One of the most meaningful trends that we are seeing in the Station A marketplace is community solar, a program that was originally developed to both encourage renewable adoption and broaden access to solar's financial benefits to more participants.
🤔 What is community solar and how can C&I properties benefit from it?
Community solar is reshaping access to renewable energy by enabling individuals and businesses to participate in solar energy generation without having to install solar panels on their premises.
In the past year, Station A has listed a number of projects for the two flavors of community solar that a commercial and industrial property owner can choose -- subscriptions and leases. Commercial and industrial property owners can participate in community solar as both a subscriber to an existing community solar farm or to lease space on a rooftop or parcel of land to a community solar developer. (See Nestlé Community Solar Offtake Solicitation, Goldman Sachs Illinois Community Solar RFQ, Sonder Community Solar Subscription and Desert Hot Springs Solar Farm RFQ).
Option A. Anchor community solar subscriptions
In order to provide access to a community of usually residents who may not have the capital or the rights to install a system on their own home, community solar programs were developed with smaller subscribers in mind. As a result, at least 50% of a community solar farm's electricity production is reserved for smaller subscribers.
For commercial and industrial buildings with larger loads, this means that a project will likely only have room for 1 large or “anchor” subscriber per project, similar to an anchor tenant in a mall. Similar to an anchor tenant, community solar developers are looking for tenants that will be subscribed to a farm for an extended period of time e.g. 5 to 10 years. Shorter subscriptions are available but since these anchor subscriptions are in such short supply, it will be hard to find a subscription without a significant term.
Option B. Community solar leases
Commercial and industrial buildings and parcels with an abundance of space (and usually smaller loads) can alternatively explore leasing their roof or ground space to a community solar developer for a regular fee. Community solar leases may also make sense for commercial property owners who do not directly pay the electricity bill since that is the main conduit for realizing the savings of a solar system. (If the building itself has a significant load and the owner pays the bill, it may make more financial sense to develop the system for the building’s own consumption, either through an All-cash purchase or a negotiated PPA.)
💰 The financial impact of community solar
Unfortunately, community solar is only permitted in a subset of states at the moment and only financially viable in a handful with supportive policies. Thanks to our partners at Ampion and Arcadia, two of the leading providers of community solar, we have crafted the map below that identifies markets where commercial property owners should focus their community solar efforts in 2024.
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Note: There are a few states like California and Pennsylvania where community solar anticipation is high but legislation is still pending.
Subscriptions yield immediate cost savings
One of the most compelling benefits of community solar subscriptions is that there is an immediate utility bill credit without both the upfront investment and the delay of installing equipment onsite. In 2024, Station A has seen the proposed time between contract to commercial operation at around 15 months.
Community solar programs do not legislate a specific bill credit amount so community solar developers can offer different amounts depending on demand. In general, Station A has observed a saving of 5-10% of the tariff for the subscribed panels. For a company paying $1M a year in electricity costs, this is equivalent o $50k-$100k in bill savings per year. Subscriptions are often offered in 5 to 10 year increments.
Many community solar projects were slow to energize in the past few years due to COVID, supply chain constraints and the uncertainty surrounding the economy so supply is also limited (This is where Station A can help especially for finding supply for larger loads). For those who are budget constrained and/or have limitations on building on their roof or ground space, subscribing to a community solar program can be a no-brainer since it offers a modest financial benefit without the complexities of a solar installation.
Leases yield ongoing revenue with no upfront capital
Leasing a roof space in a community solar friendly state can make the most financial sense for a property owner who does not pay the utility bill and has contractual rights to place a system on the roof.
While this market is dynamic and differs from market to market, Station A has observed lease payments in one market ranging from $0.05 to $0.35 per sq ft per year. For a 100k sq ft roof space, this is equivalent to an annual lease payment of $20k (assuming the average of the range) up to $35k (assuming the high end of the range). This additional payment can add to a property’s net operating income (NOI) with minimal to no upfront capital investment. The typical lifetime of a system is 20-25 years so over a lifetime, this amounts to $400k-$500k.
👋 Station A can help
If you are thinking about taking advantage of Community Solar programs this year, please reach out to the friendly team at Station A to learn more about your best options.
