Why community solar is winning, even in the midst of a pandemic

By Shaun Laughlin, Head of U.S. Strategic Development, Standard Solar

The effects of the COVID-19 pandemic have touched just about every household, business and industry across the country. Renewable energy, and solar in particular, has not been spared from the impacts of the economic downturn and collective uncertainty. Market volatility, liquidity concerns, rising unemployment, declines in consumer discretionary spending, supply constraints and worker layoffs are challenging companies throughout the supply chain.

One category, however, is showing signs that it is well positioned to weather the negative effects of the pandemic — community solar.

Before the COVID-19 crisis, community solar was the fastest growing segment of the solar industry. At the end of 2019, the country had 1.3 GW of community solar built and another 1.8 GW in the development pipeline, according to NREL. And while all parts of the industry are seeing some level of short-term pain, persistent consumer demand for solar PV, community solar’s cost competitiveness, and new market expansion are imparting a healthy degree of optimism for 2020 and 2021. Community solar developers have indicated that subscriptions are holding steady in major markets including Massachusetts, New Jersey and Colorado, and some are even hiring to support their current and upcoming offerings.

Why is this relatively new model of distributed generation solar showing more resistance to the impacts of a recession? Community solar’s fundamental propositions of affordability and accessibility give it a distinct edge in an economic decline. It increases access to the benefits of clean energy, and it offers a relatively low risk investment option.

A broader market, lower risk

Despite a growing appetite for clean, renewable energy, installing solar PV is not a viable option for more than half of U.S. residents and businesses. The reasons are myriad: they have inadequate roof space for a solar system, their roofs are shaded or not properly oriented for solar production, they rent their property and don’t have access to the roof, or they lack the financial resources to invest in an on-site system.

The community solar model removes these barriers and opens the benefits of solar to anyone who receives an electric bill, including lower-income residents, businesses, municipalities, schools and non-profits.

Community solar’s signature advantage is that a solar-ready roof — determined by on-site inspections and irradiance studies — is not required to participate. Educating prospects and converting them into community solar customers can be done seamlessly online at a fraction of the cost compared to rooftop solar.

There are also clear financial benefits to participants. Many community solar programs don’t require an upfront cost to participate and allow customers to offset all or only a portion of their electricity usage. Most programs offer rates that are lower than what participants pay utilities and deliver monetary credits for participants’ share of an array’s solar production directly on their utility bills, lowering their monthly utility costs right out of the gate.

For project financiers and asset owners, community solar farms are relatively stable and low-risk investments. As a result, we are seeing momentum in capital markets shift away from fossil fuel interests and toward renewables, with medium-scale distributed generation playing a significant role. Most community solar projects have utility off-takers with long-term power-purchase agreements and are anchored by commercial participants with commercial-grade credit, which means consistent and stable returns. Some utilize aggregators that bring buyers of all types and sizes into a single procurement, achieving mutually beneficial economies of scale and risk management.

Resilience and growth

Market development — robust prior to the pandemic with community solar programs recently initiated or expanded in New Jersey, Illinois, Rhode Island and Virginia — has continued during the crisis.

In March, Florida approved a nearly 1.5-GW community solar program, nearly doubling the capacity in the development pipeline. In April, New York passed legislation that streamlines permitting for large-scale renewable energy projects. And last month the Massachusetts Department of Energy Resources (DOER) doubled the capacity of the state’s solar incentive program.

This trend may continue in 2020 as states view investing in renewables as part of their economic recovery efforts, and more policymakers, regulators and advocates learn and adopt best practices to balance the market’s diverse interests and community solar’s economic viability.

While the true scale of the impact is yet to be seen, largely dependent on the length and severity of the economic downturn, the reality is that this crisis has amplified the need to accelerate our transition to broadly accessible and affordable renewable energy. As more businesses, consumers, schools and municipalities turn to community solar for its simplicity and flexibility, and more developers and financiers pursue predictable, steady investments, its value in this mission will continue to grow stronger.