Community Solar Financial Model

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By David Roberts:

"Between 70 and 80 percent of people in the U.S. aren’t in a building suitable for rooftop solar. However, many of those people would like to be able to invest in distributed solar, not only for the financial returns but for civic or environmental reasons. “Community solar” refers to the many ways that groups of individuals can pitch in together to buy or lease solar.

A good place to start learning is this Department of Energy-funded guide to community solar [PDF]. It divides projects into three kinds:

• Utility-Sponsored Model: A utility owns or operates a project that is open to voluntary ratepayer participation.

• Special Purpose Entity (SPE) Model: Individuals join in a business enterprise to develop a community shared solar project.

• Nonprofit Model: A charitable nonprofit corporation administers a community shared solar project on behalf of donors or members.

See also this report from the Institute for Local Self-Reliance (ILSR), which “examines nine community solar projects, the policies that made them possible, and the (substantial) barriers that remain.” Here are the three policy solutions ILSR’s John Farrell recommends to unlock community solar:

1. Community net metering — to allow project owners to share the project’s electricity output. Right now, most state policies require utilities to allow net metering, but only for a solar or wind project on your own property. [Here's what net-metering is, for those not yet in the know.]

2. Simplified securities law — to make community-based projects easier. Right now, there’s little difference between setting up a mutual fund and setting up a community solar project, and both take a lot of lawyers. (Learn more in this report.)

3. Smarter federal tax incentives — to allow community-based institutions to host community-based projects. Nonprofits, cooperatives, cities, and counties are logical entities to build projects, but they can’t (easily) use federal tax incentives for solar and wind power. This raises the stakes for problem No. 2.

Expanding and simplifying community solar will enable anyone who supports renewable energy to invest in it — kind of like carbon offsets, only with tangible results and and financial returns!" (