Do You Know the Different Ways Solar is Used to Provide Electricity?
Emily Haggstrom
There are four principal ways solar energy is deployed in the country: universal or utility-scale solar, community solar, private residential solar, and private third-party leased. Solar power is growing nationwide, but what does the different terminology mean?
Universal Solar – A large solar plant that provides the benefit of fixed-priced electricity during peak demand periods when electricity is the most expensive. They can utilize several different types of solar technologies, including concentrating solar power (CSP), photovoltaics (PV), and concentrating photovoltaics (CPV). According to the Solar Energy Industries Association, there are over 3.6 GW (gigawatts) of large, utility-scale solar plants in the U.S. with significant construction underway. Options like community solar are expanding around the country to offer customers the opportunity to buy shares of a large-scale, universal solar project if they cannot put a system on their residence or if they rent their home or apartment. Universal or utility-scale solar is the easiest, fastest, and most cost-effective way for everyone to experience the benefits of solar energy due to its economy of scale.
Community Solar – These facilities are built by third-party developers, municipalities, Rural Electric Coops, and other larger Investor-Owned Utilities. They often don’t exceed five megawatts. Community solar is most beneficial to urban dwellers, renters, small businesses, households, and local governments who want to participate in using solar energy but cannot due to several reasons, which may include: they rent/lease their property; their homes or businesses are excessively shaded, or the orientation of their roofs or property makes installing solar panels uneconomic. Via programs like virtual (or group) net metering or direct power purchase agreements (PPAs) with a solar developer, members of community solar programs can receive credit for solar power generated by residential, commercial, or municipal solar systems. By opting into this system, everyone shares the costs and the benefits without ever having to wholly own a private facility. Even large-scale utility arrays offer buy-ins to their programs so these same individuals and organizations can reap the benefits and help solar flourish in their community or state.
Private Solar – These solar installations are physically owned by customers and residents who pay upfront installation costs. There are many federal, state, and local incentive programs for many of these customers to help defray the costs and, in many cases, offer substantial paybacks over the system’s life. All residential customers who own private solar can receive a federal tax credit equal to 30 percent of the solar facility’s installed cost. In addition, many customers receive one or more of the following incentives:
State income tax credits and/or deductions,
State and/or local sales and/or property tax exemptions,
State renewable energy payments or rebates,
State Public Service Commission (PSC)-approved incentives provided by the utilities they regulate; and importantly
Private solar credit programs like “net metering” where generated power is used on-site (typically from the rooftop of a house or business), and excess power is fed into the public energy grid and purchased by the energy company from the private customer on a per-kilowatt-hour basis.
Third-party leased – This is where individuals, businesses, or municipalities can finance the cost of private solar energy development, based primarily on two models. A private customer can sign a traditional lease and pay for the use of a solar system, or the customer can sign a power purchase agreement (PPA) to pay a specific rate for the energy generated each month. When a customer utilizes this model, they are, in essence, transferring their incentives to a leasing company that handles the upfront costs of installing the system. Leasing companies also generate additional financial incentives through the tax code with the ability to accelerate the depreciation of business expenses.
