Community solar — sometimes called shared solar or solar gardens — allows households and businesses to subscribe to a portion of a remotely located solar project and receive bill credits for their share of the generation, without installing panels on their own property. For the roughly half of US electricity consumers who cannot host rooftop solar (renters, shaded roofs, multi-tenant buildings), community solar is the primary path to participating in the solar economy.
How community solar works
The mechanics of a community solar project:
- A developer builds a solar array (typically 1–5 MW) on a suitable site — often a brownfield, agricultural land or large commercial rooftop
- The project connects to the local utility grid as a standard grid-tied system
- Community members subscribe to a "share" of the project — either a fixed number of kilowatt-hours per year or a percentage of the project capacity
- The utility applies bill credits to each subscriber's electricity bill each month, proportional to the generation attributable to their share
- Subscribers pay a discounted rate for their solar credit (typically 5–15% below the utility retail rate)
The subscriber benefit is the difference between what they pay for the solar credit and what the utility would have charged for the equivalent retail electricity. The developer's revenue comes from selling the solar credits to subscribers at the discounted rate, net of the credit passed to subscribers.
Virtual net metering (VNM): the underlying mechanism
Community solar relies on virtual net metering — a utility billing mechanism that credits subscriber accounts for generation at a remote location. VNM is authorised by the utility commission in each state and varies significantly in structure:
| State | Programme name | Programme size | Credit rate |
|---|---|---|---|
| New York | CDG (Consolidated Solar) | 5 MW max per project | Full retail rate |
| Minnesota | Community Solar Garden (CSG) | 1 MW max per project | Retail rate minus distribution |
| Colorado | Community Solar Gardens | 2 MW max | Retail rate |
| Illinois | Illinois Shines (SREC + subscriber credits) | 2 MW max | Retail rate + SREC payment |
| Maryland | Community Solar Pilot | 2 MW max | Full retail rate |
Not all states have community solar programmes — currently about 20 states have active programmes, with New York, Minnesota and Colorado having the most developed markets.
Subscriber types and qualification
Community solar programmes typically have different tracks for different subscriber types:
- Residential subscribers: individual households, often with income qualification requirements for low-income programmes; subscription sizes typically 1–25 kW
- Small commercial: SMEs, non-profits, municipalities; subscription sizes up to the site's peak demand
- Large commercial/industrial: anchoring subscribers in some programmes; single subscriber may take 25–50% of project capacity
- Low-income/community benefit: many state programmes require 30–50% of project capacity to be reserved for low-income subscribers with additional bill discount
Developer economics
A typical community solar project's revenue stack:
- Subscriber credits: revenue from selling kWh credits to subscribers at the discounted subscriber rate
- SREC or REC revenue: solar renewable energy certificates sold into state compliance or voluntary markets
- Federal ITC/PTC: 30% Investment Tax Credit (or Production Tax Credit at $0.028/kWh) under IRA; domestic content or energy community bonuses may apply
- State incentives: varies by state — upfront capacity payments, additional SRECs, property tax exemptions
Key cost drivers: subscriber acquisition and management (ongoing), billing integration with utility, subscriber churn management, and land/lease costs. Subscriber churn is often the biggest O&M challenge — subscribers moving, switching utilities or cancelling creates revenue gaps that must be filled by finding replacement subscribers.
Subscription management and churn
Subscriber management is operationally intensive:
- Subscribers typically sign 20-year contracts but must be allowed to exit (with 30–90 day notice) if they move outside the utility service territory
- New subscriber acquisition to replace churned subscribers requires ongoing marketing spend
- Subscription management platforms (Arcadia, SunCentral, Solstice) automate billing file transfers to utilities and subscriber portals
- Low-income subscribers often have higher churn rates — plan for 5–15% annual churn in a mixed residential portfolio