What are the benefits of community solar?
The primary benefits are twofold. The long-term benefit is helping to reduce greenhouse gas emission and foster a cleaner environment for future generations. The short-term - and immediate benefit is saving on your electric bill. Other benefits include the ability for local farmers to generate income from lands that cannot sustain crops or be used for livestock. And local jobs are created although most of them tend to temporary. Lastly, because community solar doesn't require any upfront investment, or for a subscriber to build or maintain anything on their rooftop, everyone including renters can participate. In that sense it is the fairest and most "democratic" solar program currently offered.
How does community solar benefit the environment?
Solar energy production replaces production normally generated by fossil fuels such as oil, natural gas, and the worst of all - coal. About 20% is generated from nuclear plants. The good news is the use of coal is on its way out but it still accounts for about 23% of all electric production. Natural gas, oil, and coal all emit harmful greenhouse gases into the atmosphere. Today, renewables only account for about 20% of energy generation in the United States. Community Solar helps to further shift to increase the use of renewable energy sources.
How do the community solar developers make money and subscribers save money at the same time?
That's the questions that most people wonder about. Solar farms cost millions of dollars to build and maintain. How can a developer pay for that while at the same time offer savings to subscribers?
Community solar almost sounds too good to be true - right? But when you understand where the money comes from and how it is distributed, it all makes sense.
Most people don't ever look at their electric bill beyond the monthly cost and maybe the usage information. But if you take a close look at your bill you'll notice there are typically many additional charges. In some states these are labeled renewable energy or energy efficiency charges. In other states they are just lumped into an "other" category. Regardless, these charges are monies collected by the state to use toward promoting renewable energy developer and/or energy efficiency programs. In other words - you pay into programs like community solar every month. By subscribing to a community solar farm you're able to get a financial return on those funds. On the developer side, they are provided a financial incentive by the state to build a solar. They in turn take some of that incentive money and give it to subscribers in the form of a solar bill credit. That's how you save money and the solar farm developer makes money. Much of it comes from you the electric ratepayer through state sponsored programs.
The other sources of funding and revenue for developers include investor and/or lenders, Renewable Energy Credits (RECs), and tax incentives. In some states, renewable energy mandates require that a certain amount of power come from renewable energy resources. The utilities will purchase the Renewable Energy Credits (RECs) from the Community Solar company in order to meet their renewable energy requirement. Investors often rely on the tax benefits to make a profit on their solar investment.
Frequently Asked Question About Community Solar
How does community solar differ from rooftop solar?
All solar, whether it's on your roof or community solar has a positive impact on the environment. The biggest difference is that with community solar no solar panels are installed on a subscriber’s property and the power is not sent directly to a customer’s home. Instead, customers subscribe to solar farm built within their community but at a location owned or leased by the solar developer. The power generated from community solar farms goes directly to the utility grid.
Unlike rooftop systems where the majority of homes or businesses can't qualify for various reasons (shading, roof in poor condition...) community solar is available to everyone. It is also much more convenient to participate. There is no investment required and nothing to build or maintain.
Rooftop systems do offer one advantage: once they hit break even - which usually takes 7 - 9 years - they will provide the owner a much higher level of savings.
So if your goal is to pay nothing for your electricity, rooftop solar is the better option. With rooftop solar, the more you invest upfront, the higher the return will be in the future. However, the investment isn't trivial. Plan to spend tens of thousands of dollars to install and maintain your own system.
How does the community solar developer get paid by the subscriber?
In most states that's the one minor inconvenience associated with Community Solar. The billing process works like this:
- The subscriber receives a solar bill credit on their normal utility bill. This credit based on how much electricity they consume. For example: let's say that a subscriber is eligible for a $100 credit. Let's also say their typical monthly electric bill is $200. That subscriber will pay the utility company $100 for that month.
- About 30-days later the subscriber will receive a second bill from the solar farm developer. That bill will be for a discounted amount of the solar credits. Let's say the solar developer in our example offers a 10% discount. They would bill the subscriber in our example for 90% of the $100 credit they received or $90. The subscriber in this example would pocket the $10.
- Typically, to help ensure this process flows smoothly, the developer will require that a subscriber pay this second bill either through an automatic ACH payment or by credit card.
- Remember, the solar farm developer has invested millions into these projects and if subscribers fail to pay their bills, the whole program falls apart.
Why aren't the savings more?
Community Solar offers modest savings - usually in the 7% to 15% range depending on the state and the particular developer. While it doesn't seem like much, it can be a significant amount of money for many businesses. For example: if your business averages $2,000 to $3,000 a month in electric costs your annual savings would be in the range of $2,000 to $3,000 per year. That's nothing to sneeze at. For homeowners, it's true that the savings may only be $100 to $200 a year. But over 20 years that adds up to a few thousand dollars. Also, more importantly, especially if you have children, you're helping to reduce greenhouse gas emissions and improve the environment for your children and your children's children.
Still, everyone likes to save money so why can't developers offer better discounts?
To provide affordable clean energy with no upfront cost or subscription fees developers must ensure sufficient cashflow to maintain the solar farm over a 20-year period. Further, in order to secure investment capital developers need to demonstrate a certain level of financial return to their investors. Although building solar farms is a profitable business, it doesn't yield the level of profits many other businesses provide. At the end of the day - solar farm developers are in the utility business and they earn utility-type returns.