Is Community Solar Right for my Business?

Is Community Solar Right for my Business?


As prices decline and sustainability issues gain further traction in the public consciousness, nearly half of all U.S. electricity customers plan to embrace solar power in the next five years.

The first avenue to enjoying sun-powered electricity is fairly self-explanatory: Roof or open space + solar panels = green energy.

And for many years, this was the only route. Consumers who might otherwise be inclined to embrace solar power but lacked the time, resources, or panel-friendly accommodations were left in the dark.

Residents and businesses alike now have more options thanks to an ever-growing, diverse crop of community solar programs.

Here’s how it works: Customers purchase a portion of their electricity from a nearby solar farm or even buy a small stake of the plant itself. In return, they typically receive credits on their bills. The communal nature means both financial and infrastructure needs are spread among participants.

Community Solar & Your Business

While incentives differ from state-to-state, there are several overarching benefits of community solar that will likely be of interest to entrepreneurs and business electricity consumers.

  • Lower electricity bills. Many shared solar programs offer subscribers credits on their electricity bills in proportion to their share of the power produced, typically ranging from 5% to 20%.
  • More flexible terms. Contracts tend to be shorter, and for the occasions where they’re longer, the penalties for breaking them are minimal.
  • Hedge against rising prices. Subscribing to community solar can act as a hedge against future energy price hikes as most schemes enable consumers to lock-in rates.
  • Benefits the community. Solar power benefits the whole community by providing more accessible and affordable clean power.
  • It’s simple. Subscribers to shared solar schemes can enjoy the benefits without the financial outlay and ongoing maintenance of installing their own panels.

 

Model Flexibility

Community solar is not a one size fits all proposition. There are several engagement models, each possessing its own unique costs, benefits, responsibilities, and rewards:

Utility-sponsored model
The utility itself owns or operates the solar power plant and then either sells or leases shares in the facility. Customers contribute through an up-front payment or ongoing payments, such as a monthly subscription.

  • Benefits: In return, customers often receive credits on electricity bills in proportion to their contribution and how much electricity the project produces. Because it is simple and clear, an increasing number of utilities now offer shared solar programs including NRG, Sacramento Municipal Utility District and Tucson Electric Power.

 

On-bill crediting
Residents and businesses buy a stake in the actual local shared solar facility.

  • Benefits: In exchange, customers receive a credit which may come in the form of monetary savings on an electricity bill or kilowatt-hour offsets on the customer’s electricity consumption.

 

Special Purpose Entity (SPE)
Setting up an SPE is one of the more complex ways to get involved in community solar. Under this model, groups of individuals and businesses join together to develop and operate a shared solar project as a business.

 

Non-Profit “Buy a Brick” Model
Donors contribute to a community solar installation owned by a charitable non-profit corporation—say, a school or church. The supporters of the non-profit help finance the system through tax-deductible donations.

  • Benefits: Rather than directly profit from lower energy costs, the donors benefit indirectly by lowering the energy costs of their chosen non-profit. The Solar for Sakai project in Washington, for example, raised donations for a solar installation at a local school.

 

On the Horizon

Currently there are 19 states with supportive policies for shared solar. Massachusetts, Minnesota, California and Colorado all have solid targets and significant incentives in place to drive adoption. Minnesota's Community Solar Garden law, for example, requires its main utility Xcel Energy to create solar farms for local consumers to buy into.

Emerging players include Illinois, which is aiming for 400 megawatts of shared solar by 2030. The state in November is launching a website that will connect communities, developers and subscribers to projects. New Jersey on October 1 published details for community solar pilot projects. Likewise Virginia's Dominion Energy will soon be launching a shared solar pilot project.

As demand increases, costs shrink and sustainability issues rise ever further to the fore, more states are likely to join the pack, edging community solar and solar-for-all into the limelight.

The views expressed by the author are not necessarily those of Fifth Third Bank and are solely the opinions of the author. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever.