Community Solar Pricing Models Overview | EnergySage
Community solar pricing models overview
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It’s hard to lose with community solar. You get to enjoy the benefits of solar energy without installing anything on your property and paying little to no upfront costs. It works like this: a large-scale solar array sends renewable energy to the local utility grid. As a community solar subscriber, you support a portion of the solar array and receive credits on your electricity bills. A community solar project creates savings for you, local jobs, and a cleaner environment for the whole community. But, some community solar projects may be better suited to meet your energy goals than others.
Community solar options vary from state to state and utility to utility. As you consider joining a community solar project, it's essential to understand how and when it will deliver value to you. Let’s break down the two main types of pricing models – ownership and subscription – to help you decide.
key takeaways
- The two main types of community solar pricing models are ownership and subscription.
- Most community solar programs are subscription-based.
- Community solar options vary based on where you live and what project you participate in.
- Community solar subscribers typically aren’t eligible for incentives because they lack ownership of the solar panel system.
Subscription-based community solar
A subscription is the most popular option for joining a community solar project. When you subscribe, you pay for your solar electricity monthly through a power purchase agreement (PPA) or a one-time upfront payment.
Most subscription-based community solar programs promise immediate or eventual electricity bill savings. In contrast, others may sell a subscription to support clean electricity (and not necessarily as a money-saver).
Cost, savings, and size of share
In addition to the payments for 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 ends, but increasingly, you can cancel without a penalty if you give your provider advanced notice.
Subscription-based pricing models
The table below provides an overview of the various subscription-based pricing models you may encounter as you shop around.
| TYPE OF SUBSCRIPTION | DESCRIPTION | SAVINGS BEGIN... |
|---|---|---|
| Fixed discount | You lock in a set discount over your utility electricity rate, typically 5-20%. | 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. | Immediately or in a few years – depending on the price of solar electricity under the program. |
| Flat per-kilowatt hour (kWh) solar rate | The rate paid for solar electricity never increases throughout the duration of the program. | 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. | 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. | 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. | In a few years – once the upfront payment is recouped through monthly savings. |
| Full up-front payment | You pay for all projected solar electricity generation over a set duration at a set rate. | In a few years – this arrangement is akin to purchasing a system in that savings are deferred until the initial investment is recouped. |
Ownership-based community solar
Unlike subscription-based community solar projects that are typically owned by the developer or another organization, ownership-based community solar projects are owned jointly by multiple participants. In this case, you pay a set price upfront for your share that is typically more expensive than the monthly payments of subscription-based models, but solar loans can make this initial investment more affordable.
Virtual net metering is the billing mechanism that enables you to receive solar bill credits (the credits you earn from the renewable energy you contribute to the grid). Virtual net metering kicks in once the solar project is operational, and your credits should be equivalent to your share of the community solar project's total electricity output (e.g., 2%). After you recoup your initial investment through these electricity bill savings, you’ll 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 on your property saves you significantly more money than owning a share of a community solar project. However, owning a percentage of a community solar project is an excellent option if you can't install solar on your roof but want to take advantage of solar power's financial and environmental benefits.
But do you really “own” the panels?
As the owner of a community solar share, the important thing you 'own' is the rights to the electricity your share produces. Contracts restrict what you may physically do with 'your' solar panels. 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.
Cost, savings, and size of share
Pay attention to your proposed share's total size or wattage (W or kW). Community solar companies market project shares with various terms, including the number of 'panels,' 'kilowatts,' or 'watts'. Once you understand the size and cost of your share, you can start to compare your options.
Incentives
Although you may be eligible for state-based tax incentives, federal tax credits will generally go to the company developing the project. Additionally, your subscription costs might be lower in certain states where solar renewable energy certificates ( SRECs) are available.
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 selling your stake or gifting it to someone with the same utility zone.