Solar power without the roof panels: How community solar works

New Jersey will become the 19th state to allow residents and businesses to buy a stake in large-scale solar farms away from their property and obtain credits and refunds for power generated by those projects. State regulators are still working on details of how New Jersey's program will work, but here's a broad outline, based largely on Minnesota's nation-leading experiment.

What is community solar?

Instead of siting solar panels on rooftops, in backyards and at corporate campuses, residents and businesses contribute money toward an off-site solar farm, built by a private company that's not the local utility.

Who is a good fit for community solar?

Community solar is of particular value to people who may not be able to install panels at their homes or businesses, because they're renters, because their property is shaded, or because they can't afford to.

In Minnesota, more than 90 percent of subscribers are residential customers, yet non-residential customers account for nearly 90 percent of the power generated by community solar farms. That suggests that big companies, while few in number, are putting big money into the farms.

How do you pay for it?

There may be two options: Either buy an upfront stake in a solar farm, probably for tens of thousands of dollars, or pay a small monthly surcharge on electric bills. New Jersey officials stress that rules for the state are still being developed.

The fee would help cover the cost of building the solar farm, along with costs for maintenance and selling power back to the local utility.

How does it work?

During summer months, solar farms will generate their peak output because of longer, sunnier days. Depending on the size of your stake in the project, the output from the solar farm may cover your entire electric bill and even give you credits toward payments in months when you owe. When the solar farm generates less power, your bills may be higher than they would have been if you were not using community solar, since you're still paying the fixed costs of owning and operating large-scale solar.

Industry advocates say that over the course of a year, you can expect overall savings on your electricity bills of between 10 percent and 20 percent.

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What are the risks?

Solar farms can underperform, and individual subscribers shoulder the risk. In addition, developers of the farms may go out of business and close the project, or the project could be damaged or destroyed by severe weather or fire. If you move from your home or business out of a utility's service territory, you may have to find another buyer to take over your stake in a solar project.

These risks are of particular note to people who make large up-front investments in solar farms rather than incurring a monthly surcharge.