As you consider joining a community solar project, it’s important to understand how and when it will deliver value to you. This article breaks down the two main types of pricing models – ownership and subscription – in order to help you more accurately compare and decide between various offers.
A quick note about ownership:
Community solar options vary quite a bit from state to state, and utility to utility. Subscription-based programs are by far the most popular option throughout the country, so don’t be surprised if you can’t find any ownership-based community solar programs in your area.
Subscribe to the program, and make ongoing payments for your solar energy
The first–and most popular–option for joining a community solar project is a subscription. If you subscribe to a program, you will either pay for your solar electricity on a monthly basis through a type of power purchase agreement (PPA), or in a one-time up-front payment.
Most subscription-based community solar programs promise either immediate or eventual savings on your electricity bill, while some others may sell a subscription as a way to support clean electricity (and not necessarily as a money-saver.)
What to keep in mind for subscription-based programs
Cost, savings, and size of share
Some programs focus on the environmental benefits of going solar, while others emphasize savings.
In addition to the payments for the solar electricity, you may have to pay the following fees under a subscription program:
- Membership fees: Understand any applicable membership or sign up fees and how they will affect your potential savings
- Early termination fees: Some programs charge fees if you exit before the term is up. If you have to move before the the end of your contract term, will you still save money? What is the point at which the savings you’ve earned will be greater than the total you will have spent, including termination fees?
These considerations are particularly important if you think you may end up moving out of state before the term is up. Your community solar company may allow you to avoid termination fees if you transfer your subscription to someone else in your area who wishes to subscribe and meets the necessary program program requirements (credit score, etc).
What subscription-based pricing model are you working with?
The table below provides an overview of the various subscription-based pricing models that you may encounter as you shop around, sorted by most to least commonly available:
| Type of subscription | Description | Savings begin... |
|---|---|---|
| Fixed discount | You lock in a set discount over your utility electricity tariff rate, typically 5-15 percent. The actual rate you pay for solar will therefore fluctuate with the utility rates, but will always come at a discount. | Immediately, unless they charge a membership/signup fee. |
| Escalating solar rate | In year one, you agree to pay a set rate for your solar bill credits. In all subsequent years, your solar rates will gradually increase by a set percentage (e.g. 2.5 percent). It is reasonably assumed that your utility rates will escalate more quickly (e.g. 4.5 percent). | Immediately or in a few years – depending on the price of solar electricity under the program. |
| Flat per-kilowatt hour (kWh) solar rate | Rate paid for solar electricity never increases throughout the duration of the program. Your initial rate may be higher or lower than your current utility rate. | Immediately or in a few years – depending on the price of solar electricity under the program. |
| Flat monthly fee | Solar energy production is chunked into ‘blocks’, for which subscribers pay a flat monthly fee while receiving a set number of solar credits on their bill. You receive savings as utility rates rise and solar payments remain fixed. | Immediately or in a few years – depending on the price of solar electricity under the program. |
| ‘Lease to own’ | You pay regular, flat monthly payments for solar which cease after a set number of years, after which point solar credits are ‘free’. | Immediately or in a few years – depending on the price of solar electricity under the program. |
| Partial up-front payment | You prepay a one-time flat fee to lock in a deeper discount on ongoing solar rates as compared to utility rates. | In a few years – once upfront payment is recouped through monthly savings. |
| Full up-front payment | You pay for all projected solar electricity generation over a set duration (e.g. 20 years), locked in at a set rate per kWh. Some companies offer a discount for up-front payment vs. ongoing payments. Your utility applies solar credits to your bill over the duration of the contract. | In a few years – this arrangement is akin to purchasing a system, in that savings are deferred until the initial investment is recouped. |
Ownership of the solar project: Pay cash or finance with a solar loan
It is common–and sometimes even required–for multiple participants to jointly own a single community solar project. If you own a share in a community solar project, you will pay a set price for it, and can either pay for up-front with cash or finance your share with a solar loan.
Once the solar project is operational, virtual net metering will kick in and you’ll start to receive solar bill credits on your monthly utility bill equivalent to your share (e.g. 2 percent) of the community solar project’s total electricity output. After you recoup your initial investment through these electricity bill savings, you will continue to receive free electricity in the form of solar bill credits until you sell your share of the project, or the project is decommissioned (which can be after 25 years or more).
Typically, installing solar panels at your property allows you to save significantly more money than owning a share of a community solar project. However, owning a share of a community solar project is a great option if you cannot install solar on your roof, but want to take advantage of some of the financial and environmental benefits of solar power.
But do you really “own” the panels?
Even if you have signed your name on the back of your solar panels in the community solar project, remember that this is mostly symbolic. As the owner of a share in such a project, the important thing that you ‘own’ is the rights to the electricity that your share (percentage) of the project produces. In fact, contracts place restrictions on what you may physically do with ‘your’ solar panels (so, no – you can’t take them home until the project is decommissioned.)
This is a good thing: once you’ve bought your share, your panels are worth much more where they are than at home on your roof. In addition to the panels, a solar project is built with many commonly shared, non-divisible components–like inverters–that allow the panels to efficiently produce usable electricity for all owners.
Remember that ‘your’ individual panels are not directly linked to your power bill. Instead, the overall monthly electricity output of the solar project is always divided between all owners according to each one’s share of ownership. So it’s in your interest–and everyone else’s–for your panels to stay put.
What to keep in mind for ownership-based community solar programs
Cost, savings, and size of share
- Community solar companies market project shares with a variety of terms, including the number of ‘panels’, ‘kilowatts’ or ‘watts’ (1 kilowatt =1000 watts). It’s important to pay attention to the total size or wattage (W or kW) of your proposed share.
- How much will you pay per watt? Wattage is the measure that is indicative power output. Knowing the cost per watt ($/W) price will allow you to compare community solar ownership offers apples-to-apples.
- How much electricity will your share produce? As you evaluate different offers, you may find that one promises more solar power per watt than another—either because it uses solar tracking equipment, or because it receives more sun hours. How much value will this add in electricity savings over time?
- What is the estimated payback period for your share? How much will you save each year?
- The cost of a share includes not just panels, but also all the other equipment, administrative, operations and maintenance costs that makes up the solar project.Does the offer take all of these into account?
Incentives
- Although you may be eligible for some state-based tax incentives, federal tax credits will generally go to the company that develops the project.
- In certain states, you may also be able to receive solar renewable energy certificate (SREC) payments. Confirm in your contract!
Moving or selling your house
- If you move within the same utility area, you can usually continue to receive the virtual net metering credits associated with your share. An early exit from the program will involve either selling your share, or gifting it to someone else with the same utility zone.
Start your solar journey today with EnergySage
EnergySage is the nation’s leading online solar marketplace: using our Community Solar Marketplace, you can compare local options, get a quick community solar savings estimate, and seamlessly subscribe to an open project in your area. Over 10 million people come to EnergySage each year to learn about, shop for and invest in solar. Compare your community solar options today today to see how much solar can save you.
