What is community solar? It’s a new and rapidly growing solar market segment that has a few different business models at work in a handful of states across the nation. In Maryland and other open competition states, the dominant model is where a company builds a solar project and then sells the power the project produces to consumers (called “subscribers”) in the area. The subscribers pay the project owner each month for their share of the power and get credited for that power on their electric utility bill. With full retail rate credit, as is the case in Maryland, the subscriber ends up most likely saving money while supporting solar. They don’t have to install any equipment or commit to a 20 year contract. As I said, it’s a game changer.
The solar projects in the community solar space can either be built on an open piece of land or on a rooftop. For the landowner, community solar projects will look the same as a standard solar project. They’ll receive lease payments for the use of their land. But for building owners, community solar opens up new possibilities.
Under the old solar framework, the only way typically for a building owner to participate in the market was to sign a 20 year obligation to purchase solar energy from a system on his rooftop. For most companies, that doesn’t work as they don’t have a high enough level of credit to qualify in the first place, and even if they do, it’s a long commitment for something that is not going to offset a high percentage of energy usage. In the new community solar model, however, there’s no need for the building owner to use any of the solar the system produces. Instead, he’s merely renting out his roof space to a solar company, who pays a monthly, or quarterly lease payment in exchange. In other words, an asset that was not doing anything now becomes a source of lease payments for 20 years. Importantly, the building owner is under no obligation to purchase any of the power. There’s no legal liability. Because of this, the building owner’s credit is irrelevant. This isn’t just great news for commercial properties or warehouses, it’s also great for churches and other faith institutions that can now earn extra revenue without any additional liabilities. It’s also a great tool for landlords who own small shopping centers or strip malls.
Currently, retail businesses in a strip mall can’t practically get solar. They don’t own the buildings they’re in, and they pay their own electricity bill, so it doesn’t make sense to work through the landlord. With community solar, however, it works. The landlord now has an incentive to work with a solar developer. First, as mentioned already, the landlord will have no legal liability, but instead will earn revenue from renting his roof out. It gets even better, though. The landlord can work with a company like Neighborhood Sun to enroll his tenants as subscribers for the system he’s hosting. The tenants get to have solar power and save money while the landlord now has an added perk in the extremely competitive commercial leasing space. He can attract and retain tenants with the availability of cheap, clean and predictable solar power. Additionally, if there’s enough power left over for more subscribers, we can offer the power to the customers of the retail stores that shop at that mall, further cementing the link between the consumer and their favorite local brands. The public relations and marketing boost for the shopping center bring even more added value to the landlord and the tenants.
We’re entering a new solar world in places like Maryland and New York where the rules for the new community solar market are taking shape. Just as previous new solar programs jump started an explosion in growth, so too will the community solar programs that are just starting. This time, the financial windfall will go beyond the consumer base. Landlords, and any company that owns a rooftop not being utilized finally have a chance to get a piece of the solar pie without having to obligate themselves for long-term purchases or do any marketing work. Studies predict community solar to be a multi-billion dollar market over the next five years. Savvy property owners should start lining up to join the market now.