What is community solar?
Community is a novel concept for both the electric utilities and users. Community solar allows several energy customers to benefit from a local solar energy power plant. Energy produced is at an off-site solar garden and then purchased by customers who aim to minimise their electricity bills.
Who can benefit from it?
Since the solar plant is not installed in an individual’s rooftop or property, community solar gardens can cater to a larger audience. This model benefits renters, condominium residents, homeowners with unfit rooftops or anyone who isn’t able to meet the upfront costs of owning a rooftop solar power plant.
How does it work?
There are quite a few business models applicable to community solar. A few are:
- Utility-Sponsored Model
Here the utilities provide their customers with the option to purchase solar power from a shared facility. Here the utility customers participate by contributing an up-front or ongoing payment to support the solar project. In exchange to this, customers receive a payment or credit on their energy bills which is proportional to their contribution for the project. Here the participating customer has no ownership stake in the project. He merely buys the rights to the benefits of energy produced by the systems.
- Special Purpose Entity Model
Here organizers venture into owning a community solar garden in order to reap in the benefits of tax incentives available for solar projects. Here the system is run as a business and the revenue generated through selling electricity to the grid and other customers is divided between the investors in addition to the incentives applicable to large commercialised solar projects.
- On-bill Crediting
Here the customers or businesses, who have invested in a community solar farm, receive a credit on their utility bill for the portion of energy production they own.
- Non-Profit Model
Here, on-profit organizations like schools and churches partner with local citizens to develop community solar projects. Under this model, the donors help finance the project through tax deductible donations. The donors do not directly reap in benefits from the solar projects installed. The electricity produced is used up by the non-profit organisation.
What are the challenges faced by the community solar concept?
For most of the models of community solar, the biggest challenge faced was the way parties involved have to deal with financial, regulatory and institutional barriers. A couple of the major issues that community solar is faced with include lack of access to federal tax incentives and complicated securities regulations of community solar entities.
Community solar arrays are often optimally sited for solar energy production in a publically owned site or a jointly owned property. It is designed to enable customers to benefit from owning a portion of a solar power project which they otherwise wouldn’t have been able to. The concept of community solar is picking up in few states of the United States and is yet to expand to other places.