Community solar projects offer unique opportunities for households, businesses, and communities to access the benefits of solar energy, even if they cannot install solar panels themselves. In this guide, we will explore the concept of community solar, its benefits, key stakeholders, different ownership models, challenges, and best practices for navigating the development and implementation of community solar projects. We hope this guide will provide business leaders with valuable insights into harnessing the power of solar energy for the benefit of their local communities, and their business.

What Is Community Solar?

Community solar is a rapidly growing segment of solar energy projects where a shared solar photovoltaic (PV) system provides electricity to multiple participants. Participants are typically individuals, households, or businesses who are unable to install solar panels on their own properties due to infrastructure, ownership, or financial limitations. They subscribe to a share of the electricity generated by a community solar project and receive credits on their electricity bills. The community solar model enables wider access to the benefits of solar power and contributes to local renewable energy development and sustainability efforts.

Benefits of Community Solar

Community solar offers several economic, environmental, and social benefits:

Equitable Access: Community solar allows individuals and businesses to access the benefits of solar energy, even if they cannot install solar panels on their own properties. This increases access to clean, low-cost energy for a broader range of people, including residential and commercial tenants, property owners with unsuitable roofs, and those with limited financial resources. Community solar brings energy equity to low-income and disadvantaged communities, providing financial, public health, and sustainability benefits to historically marginalized communities.  

Affordability: Bill credits offered by community solar can help participants save money on their electricity bills and reduce their overall energy expenses.

Local Economic Development: Community solar projects can stimulate local economic development by creating jobs, supporting local businesses, and generating tax revenue for communities. Additionally, community solar projects can provide opportunities for local contractors, installers, and suppliers to participate in the renewable energy industry.

Clean Energy Adoption: Community solar projects contribute to the adoption of solar energy, which is essential for reducing greenhouse gas emissions and mitigating climate change. By supporting community solar, individuals and communities can play a part in transitioning to a more sustainable energy future.

Community Engagement: Community solar projects often involve collaboration and cooperation among community members, fostering a sense of ownership, pride, and engagement. These projects can bring people together to work toward a common goal of promoting clean energy and sustainability in their communities.

Why Host Community Solar?

There are several compelling reasons for businesses to host community solar projects:

Financial Returns: Hosting or owning a community solar project can provide a new revenue stream for businesses depending on the ownership model. Hosts can lease unused land, parking lots, or roof space to the project developers, and subscribe to the community solar project if desired. Owners can share in the bill credit savings and receive applicable tax benefits and state incentives for community solar.  

Tax Benefits and Incentives: There may be federal, state, or local tax benefits, grants, or other financial incentives available for site hosts that invest in clean energy infrastructure, including those earmarked specifically for community solar projects serving Low- to Moderate-Income (LMI) households. To find out more about policy and incentives in your region, please visit PowerFlex’s Policy Hub.

Better Project Economics: Sites with low energy consumption can sometimes struggle to find a sweet spot when sizing solar installations for self-consumption only. Community solar allows hosts to size systems larger than their onsite load. By installing excess capacity, site hosts can leverage economies of scale for better project returns while benefiting the local community with low cost, clean energy.

Energy Cost Savings: Some hosts choose to be the anchor tenant and reserve up to 40% of the project’s capacity for their own use. They offset their grid electricity consumption with solar energy, resulting in lower electricity bills. Onsite solar generation also offers increased energy independence and reduces vulnerability to long-term energy price fluctuations.

Corporate Social Responsibility (CSR): Hosting a community solar project aligns with CSR initiatives by demonstrating a commitment to sustainability and environmental stewardship. It can enhance the business's public image and appeal to customers and partners who value green practices.

Employee Benefits: Employees of the business may be given the opportunity to subscribe to the community solar project as a workplace perk, helping the business attract and retain talent.

Leadership and Innovation: Businesses that host community solar projects position themselves as leaders in adopting innovative energy solutions, potentially influencing industry peers and establishing new standards for sustainability.  

How Community Solar Works

Key Stakeholders

Key stakeholders in a community solar project typically include:

• Host: Owner of the site where the community solar project is located.

• System Owner: Owner of the solar PV system. The host and owner can be the same or separate entities.

• Operator: Responsible for the day-to-day management, operation, and maintenance of the solar PV system. The host or owner does not have to operate the system themselves; many contract operation and maintenance (O&M) to a third party.  

• Subscriber Administrator: Manages subscriptions to the solar project and the relationship with the utility.  

• Subscribers: Individuals, households, businesses, nonprofits, or local governments that purchase a share of the electricity generated by the community solar project. They receive credits or discounts on their electricity bills based on their subscription agreements.

• Anchor Tenant: Large subscribers that agree to off-take a sizeable portion of the total capacity of the community solar project. They provide revenue certainty and can help reduce costs for other participants. The project host can sometimes also be the anchor tenant, or it may be local businesses, municipalities, or community organizations. Anchor tenants are optional and not required to install community solar.

• Utility: Provides grid integration for the community solar project, distributes power to subscribers via the grid, and manages billing and metering for subscribers.

• Solar Developer: Responsible for initiating, planning, and overseeing the development and operation of the community solar project. They identify suitable sites, secure permits and approvals, arrange financing, and manage construction and operation of the solar PV system.

• Financiers and Investors: Financial institutions, investors, or lenders provide capital for community solar projects through equity investments, loans, tax equity financing, or other financing mechanisms. They assess project viability, manage financial risks, and seek returns on their investments.

Ownership Models

Community solar projects typically utilize several ownership models to facilitate participation and investment.  

Host-Owned: In this model, a property owner or project initiator works with a solar developer to install and operate the community solar project.

Typical owners of community solar projects include:

Commercial Entities: Businesses may deploy community solar projects as part of their sustainability or social responsibility initiatives.

• Utilities: Utilities may use community solar projects to strengthen their renewable energy portfolio.  
• Nonprofits: Nonprofit organizations may use community solar projects to provide access to renewable energy to underserved communities or promote environmental and social objectives. Nonprofits that do not own real estate might lease rooftop space or land from property owners to install the PV system.
• Municipal or Government Entities: Municipalities or government entities may use community solar projects to increase clean energy access or to stimulate the local economy.  

Cooperative or Community-Owned: In a cooperative or community-owned model, a group of individuals, businesses, or organizations collectively own and operate the community solar project. They may form a Special-Purpose Entity (SPE) to facilitate the purchasing of shares or memberships in the cooperative, which entitles members to a portion of the project's output and benefits.  

Third-Party Owned: In this model, a third-party investor or financing entity offers to lease a property owner’s land or roof to host the community solar project. The investor will receive all tax benefits and project revenues and sells the electricity to subscribers.  

In some cases, investors might only own the solar assets long enough to take advantage of federal tax credits and project revenues to meet a target rate of return, then “flip” or transfer ownership to a community partner after 6-10 years.  

Challenges and Best Practices for Community Solar

In this section, we will discuss the challenges and best practices unique to the community solar model.  

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Community Solar Success Stories

Summit Ridge Energy (SRE)

Summit Ridge Energy owns and operates the largest rooftop community solar project in the United States, a 9.2-megawatt (MW) system hosted on the roof of a commercial warehouse in Maryland owned by STAG Industrial. The project leveraged 23 acres of unused roof space to provide energy savings to around 1,300 residential and small commercial customers throughout Maryland. The clean energy produced annually is equivalent to eliminating emissions from burning 8.7 million pounds of coal or 20 million miles driven by a gasoline-powered passenger vehicle.

Medline Industries

Medline’s Mongomery distribution center is the home of the largest rooftop community solar project in New York. The 7.2-MW project received $3 million in support from NYSERDA, and is expected to produce over 8.5 million kilowatt-hours (kWh) of clean energy annually, which is sufficient to power 1,600 homes. It will reduce carbon emissions by nearly 6,000 metric tons, equivalent to removing more than 1,200 cars from the road. The installation is part of Medline's broader commitment to sustainability, which includes a global portfolio of 10 solar installations with around 60,000 panels.  

Krasdale Foods

Krasdale’s Hunts Point distribution center hosts a 2.7-MW solar system that is the largest rooftop community solar project in the New York City borough of the Bronx. Approximately 300 Bronx residents subscribe to the project and receive credits on their electricity bills. The project received over $1.3 million in support from NYSERDA and contributes to New York's goal of installing 6 gigawatts of distributed solar by 2025. The system is expected to generate 3.4 million kWh of solar energy annually, equivalent to the carbon emission sequestered by 2,850 acres of U.S. forests each year.

The Future of Community Solar

Looking ahead, the future of community solar is prosperous. Interest in community solar is growing with more federal and state incentives. Policy developments will likely continue to play a crucial role in the expansion of community solar. And as more government entities recognize the benefits of community solar, more incentives and streamlined regulations are likely to emerge. This will help address some of the current regulatory challenges, improve project economics, and encourage more widespread adoption. With supportive policies, a maturing market, and continued community interest, the future of community solar is bright, promising a more inclusive and resilient energy system for all.

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Contact us for more information about community solar with PowerFlex

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