Why Community Solar Makes Sense

While a bill that would enable a community, church or neighborhood group to form a local renewable energy collaborative for the purpose of hosting a community-owned solar system is bogged down in the Legislature, the residents of several New Jersey developments have taken it upon themselves to create their own solar communities.

The two community solar models are somewhat different: the bill in the Legislature enables the sharing of solar energy produced by a large communal solar installation, while the private initiative involves residents banding together to take advantage of economies of scale in the cost of installing solar on their individual residences.

But the outcome is the same--homeowners are able to install solar at a reduced cost, as well as to reap the benefits that solar brings in terms of reduced electricity bills, federal tax benefits and a new income stream from the sale of solar renewable energy certificates, each of which is the equivalent of 1,000 kilowatt-hours of electricity.

The community solar concept originated in California, but is being pioneered in New Jersey by Rumson, NJ-based GeoGenix, one of the state’s largest and most established solar integrators. GeoGenix has installed community solar at four residential developments in New Jersey, and plans are underway at several more.

The cost savings are made possible by operational efficiencies, including the need to make only one trip to city hall for permits and the ability to save on labor costs through the streamlined deployment of installation crews. And although each home’s system is custom designed, the similarities in home designs also create efficiencies. The ability to sell to a group is yet another efficiency. Once the initial customers--usually early adopters concerned about their carbon footprints--have moved forward, solar tends to sell itself. The natural curiosity of neighbors usually leads to other sales.

Although the financial benefit of community solar is an advantage, an equally important advantage is the group support. The community solar concept allows neighbors to easily share information, become acquainted with installers, navigate the complexities of state and federal financial incentives and compare their solar outputs.  

But in truth, solar is not a hard sell, especially in New Jersey, where generous state incentives have made it a national leader in solar, second only to California in installed solar capacity and first if calculated on a per-capita basis. The typical payback for a residential solar system in New Jersey is three to five years, after which the homeowner continues to benefit from free electricity for the lifetime of the system, which is 30 or more years. With electricity costs having nowhere to go but up, a rooftop solar system thus serves as a hedge against rate increases.

While most homeowners initially consider solar out of concern for the environment, it is the 15% to 20% return on investment that usually ends up being the deciding factor. As an example, let’s take Somerset Run, an age-restricted community in the Somerset section of Franklin Township, where GeoGenix recently completed a community solar project of 10 homes collectively representing 80 kilowatts of generating capacity that is expected to produce nearly 100,000 kilowatt-hours of electricity annually. The typical solar system in the Somerset Run community solar project will be paid back in less than five years through a 30% federal tax credit, an annual savings on electricity costs of about $2,000 and an annual income from the sale of SRECs of about $5,000. 

Solar becomes even more affordable when you consider the fact that homeowners are able to finance most of the upfront cost through loans, and that solar systems in New Jersey are exempt from sales and property taxes (although a solar system adds to a home’s value, it will not increase the tax assessment). Also, many who invest in community solar find it to be a much better investment than low-risk investment vehicles such as Certificates of Deposit, savings accounts or treasury bills, which are all currently yielding low interest rates.

While the legislature’s ambitious efforts to promote communal solar--in effect, allowing a community, church or neighborhood group to become a mini-utility--are to be commended, the real visionaries are the homeowners who have taken the initiative without the benefit of legislative sanction to form grassroots community solar groups.

It is our hope that these neighborhood community solar projects will serve as models for projects in other neighborhoods around the state, as well as the region and the country. With its progressive energy policies providing the foundation and enthusiastic community-solar proponents flying the banner for the benefits of going solar, New Jersey is positioned not only to overtake California as the nation’s solar leader, but also to become one of the largest solar markets in the world.  

Gaurav Naik is principal of GeoGenix, based in Rumson, NJ. The views expressed here are the author’s own.