What is Community Solar?

Business and Utility Partnership Models

Community solar allows multiple electricity customers, known as subscribers, to receive financial benefits from a single, off-site solar photovoltaic (PV) project.[1, 2] This model expands access to solar energy for individuals and businesses that cannot install panels on their own property, such as renters, condominium owners, or those with shaded or unsuitable roofs.[2] The electricity generated by the solar farm is fed directly into the local utility's grid. In return, subscribers receive a credit on their monthly electricity bills proportional to their share of the project's output.[1]

Understanding the business model behind a community solar program is essential, as it dictates the relationship between the subscriber, the utility, and the entity managing the solar project. Every program involves three key actors: the host, who owns the site where the project is located; the sponsor, who manages the project and its subscribers; and the subscribers, who purchase a share of the project's output.[3] These roles are configured differently across several primary business models.

Primary Ownership Models

• Developer-Owned / Third-Party Model: This is the most common structure in the U.S. community solar market, with third-party providers administering approximately 67% of the total installed capacity.[4] In this model, a private or nonprofit solar development company builds, owns, and operates the solar farm, often on land leased from a host.[3] The developer is responsible for financing, constructing, and maintaining the project. It sells subscriptions directly to customers, typically through a lease or a Power Purchase Agreement (PPA).[3, 5] The local utility’s main function is to apply the bill credits generated by the project to each subscriber's account, a mechanism known as virtual net metering.[6] This requires close coordination and data sharing between the developer and the utility to ensure accurate billing.[1] The prevalence of this model is largely due to its efficiency in leveraging federal tax incentives, as the third-party owner is eligible to claim credits that are critical to the project's financial viability.[5, 7]

• Utility-Owned Model: In this model, the local electric utility owns and operates the community solar project itself.[3, 8] The utility then sells or leases shares of the project directly to its customers. These shares can be defined as a specific number of panels or a certain capacity, such as a 1-kilowatt (kW) unit.[1] Subscribers receive a credit on their regular utility bill corresponding to the electricity produced by their share.[3] This model is frequently adopted by municipal utilities and electric cooperatives, which are often non-profit public entities and may have different financial structures and regulatory requirements than investor-owned utilities.[1, 9] An example is the GoSolarShares program offered by Tucson Electric Power, where customers can purchase solar energy in 150 kWh blocks.[1]

• Special Purpose Entity (SPE) Model: This is a less common, community-driven approach where a group of individuals or organizations form a new business, such as a Limited Liability Company (LLC), to develop and own the solar project themselves.[3] The members of the LLC are also the project's subscribers. This model provides the most direct local control and ownership, aligning with the early, grassroots vision of community solar seen in pilot programs in states like Maine and Vermont.[6] However, it presents significant legal and financial complexities, including the need to navigate Securities and Exchange Commission (SEC) regulations, which can be costly and time-consuming.[3]

While early community solar initiatives emphasized local ownership, the market has evolved. The financial realities of project development, particularly the need to monetize federal tax credits, have favored the third-party ownership model. Consequently, the "community" aspect of modern community solar primarily refers to the pool of local subscribers within a utility service area who share the economic benefits of a project, rather than sharing its ownership or governance.[2, 10] Prospective subscribers should understand that they are typically entering into a commercial agreement with a professional energy company, not joining a neighborhood cooperative.

Subscriber Financial Benefits

The primary financial incentive for subscribing to a community solar project is a net reduction in annual electricity costs. Most subscribers can expect to save between 5% and 20% on their electricity expenses over the course of a year.[13, 14, 15] This savings is achieved through a bill crediting mechanism that connects the off-site solar farm to a subscriber's individual utility account.

The Bill Credit Mechanism

The process of generating savings works in several steps:

1. Subscription Sizing: A subscriber signs up for a "share" of a local solar farm's production. The size of this share is typically based on the subscriber's historical electricity usage, with the goal of offsetting most of their annual consumption.[11, 12] In some states, regulations limit a subscription to no more than 120% of the subscriber's average annual electricity use to prevent over-subscription.[16]
2. Energy Generation and Grid Delivery: The community solar farm generates electricity from its panels and delivers it to the local utility grid.[2]
3. Virtual Net Metering Credits: The utility tracks the amount of electricity produced by each subscriber's share. It then calculates the monetary value of that energy and applies it as a credit on the subscriber's monthly utility bill. This process is known as "virtual net metering" (VNM) or "community net metering" (CNM).[6, 17] The value of this credit is determined by state or utility regulations and can be based on the full retail electricity rate or other complex formulas.[16, 18]
4. Payment and Savings: The subscriber pays the community solar provider for the credits they received on their utility bill. However, this payment is made at a contractually guaranteed discount. For example, if a subscriber's share generates $100 worth of bill credits and their contract specifies a 10% discount, they pay the solar company $90. The net savings for that month is $10.[13, 14]

Common Subscription Payment Models

The way savings are calculated can vary based on the subscription model offered:

• Fixed Discount on Bill Credits: This is the most prevalent and straightforward model. Subscribers receive a fixed percentage discount (e.g., 10% or 15%) on the value of the solar credits generated by their share each month. This structure guarantees that the subscriber saves money on every kilowatt-hour produced by their share, as the payment to the solar provider will always be less than the credit received from the utility.[13, 15]
• Fixed Electricity Rate: In this model, the subscriber agrees to pay a fixed price per kilowatt-hour ($/kWh$) for the electricity generated by their share. This rate is typically set below the current utility rate. Savings are realized as long as the fixed solar rate remains lower than the utility's rate, which may fluctuate over time. This model offers less predictability than the fixed discount model but can provide significant savings if utility rates rise substantially.[13]
• Ownership Model: A less common option for subscribers involves making an upfront payment to purchase a number of panels or a specific portion of the community solar project.[5] While this requires a significant initial investment, it can lead to greater long-term savings, as the owner receives the full value of the bill credits for all the power produced by their panels over the project's 25-plus-year lifespan. This model may also make the owner eligible for direct tax incentives.[13, 19]

Seasonal Fluctuations and Annual Savings

It is crucial for subscribers to understand that savings are not uniform from month to month. Solar panels produce more electricity during the long, sunny days of summer and less during the shorter, cloudier days of winter. This results in seasonal fluctuations in bill credits and payments.[11, 20]

In the summer, a subscriber's share may generate more credits than needed to cover their entire utility bill. These excess credits are typically rolled over and "banked" in the subscriber's utility account. In the winter, when solar production is lower, these banked credits can be applied to offset electricity costs.[11, 20] Because of this cycle, the 5-20% savings figure is realized on an annual basis. In some summer months, the payment to the solar provider might be larger than the reduced utility bill, but this is balanced out by lower payments and the use of banked credits in the winter, resulting in a net annual savings.[20]

Example of Annual Community Solar Savings

The following table illustrates how savings accumulate over a year for a hypothetical subscriber with a 10% discount rate. It demonstrates the role of the rollover credit bank in balancing seasonal production.

Risks and Subscription Terms

A community solar subscription is a binding legal agreement, and it is imperative that prospective subscribers conduct thorough due diligence before signing a contract.[21] Understanding the key terms and conditions is essential to ensure the promised financial benefits are realized and to avoid potential risks, such as predatory terms or outright scams.

Key Contract Terms to Scrutinize

When reviewing a subscription agreement, pay close attention to the following terms:

• Contract Length (Term): Subscription terms can vary widely, from flexible month-to-month or short-term agreements of 3-5 years to long-term commitments of 20-25 years.[1, 5] While long-term contracts can provide price stability, shorter, more flexible terms are becoming increasingly common and reduce the risk associated with a long-term obligation.[19]
• Cancellation and Termination Fees: Some contracts include significant penalties for early termination.[21] These fees can negate any savings achieved and create a substantial financial burden, particularly for households with uncertain future incomes or living situations.[1] Programs designed with strong consumer protections often have no exit fees.[2]
• Price Escalators: While many programs offer a fixed discount or rate, some contracts may include an annual price escalator, meaning the amount paid to the solar provider increases over time.[1] The agreement should clearly state whether the subscription price can change and, if so, by how much and how often.[21]
• Transferability and Portability: If a subscriber moves, the contract terms dictate what happens to the subscription. Many agreements allow the subscription to be transferred to a new, eligible customer or to be kept by the subscriber if they move to a new address within the same utility service territory.[5, 19] It is important to verify the specific process, any associated fees, and any restrictions.[22]
• Savings Guarantee: Be cautious of vague or exaggerated promises of savings. A reputable contract will clearly disclose the subscription fee structure and the expected bill credit rate, allowing for a transparent comparison of costs and benefits.[21] The most reliable offers guarantee savings as a fixed percentage of the bill credits generated, ensuring a positive financial outcome.[15]

Consumer Protections and Red Flags

State regulatory bodies, such as Public Service Commissions (PSCs), may oversee community solar programs and enforce consumer protection rules. These can include prohibitions on unfair, misleading, or deceptive marketing tactics and requirements for background checks on door-to-door sales agents.[23] However, PSCs typically do not regulate the subscription rates themselves, making contract review by the consumer paramount.[23]

Prospective subscribers should be alert for red flags that may indicate a scam or a bad-faith actor:

• High-Pressure Sales Tactics: Statements like "you must sign now or lose this opportunity" are a major warning sign.[21, 24]
• Unrealistic Promises: Claims that the federal government will pay for the power, that the subscription is "free," or that it will completely eliminate the utility bill are deceptive.[17, 21]
• Lack of Written Documentation: Always insist on receiving all contracts and disclosure documents in a form that can be kept and reviewed. Be wary of signing documents on a salesperson's tablet without being able to read them in full.[21]

If you encounter questionable practices, you can report them to the Federal Trade Commission (FTC) or your state's consumer protection office.[21]

Subscriber Checklist: Key Subscription Terms to Review

State Policy Frameworks

The availability, structure, and financial attractiveness of community solar programs are fundamentally determined by state-level policy.[4, 25] A prospective subscriber's ability to participate in community solar is not a given; it is contingent upon a specific regulatory framework created by their state's legislature and public utility commission. As of early 2025, 24 states and the District of Columbia have enacted "enabling legislation" that establishes formal rules for community solar, resulting in the most active and developed markets in the country.[2, 26] States without such policies may have some small-scale, utility-run programs, but they lack the broad market access and competition seen in policy-driven states.[4, 26]

The Role of Enabling Legislation

State policies create the market conditions necessary for community solar to function. Key components of this legislation include:

• Authorization of Virtual Net Metering (VNM): This is the cornerstone policy for community solar. VNM is the billing mechanism that directs a utility to credit a customer's electricity bill for power generated by an off-site solar facility.[6] Without a VNM framework, the financial model of crediting multiple subscribers from a single project is not possible.[27]
• Program and Project Size Caps: State policies set limits on the total amount of community solar capacity that can be built statewide (the program cap) and the maximum size of any individual project, which is often around 5 megawatts (MW).[16, 23] These caps directly influence the pace of market growth and the number of available subscriptions.
• Bill Credit Rate Determination: State regulators decide the value of the bill credits that subscribers receive. This rate is a critical factor in determining subscriber savings. It can be set at the full retail rate of electricity, a lower rate based on the utility's "avoided cost" of generation, or a more complex "Value of Solar" tariff that accounts for various benefits the solar project provides to the grid.[4, 16, 18] A higher, more predictable credit rate makes projects more attractive to both developers and subscribers.
• Third-Party Ownership Rules: Enabling policies typically clarify whether non-utility, third-party developers are allowed to own and operate community solar projects.[4] Allowing third-party ownership fosters a competitive market, encourages innovation, and is essential for leveraging federal tax incentives, which drives down costs for everyone.[7, 27]
• Low-to-Moderate Income (LMI) Provisions: Many states with mature policies include equity provisions that mandate a certain percentage of a project's capacity—often 40% or more—be reserved for LMI subscribers.[16, 23] These policies often come with additional consumer protections or incentives to ensure meaningful participation from underserved communities.

Ultimately, the existence and quality of community solar offerings in a given area are a direct result of decisions made in the state capital. The specific details of a state's policy framework—particularly the bill credit rate and rules governing project ownership—determine whether projects are economically viable for developers to build and financially beneficial for customers to join. Therefore, a prospective subscriber's first step should be to investigate whether their state has an active, policy-supported community solar program. Resources from organizations like the National Renewable Energy Laboratory (NREL) track these state policies and can provide this essential context.[2, 28]

Comparison to Rooftop Solar

For many electricity customers, the choice to go solar comes down to two primary options: installing a rooftop solar system on their property or subscribing to a community solar project. Both pathways can reduce electricity costs and support clean energy, but they serve different needs and are designed for different circumstances.[22, 29] The optimal choice depends on a customer's living situation, financial capacity, and long-term energy goals.

Key Differences

• Accessibility and Eligibility: Rooftop solar is generally limited to property owners who have a roof that is structurally sound, large enough, and receives ample direct sunlight.[22, 30] This excludes a significant portion of the population. According to analysis by NREL, nearly 50% of households and businesses are unable to host rooftop systems.[2] Community solar is designed to fill this gap, providing access to renters, condo owners, residents of multifamily buildings, and homeowners with unsuitable roofs.[19, 30]
• Upfront Cost: A primary barrier to rooftop solar is the high initial investment, which can average between $17,000 and $24,000 for a typical residential system, although financing options like loans and leases are available.[22, 29] In contrast, the vast majority of community solar programs are subscription-based and require zero upfront cost to join.[22, 30]
• Financial Savings: Rooftop solar generally offers a greater potential for long-term financial savings. A system owner can offset a large portion, or even all, of their electricity costs, leading to tens of thousands of dollars in savings over the system's 25-plus-year lifespan.[22, 31] Community solar provides more modest but highly predictable savings, typically in the range of 5-20% annually, without the initial investment.[22]
• Ownership and Incentives: With rooftop solar, the property owner owns the physical equipment (panels, inverters, etc.).[22] This ownership makes them directly eligible for valuable financial incentives, most notably the federal Investment Tax Credit (ITC), which provides a credit worth 30% of the system's cost.[31, 32] Community solar subscribers do not own any equipment and are therefore not eligible for these direct incentives. The benefits of such incentives are passed on indirectly by the project developer in the form of lower subscription costs.[7, 19]
• Maintenance and Responsibility: Rooftop system owners are responsible for all maintenance, monitoring, and repairs, though systems are generally durable and require little upkeep.[30, 31] Community solar offers a completely hands-off experience; the project developer or owner is responsible for all operations and maintenance of the solar farm.[29, 33]
• Property Impact and Portability: Installing rooftop solar can increase a home's property value and may help it sell faster.[31] However, it can also add complexity to a real estate transaction. Community solar has no impact on property value. Subscriptions are often portable within the same utility territory or can be canceled or transferred to a new subscriber upon moving, offering greater flexibility.[22, 31]

Comparison Table: Community Solar vs. Rooftop Solar

Federal and State Incentive Alignment

Government incentives are a foundational driver of the solar industry. For community solar, these incentives are critical for making projects economically viable for developers, which in turn allows them to offer guaranteed savings to subscribers.[7] While subscribers do not claim these benefits directly, their entire value proposition is built upon a framework of federal and state policies designed to reduce the cost of solar development.

The Federal Investment Tax Credit (ITC)

The single most important federal incentive for solar energy is the Investment Tax Credit (ITC). As extended by the Inflation Reduction Act of 2022, the ITC allows the owner of a solar energy system to claim a tax credit equal to 30% of the system's total installation cost.[7, 32]

In the context of community solar, the project developer or third-party owner is the entity that claims the ITC, not the individual subscribers.[7, 19] This tax credit significantly reduces the developer's net cost to build the project. These substantial savings are then passed on to subscribers in the form of lower subscription rates, making the typical 5-20% annual savings possible. Without the ITC, the cost of community solar subscriptions would be much higher, and the financial benefit to customers would be minimal or nonexistent.

The Inflation Reduction Act also introduced several "bonus" credits that can be stacked on top of the base 30% ITC. These include a 10% credit adder for projects built in "energy communities"—such as on brownfield sites or in areas historically dependent on fossil fuel economies—and additional credits for projects serving low-income communities.[7] These bonus credits further lower developer costs, creating the potential for even greater savings for subscribers, particularly those in targeted LMI programs.

State-Level Incentives

States often provide their own incentives that work in tandem with federal policy to support solar development. These programs are typically designed to benefit the project owner, further improving project economics and enabling lower costs for subscribers. Key state-level incentives include:

• Tax Exemptions: Many states offer property tax exemptions, which prevent the value of the solar project from increasing the owner's property tax bill. Some also offer sales tax exemptions on the purchase of solar equipment.[32, 34]
• Rebates and Grants: Some states or utilities offer direct rebates or grants that reduce the upfront cost of project development.[32, 34]
• Performance-Based Incentives: Programs like Solar Renewable Energy Credits (SRECs) provide an additional revenue stream for project owners. In an SREC market, the owner earns one credit for every megawatt-hour of electricity the solar farm produces. These credits can then be sold to utilities that need them to meet state-mandated renewable energy targets.[34]
• Program-Specific Adders: States with advanced community solar programs often create additional financial incentives, or "adders," for projects that meet specific policy goals. For example, New York's "Inclusive Community Solar Adder" and the Massachusetts "SMART Program" provide higher payment rates to developers for projects that serve LMI customers, encouraging the development of equitable solar access.[7]

The financial structure of community solar is designed to efficiently capture these developer-focused tax benefits. The savings offered to subscribers are a direct, calculated result of the reduced project costs that these federal and state incentives make possible. This means that the long-term health of the community solar market and its ability to provide value to consumers are intrinsically linked to the stability of this supportive policy environment.

Community Economic Impacts

Beyond the direct financial savings for individual subscribers, community solar projects serve as powerful engines for local economic development. When a new solar farm is built, it generates a cascade of positive economic impacts within the host community and state, including job creation, private investment, and increased tax revenue.[35] This positions community solar not just as an energy program, but as a significant tool for local economic growth.

Key Economic Benefits

• Job Creation: Community solar projects create thousands of well-paying local jobs. These opportunities span the entire project lifecycle, from short-term construction and installation roles to long-term positions in operations, maintenance, and land management.[35, 36] State-level studies project significant employment gains; for example, Virginia's shared solar program is expected to create 46,000 jobs over its lifetime, while legislation in Pennsylvania could generate 11,000 jobs.[35]
• Private Investment: The development of community solar attracts billions of dollars in private capital into state and local economies. This investment funds not only the solar project itself but also stimulates activity in related sectors like logistics, manufacturing, and local business services.[36] Colorado's program, for instance, has already attracted over $1.4 billion in private investment.[35]
• Increased Tax Revenue: Solar farms become significant local taxpayers, contributing property and sales tax revenue to municipalities and counties.[36] This new revenue stream can be used to fund essential public services like schools, road improvements, and emergency services, often reducing the tax burden on existing residents.[36, 37] A study in Washington projected that a 500 MW build-out of community solar would generate over $76 million in state tax revenue.[37]
• Landowner Income: Community solar projects are frequently sited on leased land, providing a stable, long-term source of income for local landowners, particularly farmers and other rural property owners. This allows them to diversify their income while keeping the land in their possession.[37]

State-Specific Economic Projections

The economic benefits of community solar are substantial and have been quantified in numerous state-level analyses [35]:

• California: Potential for $12 billion in economic impact and 25,000 full-time jobs.
• New Mexico: The initial phase of its program is projected to generate $517 million in economic impact and 3,760 jobs.
• Ohio: A 2,400 MW development could result in $3.3 billion in economic activity and support 18,000 jobs.
• Washington: A 500 MW program is forecasted to generate $1.76 billion in contributions to the state's gross product.

The distributed nature of community solar means these economic benefits are often realized in rural and underserved areas that may have fewer opportunities for new investment and job growth.[35] For a small business subscriber, participation can be viewed as both a direct cost-saving measure for their enterprise and an indirect investment in the economic vitality of their local community.

Access Equity Metrics

A core promise of community solar is its potential to democratize access to clean energy. By design, it overcomes the primary barriers of rooftop solar, making the financial and environmental benefits of solar accessible to a much broader segment of the population, including renters, residents of multifamily housing, and low-to-moderate-income (LMI) households.[2, 38, 39] However, achieving true equity requires more than just making programs available; it demands intentional program design and policies that specifically address the unique challenges faced by underserved communities.

Overcoming Barriers for LMI Households

LMI communities have historically been excluded from the benefits of the clean energy transition due to several significant barriers, including high upfront costs for system ownership, lack of access to affordable financing or credit, and not owning their homes.[40, 41] Well-designed community solar programs address these issues directly.

Program Designs for Equitable Access

States and developers are increasingly implementing specific metrics and program designs to ensure meaningful participation from LMI households:

• LMI Capacity Carve-Outs: A common and effective policy tool is the "LMI carve-out," which mandates that a specific percentage of a community solar project's capacity must be subscribed by verified LMI customers. These requirements can range from 40% in states like Maryland to over 50% in programs like New Jersey's pilot.[16, 23, 42]
• Guaranteed Savings and No-Cost Subscriptions: To provide tangible financial relief, many LMI-focused programs guarantee a minimum level of bill savings, often 20% or more.[2] Some programs, such as Washington, D.C.'s "Solar for All," go further by offering subscriptions to income-qualified households at no cost, ensuring all benefits flow directly to the subscriber as savings.[17, 38]
• Removal of Financial and Contractual Barriers: Best practices for LMI programs include eliminating common obstacles to participation. This means no upfront payments, no sign-up fees, and no early termination or cancellation fees.[1, 2] Furthermore, programs may use utility bill payment history as an alternative to credit scores for eligibility, which can significantly expand access for those with limited credit history.[1]
• Coordination with Housing Assistance: A critical administrative step has been guidance from the U.S. Department of Housing and Urban Development (HUD). This guidance clarifies that bill credits from community solar should not be counted as income for residents of federally subsidized housing. This prevents the unintended consequence of a subscriber's rent increasing or their utility allowance decreasing, ensuring that the energy savings are a true net benefit to the household.[43]
• Community Engagement: Successful equity-focused programs recognize that outreach must be tailored and trusted. They often partner with community-based organizations (CBOs) that have deep roots in the neighborhoods they serve. These CBOs help with program design, communication, and enrollment, ensuring that the program meets the actual needs of residents.[40, 44]

The presence of these intentional, equity-focused design elements is a strong indicator of a mature and consumer-friendly community solar market. When evaluating a program, prospective subscribers, particularly those with income constraints, should look for offerings that explicitly incorporate these protections and benefits.

Grid Interconnection Barriers

While demand for community solar is strong and the technology is well-established, the single greatest impediment to the industry's growth is the process of connecting new solar projects to the electric grid.[45, 46] This technical and administrative process, known as interconnection, has become a major bottleneck, creating long delays and significant uncertainty that can prevent new projects from being built.

The Interconnection Logjam

Across the country, utility interconnection queues are flooded with applications from new energy projects, including community solar, utility-scale solar, and wind. Utilities are often understaffed and use outdated processes to handle this surge in requests, leading to massive backlogs.[46] In some cases, the projected timelines for clearing these queues are measured in years, if not decades.[46]

For a community solar developer, this logjam creates two critical problems:

1. Delays: Long waits for interconnection studies and approvals can delay a project's construction and operation by years, jeopardizing financing and subscriber agreements.[39]
2. Cost Uncertainty: The cost to upgrade the local distribution grid to safely accommodate a new solar project is often unknown until late in the interconnection process. These upgrade costs can be unpredictable and, in some cases, prohibitively expensive, forcing developers to abandon otherwise viable projects.[45, 46]

Technical and Procedural Challenges

The grid itself presents technical hurdles. Much of the existing distribution infrastructure was designed for a one-way flow of power from central power plants to consumers. The rise of distributed energy resources like community solar introduces two-way power flows, which can cause technical issues like voltage fluctuations or power backfeeding onto the higher-voltage transmission system if not properly managed.[47, 48] Addressing these issues often requires costly equipment upgrades.

Procedurally, many utilities follow a "first-come, first-served" approach where the first project to trigger the need for a major grid upgrade is required to pay the full cost of that upgrade.[48] This approach can unfairly burden a single project with costs that will ultimately benefit all future projects connecting to that part of the grid.

Potential Solutions

Addressing the interconnection barrier is a top priority for the renewable energy industry and regulators. Potential solutions include:

• Increased Transparency: Developing publicly available "hosting capacity maps" that show, in detail, where the grid has available capacity to accommodate new projects at a low cost. This allows developers to site projects more intelligently from the start.[48]
• Process Reform: Streamlining interconnection procedures, adopting a "cluster study" approach where multiple projects in the same area are studied together, and reforming cost allocation rules to be more equitable.[39, 48]
• Advanced Technologies: Utilizing smart inverters, energy storage systems, and other grid-enhancing technologies to manage the technical impacts of solar generation, potentially reducing the need for expensive hardware upgrades.[47]

For a prospective subscriber, this behind-the-scenes administrative battle is the primary reason why new community solar projects may be slow to become available, even in states with supportive policies. The industry's ability to solve this gridlock is the key to unlocking the vast potential of community solar nationwide.

Future Industry Outlook

The community solar industry is at a pivotal moment, characterized by record-breaking growth and strong consumer demand, yet facing significant headwinds related to policy uncertainty and infrastructure constraints.[49] The future trajectory of the market will depend on a race between the saturation of established state markets and the ability of new states and federal regulators to enact reforms that can sustain long-term growth.

Growth Projections and Market Trends

The U.S. community solar market has expanded rapidly, installing a record 1.7 GW in 2024 and reaching a cumulative capacity of over 8 GW.[49, 50] Projections show the market is on track to surpass 15 GW by 2030.[49] This growth has been overwhelmingly driven by a few key states with mature policy frameworks, such as New York, Massachusetts, and Minnesota.[49, 51]

However, this reliance on a few leading states presents a challenge. As these markets begin to saturate and hit their state-mandated program caps, the industry's overall growth rate is expected to slow.[49] Sustaining momentum will require new, large markets to open up. There are promising signs of bipartisan support for new programs in states like Pennsylvania, Ohio, and Wisconsin, which could become the next engines of growth.[49]

Evolving Business Models

The industry continues to innovate to increase value and resilience:

• Solar-plus-Storage: The integration of battery storage with community solar projects is a key emerging trend.[4] Storage allows a project to provide power during grid outages, creating "resilience hubs" for communities, and enables project owners to dispatch power when it is most valuable to the grid, creating new revenue streams.[52]
• Focus on Broader Community Benefits: Driven by federal initiatives like the National Community Solar Partnership and the "Solar for All" program, there is a growing emphasis on ensuring projects deliver benefits beyond just bill savings. This includes creating local workforce development opportunities, promoting community ownership models, and building local wealth.[38, 52]
• Simplified, Consumer-Friendly Products: In response to consumer demand for flexibility and transparency, many providers are moving toward simpler subscription models with no long-term contract requirements and guaranteed savings, reducing risk for subscribers.[53]

Headwinds and Tailwinds

• Primary Headwind: Grid Interconnection: As detailed previously, interconnection delays and costs remain the most significant barrier to deploying the tens of gigawatts of planned projects currently stuck in queues.[49, 53]
• Policy Uncertainty: The long-term availability of federal incentives like the ITC and funding for programs like Solar for All is subject to political change, creating uncertainty for developers and investors.[49, 53]
• Primary Tailwind: Strong Demand: Rising utility electricity rates and increasing consumer interest in clean energy continue to fuel strong demand for community solar subscriptions.[50, 53]
• Market Expansion: The potential entry of new states into the community solar market represents a massive opportunity for growth.

The long-term outlook for community solar hinges less on technological innovation and more on policy and infrastructure reform. If states can continue to pass effective enabling legislation and if utilities and regulators can successfully reform interconnection processes, the industry is poised to provide affordable, clean energy to millions more American households and businesses. If these reforms lag, the industry could face a period of slower growth as the pipeline of projects in mature markets is exhausted.

Appendix

Program Funding Models

Community solar projects are capital-intensive assets that require a sophisticated financing structure to cover the costs of development, construction, and long-term operation. These funding models are designed from the perspective of the project owner to maximize financial returns, primarily by efficiently leveraging federal and state tax incentives.[54, 55]

The financing for a typical project is assembled from several sources, often referred to as the "capital stack":

• Tax Equity: This is a cornerstone of renewable energy finance in the U.S. and the primary reason third-party ownership is the dominant community solar model. A project developer partners with a tax equity investor—typically a large bank or corporation with substantial tax liability—that provides a large portion of the upfront capital for the project. In exchange, the investor receives the project's federal tax benefits, most notably the 30% Investment Tax Credit (ITC).[5, 55]
• Debt Financing: After securing a tax equity commitment, the developer will obtain loans from commercial banks or specialized energy lenders to finance the remaining project costs. The project's future revenue from subscriber payments serves as the collateral for this debt.[55]
• Developer Equity: The solar development company itself will contribute its own capital to the project, covering early-stage development costs and holding a long-term ownership stake.

The primary revenue stream used to repay debt and provide a return to investors comes from the monthly subscription payments made by residential and business customers.[54, 55]

For projects focused on serving LMI communities, developers may access specialized, lower-cost funding sources to improve project economics and pass on greater savings to subscribers [55]:

• Low Income Home Energy Assistance Program (LIHEAP): Federal LIHEAP funds can be used by states or community action agencies to pay the monthly subscription fees on behalf of eligible LMI households.
• Targeted Tax Credits: Programs like the Low-Income Housing Tax Credit (LIHTC) and the New Markets Tax Credit (NMTC) can be layered on top of the solar ITC to provide additional equity for projects built in or serving designated low-income areas.
• Green Bonds and Community Development Financial Institutions (CDFIs): Publicly issued green bonds or loans from mission-driven CDFIs can provide capital at more favorable rates than traditional commercial loans for projects with clear social and environmental benefits.

Project Development Lifecycle

Bringing a community solar farm from an idea to an operating power plant is a complex, multi-year process involving numerous stakeholders, including landowners, engineers, lawyers, investors, and government agencies.[56, 57] The lifecycle consists of several distinct, often overlapping, stages.

1. Site Identification and Feasibility: The process begins with identifying a suitable parcel of land. Key criteria include sufficient acreage, minimal shading, flat topography, and close proximity to a utility substation with adequate grid capacity. Developers then conduct a feasibility study to assess the site's solar resource, environmental risks, and local zoning and permitting requirements.[56, 57]
2. Permitting and Regulatory Approvals: This is often the longest and most challenging phase. The developer must secure a wide range of permits from local, state, and sometimes federal authorities. This includes land use and zoning approvals from the local municipality, environmental permits to protect wetlands or wildlife habitats, and a formal interconnection agreement with the local utility.[57, 58]
3. Design and Engineering: Once permits are in hand, engineers create detailed blueprints for the project. This includes the precise layout of the solar arrays to maximize energy capture, the design of the electrical system (inverters, transformers, wiring), and the structural engineering for the panel racking and foundations.[57]
4. Financing: With the project fully designed and permitted, the developer finalizes the complete financing package, securing commitments from tax equity investors and lenders to cover the full cost of construction.[57]
5. Subscriber Acquisition: In parallel with the later development stages, the project sponsor begins marketing the project to potential subscribers. The goal is to have the project fully subscribed by the time it begins operating to ensure a predictable revenue stream.[55]
6. Construction and Installation: This phase involves the physical construction of the solar farm. It starts with site preparation, such as clearing and grading the land, followed by the installation of foundations, racking systems, solar panels, and all associated electrical equipment.[57]
7. Commissioning and Interconnection: After construction is complete, the entire system undergoes rigorous testing to ensure it operates safely and meets its designed performance specifications. Once it passes all inspections, the utility grants formal "Permission to Operate," and the project is officially connected to the grid.[57, 58]
8. Operations and Maintenance (O&M): For the next 25 or more years, the project owner is responsible for the ongoing operation and maintenance of the solar farm. This includes continuous performance monitoring, regular panel cleaning, vegetation management, and any necessary equipment repairs or replacements.[57]

Subscriber Acquisition Strategies

Securing and retaining a full roster of subscribers is a critical business function for any community solar project. A fully subscribed project is essential for generating the revenue needed to satisfy lenders and investors. Because project development and customer management require different expertise, many developers outsource subscriber acquisition and management to specialized third-party companies.[59, 60]

Key strategies for acquiring and retaining subscribers include:

• Marketing and Sales Channels: Acquisition companies use a mix of strategies to reach potential customers, including digital marketing, direct mail campaigns, partnerships with local community organizations, and in some cases, direct or door-to-door sales.[59, 61]
• Customer Education and Onboarding: A smooth and transparent onboarding process is vital for long-term retention. Companies that effectively educate subscribers about how billing works, how to read their new utility bills, and the seasonality of solar credits see much lower cancellation rates. An informed subscriber is a satisfied subscriber.[59]
• Flexible and Consumer-Friendly Contracts: Offering flexible terms, such as month-to-month agreements and contracts with no cancellation fees, significantly reduces the risk and friction for new subscribers and improves retention.[62]
• Simplified Billing: The industry recognizes that receiving two separate bills (one from the utility and one from the solar provider) can be confusing for customers. While technically challenging for utilities to implement, consolidated billing—where all charges and credits appear on a single, unified utility bill—is a key goal for improving the customer experience and reducing churn.[63]
• Responsive Customer Service: Providing accessible, knowledgeable, and responsive customer support is crucial for managing subscriber accounts, answering billing questions, and resolving any issues that arise, which helps maintain high levels of satisfaction and retention.[59, 61]

Prospective subscribers should be aware that their primary point of contact for signing up and for ongoing service may be a subscriber management company, whose name could be different from that of the actual developer or owner of the solar farm.

Key Industry Developers

The U.S. community solar market is active and growing, with a number of key development companies leading the way. These firms often specialize in the community solar and commercial & industrial (C&I) sectors, which are distinct from the residential rooftop installation market. The following table lists some of the prominent developers and EPCs (Engineering, Procurement, and Construction firms) in the community solar space, based on industry rankings. Seeing a company on this list may provide a degree of confidence when evaluating a subscription offer.