Join a Community Solar Farm

There are two ways to join a community solar farm: via an ownership model or a subscription model. In the ownership model, customers own and maintain a share of the panels installed, while in the subscription model they buy their monthly energy from a company that installs and maintains the solar panels. It's like the difference between buying a house and renting: the first involves greater upfront costs, the second involves signing a lease. Each model has its benefits and drawbacks.

The Ownership Model

Purchasing a solar farm share is beyond the budget of many people, is subject to credit approval and current interest rates, and entails long-term responsibility for maintenance, insurance, and taxes. Those can all be good things, however, as ownership means the solar farm share is property that the owner can sell, bequeath, or transfer. As an owner, they reap the benefits of being able to sell renewable energy credits (RECs), which may increase in value over time. Purchasers of a farm share are also eligible for a 26% federal tax credit (as of April 2021), which can be spread out over multiple years. (That tax credit is subject to congressional renewal. Different states also may offer their own incentives.) The key benefit of the ownership mode is that once the owner's share is paid for in full, their energy is essentially free for the life of the panels — which are often guaranteed for 25 years, after which the panels continue to function at less than 100% efficiency.

The Subscription Model

Without little or no upfront costs, the subscription model is easier to join, the commitment involves a shorter time span, and the responsibilities are more limited. As with renting an apartment, the owner of the property takes care of the maintenance, liabilities, and property taxes. With a subscription model, if the subscriber decides to leave the state or utility district, they are not left with owning panels that may have depreciated in value over time. On the downside, solar subscribers do not get any tax credits or renewable energy credits (the owner/installer does, but often passes on a portion of those savings to customers). And at the end of the day, the subscriber never reaps the benefit of nearly free energy which comes with owning the property. They do, however, usually have lower utility bills and enjoy the satisfaction of helping create a carbon-free economy.

View Article Sources
  1. Community Solar.” U.S. Department of Energy's National Renewable Energy Laboratory.

  2. Feldman, David et. al. “Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation.” National Renewable Energy Laboratory, April 2015.

  3. "Guide to the Federal Investment Tax Credit for Commercial Solar Photovoltaics." United States Department of Energy.