Shared Solar: What It Is and What We Recommend for Your Community

Whether you’re a multifamily resident, property manager, or a real estate owner or developer, you may be wondering how you and your community could benefit from clean energy. Sustainable living is at the forefront of nearly everyone’s mind, but the availability of sustainable solutions is still developing. Until recently, solar power has primarily been available for small installations on single-family homes or massive installations for large businesses. Without a way for multifamily residential or commercial spaces to share the benefits of solar, that part of the market has been left out. However, many individuals, businesses, and the state of California have set forth renewable energy goals and now must find a way to reach them. An innovative new concept called shared solar is one way for businesses and multifamily real estate to realize the benefits of solar energy.

What is Shared Solar?

Shared solar is a solar project that shares the benefits with multiple customers, which may be individuals, residents, businesses, or other groups. The shared solar end users may “opt in” or “subscribe” to the program giving them access to clean energy as well as energy savings. The solar power feeds the grid and shared solar participants receive credits on their utility bills spreading the benefits of the system to every community member fairly and equitably. Because shared solar is such an excellent option for multifamily residents, businesses, or individuals who don’t have the right roof or solar conditions to install panels of their own, it has been growing in popularity across the country. A study on shared solar completed in 2016 found that 77 utilities from 26 states managed 111 shared solar projects. In comparison, there were only two shared solar projects in 2010. Now six years since the last study, shared solar projects have continued to grow in popularity. In fact, renewable energy analysts predict that shared solar will eventually overtake non-shared rooftop solar in terms of total production. There are certain policies that support shared solar, so it’s only available in a select number of states yet growing rapidly.

Policy Drivers for Shared Solar

Some states require utility companies to offer shared solar programs, while others may require a pilot program or haven’t passed any community solar policies. Other policies that drive the growth of shared solar include virtual net metering (VNM), deregulation, and renewable portfolio standards. Virtual net metering allows multiple utility customers to benefit from solar bill credits generated by a single solar system. Deregulated utility markets enable third-party providers to create and offer shared solar programs. Finally, renewable portfolio standards are policies that require the utility company to attain a specific percentage of power from clean energy sources. All these policies either encourage utility companies to pursue renewable energy or create the opportunity for individuals, businesses, and real estate developers to pursue it.

Shared Solar and Virtual Net Metering (VNM)

Net metering is the policy enabling single-family properties to receive credits on their utility bill for their solar power. For that benefit to scale to shared solar, virtual net metering is required. It allows a third-party to accumulate multiple utility customers under a single “virtual meter”. The only obstacle to VNM is that you must determine how to divide the benefits across all the community members. For multifamily properties, this has been done with a flat discount for all residents, otherwise, it requires more paperwork and time to manage. With Ivy Energy’s Virtual Grid software, all these problems are solved. The software automates the calculations, generates an easy-to-read bill for residents, and provides property owners with an additional net operating income.

Is Shared Solar Worth It?

With the right backend support system to manage the distribution of solar benefits, a shared solar is most definitely worth it. There are the large-scale benefits of reducing our collective carbon footprint by making solar power available to more people. However, there are direct financial benefits as well. Multifamily property owners can not only recoup the cost of their solar investment, but they can also generate an income (NOI) from their shared solar investment. All while still passing on a portion of the electricity savings to their residents.

Shared Solar Pros and Cons

Starting a shared solar project is understandably a big decision. It’s important to weigh the pros and cons, as well as understand that you’re not alone in your shared solar project. The US Department of Energy Solar Energy Technologies Office (SETO) is actively working to improve shared solar. They created a coalition, the National Community Solar Partnership, for shared solar stakeholders to leverage their resources and network to make solar power more accessible to Americans. Additionally, you have the support of companies in the space, such as Ivy Energy, to forecast your shared solar revenue projections and assist with project implementation and ongoing management.

Benefits of Shared Solar

The number one benefit of solar sharing is the savings it can generate. This is especially true for locations where grid electricity is more expensive than solar power, or where rate hikes happen often. Some of the other benefits of solar sharing include:

●       Possibly the easiest way to adopt clean energy and save on your utility bill

●       Providing solar power to those who don’t own their roof or can’t install solar

●       A less involved experience where you can reap the benefits without a huge amount of maintenance

●       Minimizes investment risk with community buy-in

●       Improves the overall strength of the grid by feeding excess solar power

●       Brings solar to low-income households who can benefit greatly from the savings

●       Creates supply for the increasing demand for clean energy

For multifamily properties, the benefits go a step further. Installing a shared solar system allows the property owner to take advantage of tax credits and solar incentives. California even offers an exemption of the increased property value from your solar system on your property taxes. Also, while it varies based on your location’s VNM rates, multifamily owners can potentially generate $650 to $1000 per unit of additional net operating income with a community solar system.

How Does a Shared Solar Subscription Work?

A shared solar subscription can be arranged in a few different ways. In the case of multifamily shared solar, residents can opt in and receive savings on their energy bill based on their usage. With Ivy’s Virtual Grid software, the shared solar subscription process is managed by the software. First, it tracks how much energy your solar panels generate and your VNM credits. Next, it collects individual meter data for the participating community members. Then, the Virtual Grid software generates a community savings ledger using a proprietary algorithm to account for the portion of the savings passed to residents and the portion reserved for the property owner. Finally, the software creates a transparent, easy-to-read monthly solar energy bill for your shared solar members.

●       Residents have the choice to opt into the program or not

●       Residents receive guaranteed monthly solar energy savings

●       Easy Implementation process- simple solar energy addendum added into the lease

Title 24 & ESG Benefits

Not only do shared solar projects on multifamily buildings help with Title 24 compliance in California, but they also provide a large boost to ESG metrics. While sometimes it feels as if the term “Environmental, Social and Governance (ESG)” has been around for a long time, in reality the term was first coined in a report from the 2005 Who Cares Wins conference in Zurich, Switzerland. And the term has been evolving ever since as more and more companies and investors catch on. Shared solar on multifamily properties helps owners gain valuable ESG reporting data that other programs cannot offer such as social equity benefits and resident energy use converted to distributed clean energy. The energy resources that Virtual Grid enables are not exclusively contingent on transmission and distribution infrastructure and also provide on-parcel stability of a volatile commodity. 

How Does Shared Solar Generate NOI for Owners?

There are upfront and ongoing maintenance costs to install and operate a shared solar project. The Federal Solar Investment Tax Credit (ITC) currently allows you to take 26% of your solar system’s total cost as a tax credit. The tax credit even rolls over to future years for those who don’t have enough tax liability to take the full credit in one year. After the tax credits, rebates, and incentives, shared solar projects make money simply by distributing their solar power to residents. Property owners create a new Net Operating Income (NOI) by selling the solar energy that the solar system produces directly to their tenants. The margin of opportunity comes from the owners paying an average of 0.8 cents levelized cost of solar per KwH and then distribute that same solar energy to residents for up to .20-.30 cents per KwH. Owners that have been using Virtual Grid by Ivy to handle all solar distribution and billing for their shared solar projects are seeing between $500-$1000 of new Net Operating Income (NOI) per unit annually. Owners get the satisfaction of removing their entire resident carbon footprint, boosting ESG and offering solar energy access and energy savings to residents.

How to get Started on a Shared Solar Project

The best way to start a shared solar project for your property is to talk to an expert and determine the perfect system size. Our team at Ivy Energy would be happy to talk through your project and calculate your solar investment payback. In our experience, understanding the financials and long-term return on investment is the first step to shared solar for your community. Click here to get started

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