Democratizing the Sun: Policy, Progress, and the Path Ahead for Community Solar

What is Community Solar, and Why Does it Matter?

Community solar enables a diverse range of customers-including residents, businesses, and institutions-to subscribe to a shared solar project within their utility territory and receive direct credits on their electricity bills for the energy produced by their share. Unlike traditional rooftop solar, which is often limited by financial barriers, tenancy, or unsuitable roof conditions, community solar provides an inclusive pathway to renewable energy for those historically left out of the clean energy transition. The term “community solar” reflects the collective nature of these projects: they are intentionally designed to serve entire communities, not just individual property owners. By allowing renters, homeowners with inadequate roofs, and those unable to afford the upfront costs of solar installation to participate, community solar expands equitable access to the benefits of solar power, fostering broader participation and delivering meaningful savings and resilience to a wider population.1

Mapping the Community Solar Opportunity

By 2024, cumulative installed community solar capacity in the U.S. reached a record 8.6 GW, nearly doubling since 2021. Annual installations surged by 35%, hitting 1.745 GW primarily driven by policy innovations and increasing market demand in states like New York, Illinois, and Maine.2

Source: US Department of Energy, Based on NREL’s Sharing the Sun Database

Data from NREL's Sharing the Sun project shows that about 91% of cumulative community solar capacity is located in just 10 states, as highlighted in the figure above. The market structure is also notable for its concentration in investor-owned utility service areas, which account for 90% of installed community solar capacity, highlighting the significant influence of state policies on deployment.

Recent National Renewable Energy Laboratory (NREL) studies also underscore the vast potential of community solar. Technically, the U.S. could support between 967 GW (conservative siting limited access scenario) to 2,862 GW (common practice siting based reference access scenario) of community solar projects, capable of generating 1,710 to 5,921 TWh annually.3 This represents a capacity to serve more than 50 million American households and hundreds of thousands of businesses that cannot access behind-the- meter (BTM) solar.

The opportunity to scale community solar is enormous, especially given the significant gap between its technical potential and current deployment. Notably, the primary barriers to growth are not physical or technical limitations, but rather challenges related to technology adoption, market dynamics, and policy design. These challenges include inconsistent state policies, complex interconnection standards, limited financing access, and the absence of enabling mechanisms like virtual net metering or consolidated billing. In states without clear regulatory frameworks or capacity targets, community solar remains underdeveloped, deterring investment. Administrative hurdles such as dual billing, stringent consumer protection requirements, and fragmented permitting processes further complicate deployment and increase costs. As highlighted in University of Washington Urban Infrastructure Lab’s economic impact analysis, these non-technical constraints significantly dampen community solar’s economic potential, especially for smaller projects that struggle to achieve economies of scale or streamline subscriber management without supportive policy design.4

Although community solar currently supplies only a small portion of total energy demand, evolving state policies and utility frameworks are beginning to address these constraints, paving the way for broader and more equitable adoption across the country.

Core Policy Foundations for Community Solar

Community solar relies heavily on supportive state policies to function and thrive. Currently, 23 states plus the District of Columbia have policies that support community solar development.

Source: NREL State Policies and Programs for Community Solar tracker (2025 Q1 Update).

1. Net Metering and Virtual Net Metering

Net metering is foundational, it allows subscribers to receive credits on their electricity bills for the energy produced by their share of a community solar array, typically at or near the retail rate. Virtual net metering extends these credits to offsite subscribers, enabling renters and those with unsuitable rooftops to participate. This policy is critical for project economics, as it ensures that the value of solar generation is fairly compensated and accessible to a wide range of customers.

2. Financial Incentives

Targeted incentives such as tax credits, rebates, and grants are crucial for bridging the gap between project costs and subscriber affordability. The federal Investment Tax Credit (ITC) and state-level incentives can significantly reduce upfront capital requirements. Performance-based incentives, like those in Massachusetts’ SMART program, reward ongoing production and encourage long-term project performance.

3. Equity and Low-Income Provisions

To ensure community solar benefits are shared equitably, many leading programs require a portion of project capacity to be reserved for low- and moderate-income (LMI) households. These “set-asides” may be paired with bill discount requirements, ensuring meaningful savings for LMI subscribers. For example, New Mexico’s Community Solar Act mandates that 30% of each project serve low-income users, while Massachusetts and Colorado have similar provisions.

4. Clear Definitions and Regulatory Structure

Legislation must clearly define what constitutes a community solar project, including size limits, subscriber requirements, and ownership models. This clarity reduces uncertainty, encourages investment, and ensures projects are structured to deliver intended benefits. States like Minnesota and Colorado have established “community solar gardens” with specific rules for subscriber makeup and local participation.

Notable Program Structures

• SMART Program (Massachusetts): Combines a declining block incentive with virtual net metering and LMI set-asides, making it a national model for integrating financial and equity goals. The program’s “adders” provide bonus incentives for projects serving low-income households, and recent updates require 40% of municipal aggregation subscribers to be LMI.
• Community Ownership Models: Some programs encourage or require partial community ownership or benefit agreements, allowing local stakeholders to share in project revenues or decision-making. Such projects are usually referred to as community owned solar or co-op solar. While still rare, these models can double the local economic benefits compared to absentee ownership.
• Bill Discount Guarantees: Leading states often require guaranteed bill savings for subscribers, especially LMI households. Colorado’s new legislation mandates 25- 55% bill savings for LMI participants, far exceeding the typical 10% savings for general subscribers.5
• Flexible Siting and Virtual Hosting: Policies that allow both rooftop and ground- mounted arrays, as well as virtual allocation of credits within utility service territories, maximize the technical and market potential for community solar. NREL’s latest technical report highlights that such flexibility enables projects to reach underserved urban and rural markets.6
• Targeted Workforce and Economic Development: Some states and programs integrate workforce development requirements, prioritizing local hiring and supporting prevailing wages, which amplifies the community benefits of solar deployment.

Policy Activity in 2025

The first quarter of 2025 has been particularly active for solar policy, with 47 states plus D.C. and Puerto Rico taking some type of distributed solar policy action. According to NCCETC's report, the greatest number of actions continue to address net metering policies (55), community solar policies (35), and residential fixed charge or minimum bill increases (34)7. These ongoing policy revisions show the dynamic nature of the community solar landscape.

Community solar is gaining surprising bipartisan support across the United States. In several states, Republican lawmakers are leading efforts to expand community solar: Canary Media highlights that in Georgia, Iowa, Missouri, and Ohio, Republican legislators have put forward proposals to boost community solar. Various local Republican entities- including chambers of commerce, landowners, and conservative advocacy groups-are expressing support for these initiatives. The appeal to conservative lawmakers appears to stem from community solar's alignment with free-market values and property rights.8

New State Programs

• Alaska: Republican Governor Mike Dunleavy signed SB-152 in August 2024, establishing standards for community solar programs and requiring electric utilities to make these programs available9.
• Colorado: Governor Jared Polis signed SB24-207 in May 2024, implementing significant capacity requirements for utilities of different sizes10
• New Jersey: The state has made its pilot program permanent, increasing the total planned capacity to 448 megawatts11.
• Meanwhile, in Minnesota, some lawmakers have proposed legislation that would end the state's successful 11-year-old community solar program, which has been a model for 20 other states12. This highlights the sometimes contentious nature of these programs, particularly when they affect utility business models.