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Community Solar

Written by Dr. Tomy Granzier-Nakajima
Published on November 30, 2022
Research Highlights

Many households are unable to install rooftop solar panels because of limits due to shading, roof suitability, house ownership, income, etc.

Community solar projects are quickly growing in the U.S. and provide a means to expand access to solar energy.

Most projects are found to be profitable for subscribers over their lifetime.

Related Policy Memo: Project Policy Considerations

Shared renewable energy installations allow multiple “subscribers” to purchase or lease a part of the output of a renewable energy system. Subscribers receive a portion of the financial returns as a bill credit or direct payment. Shared renewable facilities can be owned by utilities, third parties, or by the customers themselves (Cleveland, 2016). While most shared renewable energy systems are solar projects, referred to as community solar, there are a small number of shared wind projects.

Many households are unable to install rooftop solar panels.

The National Renewable Energy Laboratory (NREL) estimates that around half of households and businesses cannot host a rooftop solar system due to shading, roof suitability, size, or housing ownership (Feldman, 2015). Local ordinances and homeowner association rules can also prohibit installation and increase rooftop solar installation costs (NCSL, 2018).

Low- and moderate- income (LMI) households earn less than 80% of the median income in an area. LMI customers often have low credit scores, preventing them from accessing traditional borrowing mechanisms (Heeter, 2021a). LMI communities are typically not targeted for solar investment, and may be unfamiliar with solar products and their benefits.

  • Approximately 43% of U.S. households are considered LMI (Sigrin, 2018).
  • In 2018, LMI households represented 15% of solar adopters (Barbose, 2019).

Renting creates barriers to solar panel access. Landlords may not allow solar panel installation, and the high upfront cost may not be worth it to those who rent. Renters are also ineligible for the most widely used tax credits because of resident ownership requirements, such as in the Residential Energy Efficiency Property Credit and the Federal Investment Tax Credit.

In 2016, 58% of Black households and 54% of Hispanic households rented, compared to 28% of White households (Cilluffo, 2017).

  • When corrected for home ownership, Black- and Hispanic- majority census tracts install 61% and 45% less rooftop solar than non-majority census tracts, respectively, while White-majority tracts have installed 37% more (Sunter, 2019).

Community solar project capacity is growing.

Total community solar capacity in the U.S. more than doubled every year from 2010–2020 (Figure 1) (Heeter, 2021b). By the end of 2021 there were approximately 5,219 megawatts (MW) of community solar capacity distributed across ∼2,000 projects in 40 states and Washington, D.C. (Chan, 2022) A small town uses about 1 MW of electricity, while the largest cities use tens of gigawatts (Gates 2022).

By measuring the difference between subscriber costs and the credits that they receive, NREL assessed if community solar subscribers see a net positive economic benefit.

  • Since 2016 the median subscriber saves money over the lifetime of their subscription (Heeter, 2021b). In Massachusetts, the average subscription provides about $14/kW∙year (DOE, n.d.). Similar data for other states is not available.

Potential benefits of community solar projects include (NREL, n.d.; NCSL, 2018):

  • increased solar access for LMI households;
  • lower costs and improved efficiencies due to operation of a larger solar farm;
    • the ability to place a solar farm in an area beneficial to the energy grid;
    • the ability to use unused land like commercial rooftops, public properties, and hazardous/contaminated land (e.g., abandoned gas stations, mines, capped landfills)

    Challenges include:

    • a lack of understanding of community solar by the public and lawmakers;
    • upfront subscription costs that can price out LMI households;
    • a lack of scientific research regarding the impact of policy decisions.

Community solar can increase access to solar energy for LMI and minority households.

Community solar projects may improve subscription to solar energy by LMI and minority households by increasing accessibility and mitigating the need for individuals to secure their own financing for rooftop solar systems (Heeter, 2021a). Some barriers may still exist for these households including:

  • Community solar developers who use contracts that require up-front investments or credit checks (Cleveland, 2017).
  • LMI households typically use less electricity than other households so they may see smaller electric bill reductions than high-income households (Heeter, 2021a).

NREL identified four general approaches for equitable solar development (NREL, 2021):

  • Policy mandates for equitable participation.
  • Financial incentives.
  • Equity requirements such as solar installation for multifamily housing.
  • Voluntary utility-led programs.

For more information, view their fact sheet.


**This Note has been updated since its original publication. Previous versions are not up-to-date, but can be accessed here: Version 1 (March 2022)

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