FINANCING COMMUNITY-SCALE SOLAR

This RMI report outlines the investment potential and financing frameworks for community-scale solar (CSS) in the United States, estimating a market opportunity of up to $16.3 billion by 2020. It details the benefits of CSS—such as lower costs and flexible customer arrangements—while analyzing various finance structures, including tax equity, debt, and innovative tools like New Markets Tax Credits. The document provides a risk management framework to address customer acquisition, subscription volatility, and regulatory uncertainty, aiming to help developers and investors standardize models to accelerate market growth.

• The shared solar segment of the community-scale solar (CSS) market represents a significant investment opportunity, with National Renewable Energy Laboratory (NREL) projections suggesting it could contribute 5.5 to 11 gigawatts (GW) to the distributed solar market by 2020. This opportunity is valued between $8.2 and $16.3 billion, potentially requiring $8 billion in tax equity and $6 billion in project debt.
• CSS offers several economic and operational advantages over residential and utility-scale solar, including lower costs due to economies of scale and the avoidance of transmission charges, which average $0.011/kWh nationwide. It also provides flexible customer arrangements where the owner can reallocate contracts if a customer defaults or moves, mitigating individual credit risk.
• Current financing models for CSS generally fall into two categories: power sold to creditworthy offtakers (such as utilities or MUSH market entities) via long-term fixed-price power purchase agreements (PPAs), and power sold to diversified residential or small commercial customers via subscriptions or leases. The latter resembles residential solar asset securitizations, where diversification helps mitigate the risk of customer attrition.
• Innovative financing tools can be used to increase accessibility and reduce costs for CSS, including New Markets Tax Credits (NMTCs) for projects in distressed census tracts and Community Reinvestment Act obligations for banking institutions. A case study in Denver showed that using NMTCs for a 1 MW project allowed the city to reduce electricity costs for low-income housing by more than 50%.
• Community ownership of CSS projects presents specific challenges, including the potential underutilization of tax attributes (ITC and accelerated depreciation), higher costs of capital for local members compared to commercial developers, and potential misalignment of interests between community equity holders and third-party debt providers.
• Key risks associated with CSS include customer acquisition complexity in retail markets, the uncertainty of short-term subscription agreements, and regulatory risks such as changes to virtual net metering (VNM) or the imposition of net metering caps. Mitigants include using 'subscription agents,' creating a 'subscription cushion' of wait-listed customers, or securing a creditworthy anchor tenant under a long-term PPA.

APA

Coleman, K., Blank, T. K., Probst, C., & Waller, J. (2017). FINANCING COMMUNITY-SCALE SOLAR. RMI. https://rmi.org/Content/Files/Financing_Community_Scale_Solar.pdf

Chicago

Coleman, Kieran, Thomas Koch Blank, Curtis Probst, and Jeff Waller. FINANCING COMMUNITY-SCALE SOLAR. RMI, 2017. https://rmi.org/Content/Files/Financing_Community_Scale_Solar.pdf.

Wikipedia

{{cite report |last1=Coleman |first1=Kieran |last2=Blank |first2=Thomas Koch |last3=Probst |first3=Curtis |last4=Waller |first4=Jeff |title=FINANCING COMMUNITY-SCALE SOLAR |publisher=RMI |date=February 2017 |url=https://rmi.org/Content/Files/Financing_Community_Scale_Solar.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{coleman2017financing, author = {Coleman, Kieran and Blank, Thomas Koch and Probst, Curtis and Waller, Jeff}, title = {{FINANCING COMMUNITY-SCALE SOLAR}}, institution = {RMI}, year = {2017}, month = feb, url = {https://rmi.org/Content/Files/Financing_Community_Scale_Solar.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }