Signing a contract is often part of joining a community solar program. However, when it’s many pages long, it can feel like a confusing and intimidating part of enrolling. Below we’ll share why energy developers ask you to sign a contract. We’ll also discuss what some common contract elements mean, and we’ll dispel any misconceptions about them.

Why do I need to sign a contract?
Contracts are needed to demonstrate to the solar developer that you want to be a part of the community solar program. After signing the contract and once the project starts producing clean electricity, you will begin seeing credits on your utility bill.

There will be some terms that differ on each contract, but all of these are often summed up on the first page, called the "disclosure" statement. Many states require this form to have specific details in it, such as the term, benefits, cancellation details, any fees, and more. This ensures the most important information is read first.

Let’s discuss the different terms you can expect, so you can better understand what you are getting from your community solar project.

The savings rate
Competitively priced projects nowadays offer savings of 10%–20%. The level of savings varies based on the state the project is located in, the project developer, and other criteria. Your savings are discounts off the value of the solar credits applied to your electricity bill and not a promise to lower your total electricity payment by the same percentage each month. This is because the amount of sun a project receives is always changing, and in some months, your portion of the project may not always produce enough to cover your entire electric bill.

For example, if you used $180 worth of electricity in one month and your portion of the solar project produced $160 worth of electricity, that’s $160 you no longer owe your utility. However, you’ll still owe your utility the remaining $20 not covered by the project. If your community solar agreement guarantees a 15% discount, your savings will be 15% of $160. You’ll owe $136 to your community solar provider, and you’ll have therefore saved $24 off your total electricity costs that month.

A higher savings rate may be offered for households that meet specific income requirements due to unique state policy and the 2022 passage of the Inflation Reduction Act. Contact our team to learn more about this and to see if you’re eligible for more savings.

The term
Projects often have terms that last up to 25 years long, but don’t let that worry you. It often reflects the minimum useful life of the project rather than the length of time you’d have to participate. It’s a key part of contracts, which developers primarily use to help secure financing to build your project. With that in mind, think about this term instead as the total length of time you could choose to stay on your project and save on your electricity bill.

Cancellation
There are typically two types of cancellation policies found on contracts — one designed for consumer protection by law and another for if you cancel your membership, which the project developer determines.

For the first, upon signing, you typically have the rest of that day and three more full calendar days to cancel your membership. This is to protect anyone who may have signed up in a rush without having a clear understanding of if this program was suitable for their needs.

The second type of cancellation is more likely the one you want to learn more about. To cancel your membership and leave a community solar program, advanced notice is usually needed and often ranges between 60 to 180 days. The intention of any cancellation policy is purely to capture the final sets of credits applied to your electricity bill and nothing more.

While this delay may feel unusual, it’s for good reason. Utilities don’t process cancellations with immediate effect. In the best-case scenario, they accept them once per month, and that cancellation wouldn’t take effect until a month later. In other cases, utilities may only accept cancellations twice per year. If you move addresses and permanently close your utility account, this timeline is often abbreviated.

The ease with which you can join and leave a community solar project allows you to participate and benefit from clean energy in a way that works for your personal circumstances.

Allocation (the size of your subscription)
You can expect to see reference to your “allocation”, which is industry-speak for the percentage of the project assigned to produce credits on behalf of your utility account. You can think of this in terms of the number of panels you have, or more specifically, in terms of kilowatts (kW). A 5kW community solar assignment in Maine is expected to produce about 6,000+ kWh of electricity each year. In New Mexico, that same assignment may produce 7,000+ kWh. If you have a 5kW assignment of a community solar project that is 5,000kW in size, your allocation would be .1%.

Your contract may say something along the lines of “your community solar provider has the right to adjust your allocation at will.” This is common for a variety of reasons. The most important one is that many utilities require 100% of the project to be assigned to an electricity account each time we submit any changes to the participants on a project. As a result, if someone were to join or leave in any given month, we’d adjust everyone’s allocation by a fraction of a percent.

Our goal is always to maximize everyone’s savings. To read more about the factors we consider to achieve this, please go here.

Credit check or alternative
A credit check may be needed depending on the project on which you enroll. Project owners often look for a 600 credit score at a minimum. We recognize not everyone has a good credit score, and that’s okay. A year of on-time utility payment history can sometimes be an acceptable substitute to approve your account to participate in our program. Additionally, for larger accounts such as businesses, other information in lieu of a credit check may be requested before approving your participation.

Renewable Energy Credits (RECs)
In most cases, developers typically own the RECs associated with the generation from their solar projects. A REC is produced for every 1,000 kWh produced by the project. The developer will choose what to do with these RECs, such as selling or retiring them. If you were to install your own solar panels on your property, you’d be entitled to owning the RECs your system produces.

In short, joining a community solar program can be a smart way to save on your electricity bills while supporting clean energy. However, we understand contracts are often associated with onerous, long-term commitments, and we want to assure you that’s not the case here. It’s our hope we’ve lifted the curtain on everything you should expect on a contract prior to signing. In turn, by understanding the various elements of a community solar contract, you can make an informed decision about whether to enroll. Whatever you decide, we’re here to help. Please contact our team if you have any questions.