Posted on Wednesday October 28, 2015
Maybe there’s an abundance of apartments or condominiums in your area, or thick forests make rooftop solar impractical for many homes. Whatever the reason that on-site solar isn’t ideal—now there’s community solar.
Community solar or “solar gardens” allows businesses and residents to share the clean energy from a centrally-located solar array and enjoy the financial and environmental benefits without worrying about maintenance or monitoring.
In the U.S., there are three primary models: owning the panels, leasing the panels and subscribing to the solar energy output. Each arrangement offers different advantages, from convenience to long-term payback.
With 115 MW of community solar expected to be installed in 2015 (compared with 66 MW cumulatively installed between 2010 and 2014), solar gardens will be sprouting up in communities across the nation.
So, which community solar model is best to pursue? It depends on your goals and which attributes are most important to your customer base. Below, we explore the different programs in greater detail.
Leasing Community Solar Panels
With a leasing arrangement, the photovoltaic (PV) solar panels are owned by the utility company or other third-party solar developer who maintains control over the facility. This model is ideal for ratepayers in a given area who want to want to pay a one-time fee and protect themselves against escalating energy prices for an average of 15 or 20 years. During this time, they’ll receive reductions on their electricity bill for the power their panels produce. The downside is that the financial payback expires when the lease is up—regardless of whether the PV panels continue generating clean power—and customers must then “return” their panels to the supplier.
“The leasing model has been tremendously successful in enabling more and more citizens to get more access to solar. But it’s ultimately the financing tool,” said Minh Le, director of the DOE’s Solar Energy Technologies Office. “A certain fraction of our population will lease vehicles for a number of reasons. Generally the payments are more modest than if you were to take out a loan.”
Owning Community Solar Panels
The community solar ownership model enables customers buy panels in a shared array and reap the benefits of their asset. As with leasing, the cost of maintenance and insurance is included in the one-time, up-front fee—which is generally higher than leasing. However, the cost can be mitigated through loans and financing. Ultimately, the ownership model affords customers the most lucrative savings of all community solar models, providing a payback throughout the lifetime of the array—up to 50 years.
“After purchasing panels, customers receive an ongoing payback in the form of lower utility bills for many years,” says Dave Konkle, community solar specialist at the Great Lakes Renewable Energy Association. “Panels are often priced for complete paybacks within 10 to 15 years, much better than a bank and less volatile than the stock market.”
The disadvantage to community solar ownership is that the cost can deter some residents who lack the initial capital and are unable to obtain financing. Some utilities also require a minimum panel purchase to participate (such as a 1 kW system as opposed to a single panel). This model can be difficult to develop and administer if it is considered a security and regulated by the SEC, as this will increase program costs and complexities.
“From a cash-flow basis, the leases appear more attractive. On a long-term financial basis, I believe the financial planners will tell you that loans make more sense—if you can get it at a reasonable interest rate,” says Le. “In the long run, for an asset like solar, I personally believe that loans are the way to go.”
The solar expert recognizes, however, that various situations—such as a transitory lifestyle—could make community solar leasing more attractive to consumers.
“If someone believes they’re only going to be in an area for a limited number of years, they may not want to buy a 25-year asset,” Le said. “They may want to lease it for [those] years.”
Subscribing to the Power
A model that’s gaining popularity across the nation, a subscription program allows participants to buy clean power from a shared solar array, which is owned by a utility or third-party. The cost of solar energy is added to a customer’s monthly electricity bill, and the value of the clean energy purchased is then deducted from the same bill. When the price of power purchased exceeds a home or business’ usage, credits are then applied. Essentially, subscribers are buying power at a reduced rate.
This community solar model should not be confused with green power purchasing (technically not community solar), where customers pay a premium to use electricity generated by renewable energy plants.
The subscription model offers immediate savings without requiring upfront fees, thereby allowing more people to access solar energy. These programs are the most convenient method for customers to participate in community solar, as they can leave on short notice without incurring any costs—compared with buying and leasing panels, where customers must sell or transfer their panels if they move outside the service area.
On the other hand, subscribers are often subject to low returns. “This model works for ratepayers who want to support the increased use of PV and who would like to use PV as a hedge against future base fuel costs, but who do not have specific financial ‘payback’ needs or expectations,” Konkle said.
Increasing Demand for Community Solar Solutions
No matter what community solar offering you decide is most appropriate, the consumer demand is only expected to escalate.
“Between 2015 and 2020 in the United States there could be 5.5 to 11 gigawatts worth of community-shared solar deployment,” Le said. “And as we know from our solar energy evolution diffusion (SEED) studies, when people see something like solar, they are more likely to want to keep up with the Joneses.”
When trying to determine what kind of shared solar program to pursue, the Community Solar Hub is a good place to begin the research process. An online portal, the Community Solar Hub provides information and implementation tools to simply the development process and help individuals avoid common mistakes.
“A portal like this can help reduce financing costs by highlighting the multitude of projects that are under development or have been developed around the country,” Le said. “Then financers can gain confidence that this is an exciting area to make investments in.”
Join the campaign to bring community solar to every neighborhood in the nation. Gain access to the tools that will make your projects a success. Share the details of your developments for others to see and repeat your achievements. Contribute to your community by providing the choice of clean and affordable electricity to everyone.