Community Solar: What is it, and how does it work?

It is a dream of many people to set up a solar energy harvesting system in their homes. One generally shifts to solar for two reasons. Firstly, an inclination to move to renewable energy sources to reduce the carbon footprint, and second, to reduce dependency on local electricity utilities.

However, due to various problems like shading, poor sun number score, or unavailability of installation space, it may not be profitable to set up solar panels at every home.

residential solar panel
Photo by Vivint Solar

However, there is a solution for these woes. It comes with the concept of remote solar energy system called community solar. It allows you to reap the benefits of a solar module system without installing one.

This article discusses community solar systems and its benefits.

What is community solar?

As per the U.S Department of Energy, community solar is a large-scale facility capable of producing a colossal amount of energy that will be purchased or shared by more than a single individual, organization, or institution.

Furthermore, the community solar project is usually fixed for a specific geographical location. Therefore, one can reap the benefits of solar energy without considering the hassles of maintaining solar panels.

community solar
Photo by Kindel Media

Common community solar ownership arrangements

Owning a solar setup is an excellent and cost effective solution for the long-term. However, people without the necessary initial resources may need to settle for grid based energy supplies.

Community solar has mainly three kinds of solar ownership arrangements based on the financing options, cost of participation, etc. Each structure has its benefits and responsibilities and is composed of a specific group of people.

Let us explore them.

Utility-sponsored model: A utility owns a solar farm and operates it in this model. This model allows customers of a demographic region to participate voluntarily in the solar community program.

Customers usually pay a fixed price for the benefits of solar energy for a long time. More than ownership over the solar system, the customers buy the right to the benefits of the energy produced.

Most neighborhoods form utility-sponsored models and want to shift from traditional electricity services to renewable sources. This model has the lowest financial liability and is made in a way that is easily accessible.

Special purpose entity model: The leading utility of special purpose models is to provide tax benefits to their owners. Most individual investors show up to form an organization whose primary purpose will be to develop and run a solar community project.

The investors need to work out all the financial hurdles and legal formalities of setting up a business in this model.

Along with electricity use, the investor’s motive in this case also includes a healthy return on investment. University Park Community Solar LLC and Clean Energy Collective LLC are two good examples of the Special Purpose Entity model.

Non-Profit model: In this model, non-profit organizations approach their local neighborhoods to form a solar community project. In addition, the non-profit organization helps with financing the project through donations.

The “Solar for Sakai” project on Bainbridge Island, Washington, developed by the donation of a local school, is a classic example of a non-profit community solar model.

Although this model doesn’t directly provide tax benefits, donors can get some benefits through a tax deduction.

How does community solar work?

The functioning of community solar is pretty simple. Once all the legal formalities are completed and the legislature to run the arrays is formed, the solar community model can run and generate electricity.

The generated electricity is fed into the local power grid. Then, using a method called net metering, the users can benefit from reduced monthly electricity bills in the form of bill credits.

One can subscribe to a solar community model. The subscriber buys the ownership rights, but that person will have a stake in the models and only reap benefits from the generated electricity.

For the subscriber model, there are different fee structures with variable benefits.

In this manner, one can take advantage of solar benefits without installing panels at one’s home.

How does community solar make money?

Usually, a solar developer is in charge of a solar community model. The solar community organization earns money every time a new subscriber or panel owner is added to the list.

If the solar community model has given the developer the responsibility of acquisition and financial management, they pay a fraction of the collected money to the community model investors.

In turn, the developer earns money from the customers’ monthly subscription fees for the service.

If the ownership model is available, communities can allow participants to own some of the panels or shares of the community project. However, sometimes there are strict rules that one needs to buy this much land or this many kilowatts-hour blocks.

Although the user has to pay a lump sum fee in such a situation, it’s still beneficial.

Benefits of community solar

Community solar panels have many benefits, but here we will discuss the two prime ones.

Financial benefits

One can reap financial benefits from solar community projects like rooftop solar using virtual net metering(VNM).

VNM allows community solar subscribers to receive bill credits on the monthly electricity bills based on renewable energy generated at the remote community project.

VNM ultimately allows you to save some money on your electricity bills without the actual installation of panels at one’s home. Although there is no minimum credit score, the average saving is around (10 – 25) percent.

Additionally, with community models, one can get all the benefits of a traditional solar model from a remote location without physically owning a setup.

calculate the cost
Photo by Karolina Grabowska

Utility benefits

With solar community models, the accessibility of solar energy does not get limited. Previously people who only had space for solar installation and supporting conditions could garden its benefits.

Additionally, there is no post-purchase maintenance cost, no changes to utility connection, e.t.c. On the other hand, if you physically own modules, you must take them with you.

If you change your home out of that locality, you can cancel your current subscription and transfer it to a new community solar set up, which your new home falls in.

How to start a solar community project?

One needs to ask a few questions before starting a solar project.

Who will be the people who’ll use this project? 

Who’s going to pay for the development of the project and maintenance? 

Finally, where will the project be located?

The type of community solar can be selected based on the responses to these questions.

Apart from project financing and model selection, solar community projects need all the parties (subscriber, developer, Utility Company, Public service commission, investor) to work in harmony for the successful implementation of the project.

Once all these questions are answered and the project’s magnitude is fixed you can start with the outline and slowly move on to the execution part, followed by subscriber allocation.


Solar energy is one of the most readily available renewable sources of energy.

However, due to its heavy installation cost and dependency on other factors, people shy from solar energy even after completely knowing about it.

Community solar solves this problem like a walk in the park. One can benefit from the positives of a traditional solar energy system without taking the burden of a physical set-up.

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