These solar systems are typically rooftop solar, or ground mount solar farms and are larger scale relative to residential or small commercial systems. The local utility pays the community solar provider for the energy generated, and each subscriber receives a portion of the dollar value generated by their community solar as a credit on their utility bill. For residents and businesses that cannot install solar, they are still able to receive the benefits by subscribing to their community solar project.

The states that are leading the charge in community solar are; New York, Minnesota, and Massachusetts. California is the leading state for solar installations, and yet they aren’t in the top 10. Policies exist to allow community solar in California, however, they are not yet working effectively and have not seen any material adoption. Currently subscribers to community solar in California are not seeing utility savings. The main reason for this is the ongoing debate on how to properly compensate the community solar owners.

In order for the community solar model to work, private developers need to be able to profit from the systems and subscribers need to pay less for power. Recent legislation, AB 2316, which is expected to be signed by Gavin Newsom imminently, will require utilities to compensate for community solar based on the actual value of the power at the time it’s delivered to the grid. This is also commonly referred to as the avoided cost.

The bill also includes requirements for community solar projects that are meant to drive climate equality. At least 51% of subscribers to a project have to be low income, they are required to be built using prevailing wages, and they will be connected to the distribution grid instead of the transmission network. Keeping the power generated within a localized grid will provide resiliency to the local community.

The proposed compensation method for California community solar, avoided cost, will make it more economical for projects to add batteries. Essentially, the value of the power increases when demand is high but solar generation is low. This will also help the grid, and ultimately reduce grid outages.

For industrial developers and owners, your large roofs will become a new revenue stream. Community solar developers will be renting as much roof space as possible. While this isn’t entirely new, the difference is that now solar owners won’t rely on a PPA with the tenant to earn revenue, as they can sell the power to remote subscribers via the grid. As an owner this removes a layer of risk and complication in dealing with the tenant, while also effectively capturing a much more bankable offtaker in the utility.

AB 2316 will usher in a new era of solar for California, the future is community solar.