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What Is Community Solar?

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If you think of installing a solar energy system in your community, you’ve likely considered implementing community solar programs. However, before you decide, it’s important to understand the basics. In addition, there are costs, benefits, and structures to consider. This article will explain more about each of these topics. We’ll also discuss how insurance works and whether or not the project will be able to receive tax credits for energy production.

Benefits

Community solar projects can benefit communities in many ways. First, they can aggregate user demand and supply to access economies of scale. As a result, they can purchase tons of solar panels or even a whole project. In addition, big customer commitments can give solar farms stability and enable more diverse subscribers. That way, everyone wins. What’s more, community solar projects can save the environment.

One of the most significant advantages of community solar is its cost-efficiency. The cost of solar panels is reduced significantly by using economies of scale. For example, 20 neighbors could benefit from a lower wholesale price by installing a 100 kW solar panel system. In addition to this, a large group can purchase solar panels in bulk, and the system’s total cost should be much less than if each household installed a smaller system.

Costs

There are several costs associated with community solar:

  1. It may cost utilities a lot of money to upgrade their billing systems. Changing your utility’s billing system means replacing dozens of employees.
  2. Updating your billing system is a hassle. Fortunately, some utilities have taken pains to disclose the costs of implementing a community solar program.
  3. In some cases, the utility’s decision may be based on legislative restrictions.

Depending on the size of your community solar project, the installation cost can be high, but in most cases, the savings from the installation of the panels can make up for this. Depending on the size of your community solar project, you may pay between $2 and $3 per watt. In many cases, you can break even in eight years and receive 10-30% ROI on your investment. The subscription to Community Solar can also be free. If you are not satisfied with the service, you can cancel your subscription without cost.

Structure

A community solar project is structured as a Special Purpose Entity (SPE) and involves collaboration among individuals. The investment structure is critical, as the SEC can require compliance with strict regulations if the community solar project is not structured correctly. The U.S. Department of Energy has a guide for community solar projects, which outlines establishing community solar and details the different types of projects that can be developed.

The utility-sponsored model is a popular community, solar model. Under this model, the utility company owns the solar project and leases the host site to its customers. Participants may purchase individual panels or subscribe to a power purchase agreement through which they receive credits on their utility bill proportional to the amount of electricity they buy. The utility, in turn, reaps benefits from the energy generated from the project. This structure is the most common in the community solar sector.

Insurance

While a community solar project may not involve large amounts of money, there are certain risks associated with a project of this nature. Such risks can be covered by specialized insurance for community solar projects. A pure solar developer, for example, should have general liability, professional liability, and other types of insurance. Community solar developers should ensure they carry appropriate insurance coverage, keeping these risks in mind. In addition to specialized insurance, solar developers should consider securing bonding for their shared solar projects.

To protect the interests of community solar projects, investors should consider purchasing a payment, construction performance, and operations and maintenance bond. These bonds may be required to reduce the risk of contract default, cover a gap in traditional insurance, and enable the project’s securitization or monetization. These bonds also provide an alternative to purchasing a commercial property policy for community solar projects. This bonding option may also benefit community solar projects with limited financial resources.

Bonding

Community solar programs require project developers to purchase various forms of bonding, including payment, performance, and operations and maintenance bonds. Payment bonds protect against contractual default, while performance bonds fill the gap between traditional insurance and contractual obligations. Performance bonds can also facilitate the monetization and securitization of a community solar project. However, not all community solar programs require project developers to obtain payment bonds. To ensure that projects meet all state requirements, check with your state’s Office of Public Advocate.

Some states require a certain minimum number of units per household, for starters. Another option is to purchase individual panels through a subscription program. These subscription programs can either be outright or financed through loans. Depending on your community’s policy, there may be an application process or other fees. Some programs offer immediate savings, while others can only pay a fee once a month. However, if you are interested in participating, check with your local utility to find out the details.

 

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