How Does Community Solar Work?

    Community Solar

    Over half of homeowners or businesses cannot install solar due to rooftop or financial limitations. Community solar may make sense for these folks. As of October 2018, the U.S. boasted 1.2 GW of community solar installations throughout 42 states. Learn how community solar can be an equalizer among homeowners, renters, and businesses yearning to live more sustainably and save money. Here’s a breakdown of the three central models in which community solar operates today.

    Utility-Sponsored Model

    Utility-sponsored models of community solar make renewable energy more available by decreasing financial commitments from homeowners and business owners. For neighborhoods that want to organize a community solar project, the local electric utility is a logical place to start. Utilities most likely have the legal and program management infrastructure to successfully organize a community solar project. Most customers opt to pay a fixed rate on a long-term plan within these programs; moreover, they receive credits on their electric bills proportional to their financial contribution and the electricity generated. Thus, the fixed rate is protected against instability and rising rates of grid electricity. Furthermore, even though the customer has no ownership over the solar system, they have rights to the benefits that the solar system produces.

    Surprisingly enough, Minnesota is the leader in installed megawatts of community solar from a utility. According to the Institute for Local Self-Reliance, Minnesota has 505 megawatts of operational community solar as of January 2019. Below is a graph of the overall progress of the state’s community solar program since August 2015.

    Minnesota Community Solar

    Special Purpose Entity

    Special Purpose Entity community PV projects are solar plants are owned by a third party like a business. Community members subsequently subscribe to the solar plant and invest their money. The subscriptions involve individuals purchasing a set share of a community solar (i.e. 1000 kWh/month) and then earning credit if they use less than their purchase share that month. These credits are paid out in either in kWh offsets or in cash. The main draw to this model is that these third parties are able to take advantage of incentives and tax credits that are not available to utilities. Massachusetts has the most amount of third-party community solar providers.

    Non-Profit Model

    The non-profit model involves a charity or non-profit organization owning the array and people donating to help raise capital to start the project. The non-profit then has the option to use the energy or sell it to the local utility for bill credits. The donors may also have options to receive some electrical benefits as well as available some tax deductions. Some non-profit models partner with for-profit businesses which allows them to own the system and take the tax incentives.






    Owned by

    Utility or third party

    SPE members


    Financed by

    Utility, grants, ratepayer subscriptions

    Member investments, grants, incentives

    Donor contributions, grants

    Hosted by

    Utility or third party

    Third party


    Subscriber profile

    Electric ratepayers of the utility

    Community investors


    Subscriber motive

    Offset personal electricity use

    ROI; Offset personal electricity use


    Long-term strategy of sponsor

    Offer solar options

    Add solar generation (RPS)

    Sell system to host

    Retain for electricity production for life of the system

    Retain for electricity production for life of the system.


    Further Reading

    3 years 7 months ago
    Written by
    Morgan Maltby
    Support topic
    Ground mount
    License and permit
    Support keywords
    Community Solar
    Utility-Sponsored Model
    Special Purpose Entity
    Non-Profit Model