With the 30% federal tax credit for homeowners gone as of the end of 2025, a lot of people are taking a second look at how they can still save on their electric bill with solar. For homeowners with a good roof, that conversation is pretty straightforward. But for renters, condo owners, or anyone with a shaded or undersized roof, the option that usually comes up is community solar.
Community solar is growing quickly. Wood Mackenzie and the Coalition for Community Solar Access report that the U.S. passed 10 gigawatts of installed community solar at the end of 2025. But growth doesn’t automatically mean it’s a good deal for everyone. The savings are real; they’re just smaller than most people expect, and they depend almost entirely on the contract you sign.
Below, we’ll break down how community solar works, when it makes sense compared to putting panels on your own roof, and how to tell if the offer in front of you is actually worth it.
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Table of Contents
Key Takeaways
- Community solar can be worthwhile if you rent, have a roof that isn’t suitable for solar, or don’t want the upfront cost of owning a system.
- The contract matters more than the headline discount. A percentage discount is generally safer than a fixed rate with an annual escalator.
- If you can install your own solar, compare the numbers first. Owning a system will usually provide greater long-term savings than community solar.
- Before signing, check the rate, escalator, contract length, cancellation terms, moving policy, and subscription size.
What Is Community Solar and How Does It Work?
Community solar is a shared solar farm, usually built somewhere in your utility’s service territory, that people can subscribe to. You don’t own any of the equipment, and nothing gets installed on your home. The farm sends its electricity onto the grid, and your utility credits your bill for the energy your share of the farm produced.
The policy that makes this work is called virtual net metering. If you’re familiar with how net metering works on a rooftop system, it’s the same idea. The only difference is the panels generating your credits are a few miles away instead of on your roof.
Here’s how the money usually moves each month:
- Your share of the solar farm produces electricity worth $50 in bill credits.
- Those credits show up on your utility bill as a negative line item, lowering what you owe the utility.
- The community solar company bills you for those credits at a discount. On a 10% discount, you pay $45.
- You keep the difference, which is $5 for the month.
Most subscribers get two bills, one from their utility and one from the community solar company. Some markets offer consolidated billing so everything shows up on one bill. Either way, don’t expect savings right away. Nexamp notes it can take two to three billing cycles after a subscription goes live before credits start showing up.
Credits also follow the seasons. Your share will produce more than you use in the summer and less in the winter, and many programs let you bank those summer credits for later in the year.
The biggest limitation is availability. NLR’s community solar data shows 43 states having community solar projects, and 24 states and localities, including Washington, D.C., have passed legislation enabling community solar. Some utilities in other states run their own programs, but if your state has neither, community solar might not be an option for you yet.
Who Community Solar Makes Sense For
The main reason people choose community solar is access. It gives you a way to benefit from solar when putting panels on your own home isn’t realistic. That’s usually because:
- You rent, or you own a condo or townhome where the roof isn’t yours to use
- Your roof is heavily shaded, faces the wrong direction, or is too small
- Your roof needs to be replaced soon, and you don’t want to install on it now
- You plan to move in the next few years
- You don’t want to/can’t spend $20,000 or more up front or take on a solar loan
There’s also no equipment to worry about. If an inverter fails at the solar farm, that’s the project owner’s problem, not yours. If you’ve read our breakdown of realistic solar maintenance costs, you know that can be a serious drain on savings if you didn’t get an independent warranty that covers labor costs.
The tradeoff is smaller savings. Despite what some community solar ads might suggest, you’re not going to wipe out your electric bill. EnergySage puts the typical discount on bill credits between 5% and 20%, and that discount only applies to the portion of your usage your subscription covers.
Should You Do Community Solar or Install Your Own System?
If you have the roof space, installing your own system will almost always save you more. The reason is simple. Community solar gets you a discount on the electricity you buy from the utility. Owning a system replaces a portion or all of the energy you would buy from the utility with energy you produce yourself.
To show the difference, let’s run the numbers. EnergySage’s latest marketplace report put the median quoted residential solar price at $2.57 per watt in the first half of 2026. For an 8 kW system, that looks like this:
- System cost: 8,000 W × $2.57 = $20,560
- Year-one production, assuming 1,200 kWh per kW: 8 × 1,200 = 9,600 kWh
- 25-year production with 0.5% annual degradation: about 226,000 kWh
- Lifetime cost per kWh: $20,560 ÷ 226,000 = about 9.1 cents
The EIA forecasts the average U.S. residential electricity rate at 18.2 cents per kWh in 2026. A community solar subscription with a 10% discount brings that down to about 16.4 cents. Here’s how the two compare in year one on the same 9,600 kWh:
| On 9,600 kWh per year | Community solar (10% discount) | Owned system (cash) |
| Effective cost per kWh | 16.4¢ | ~ 9.1¢ |
| Upfront cost | $0 | $20,560 |
| Year-one savings vs. 18.2¢ utility rate | ~ $175 | ~ $874 |
| Who maintains the equipment | Project owner | You |
So the owned system saves about five times as much per year. The catch is that you’re putting real money in up front, and you’re responsible for that equipment for the next 25+ years.
To be fair to community solar, a few things can narrow that gap:
- Net metering: The math above assumes every kWh your panels produce offsets a full-price kWh from the utility. In states that pay less than retail for the power you send back to the grid, your savings will be lower.
- Financing: If you finance instead of paying cash, interest raises your cost per kWh. In the same report, EnergySage found the median quoted solar loan rate was 7.5%.
- Maintenance: Equipment will need service at some point over 25 years. Our data from more than 50,000 systems show that a typical inverter repair runs roughly $480 on labor alone.
- No federal tax credit: The 30% Section 25D credit ended for systems installed after December 31, 2025, so the math above doesn’t include it. Third-party-owned options like prepaid leases and PPAs can still use the commercial credit, which we cover in our buyers’ guide to prepaid solar.
Even with all of that factored in, a homeowner with a good roof who plans on staying in their home will almost always come out ahead by owning their system. Community solar makes the most sense when owning just isn’t an option.
How to Tell If a Community Solar Deal Is Worth It
A quick disclaimer before we get into this: Solar Insure and I aren’t financial advisors. Every contract is different, so read yours carefully and talk to a professional if you’re unsure about the terms.
With that said, the most important thing to evaluate is pretty simple. A community solar deal is worth it when the price you pay per kWh stays below what those credits are worth for the entire contract, not just the first year.
Start With What You’re Actually Paying
Grab your last few electric bills and divide the total charges by the kWh you used. That’s your all-in rate.
Then ask the community solar company what one kWh of bill credit is actually worth on your utility. In some states, credits only offset part of your bill, like the supply portion, and don’t cover delivery charges or fixed fees. If the credit is worth less than your all-in rate, use the credit value for your comparison. Otherwise, the savings will look better on paper than they will on your bill.
Discount vs. Escalator: Know Which One You’re Signing
Most community solar offers use one of two pricing models, and they play out very differently over time.
| Pricing model | How it works | Main risk |
| Percentage discount | You pay a set percentage less than the value of your credits, commonly 5% to 20% | Low. Savings move up and down with utility rates but stay positive |
| Fixed rate with escalator | You pay a set price per kWh in year one, and it goes up by a fixed percentage every year | If the escalator outpaces utility rate increases, savings shrink and can turn negative |
If the annual escalator is higher than the rate your utility prices go up, your savings shrink every year and can eventually flip into paying more than you would have paid the utility.
Running the Escalator Math
Here’s an example. Say an offer starts at 16 cents per kWh with a 3% annual escalator, and your utility currently charges 18.2 cents. In year one, that’s about a 12% discount, which sounds great. What happens after that depends on how fast your utility rates go up.
| Contract year | Contract price (3% escalator) | Utility rate, rising 2%/yr | Utility rate, rising 4%/yr |
| 1 | 16.0¢ | 18.2¢ | 18.2¢ |
| 5 | 18.0¢ | 19.7¢ | 21.3¢ |
| 10 | 20.9¢ | 21.8¢ | 25.9¢ |
| 15 | 24.2¢ | 24.0¢ | 31.5¢ |
| 20 | 28.1¢ | 26.5¢ | 38.3¢ |
On a subscription covering 600 kWh a month (7,200 kWh a year), here’s what that means over 20 years:
- If utility rates rise 2% a year, you save about $885 total, and you’re paying more than the utility rate every year from year 15 on
- If utility rates rise 4% a year, you save about $8,067
- A flat 10% discount on the same usage saves about $3,184 at 2% growth and $3,902 at 4% growth, with no chance of going underwater
In other words, an escalator contract is a bet on future utility rates. Sometimes that bet pays off. Residential rates jumped 7.3% between April 2025 and April 2026, according to EIA data reported by Newsweek. But nobody can guarantee rates keep climbing at that pace for 20 years, and if they don’t, you’re the one who loses out.
A few rules of thumb to take away from this:
- Compare the year-one price to what your credits are worth, not just your all-in rate
- A 0% escalator or a percentage discount is the safer choice for most people
- If there is an escalator, it should be comfortably below how fast your utility’s rates have historically gone up
- Ask the provider for projected savings in year one and in the final year of the contract. If they only show you year one, run the numbers yourself
What Else to Look for in the Contract
Price matters most, but a good rate can still come with a bad contract. Before you sign, make sure you understand:
- Term length: Some contracts are month-to-month. Others, like NRG’s community solar contracts, generally run 20 years.
- Cancellation fees: Look for a no-cost exit or a small flat fee. Be careful with penalties based on the project’s future production.
- Moving: Find out if you can transfer the subscription to a new address in the same utility territory, or cancel without a penalty if you leave it.
- Upfront or signup fees: Most subscriptions cost nothing to start. A signup fee pushes back the point where you actually start saving.
- Subscription size: Your share should match your usage. Extra credits may roll over, but in many programs they can’t be cashed out.
- Billing: Know whether you’ll get one bill or two, and roughly how long it’ll take for your first credits to show up.
The Right Choice Depends on Your Roof
For renters, condo owners, and anyone with a roof that can’t support panels, community solar with a percentage discount and an easy way out of the contract is a low-risk way to lower your electric bill. Just go in with realistic expectations. You’re saving on a portion of your bill, not replacing it.
If you own your home and have the roof space, get quotes for your own system before signing up for a subscription. It’s a bigger commitment up front, but that’s where the real savings are. It also means you’re responsible for equipment that needs to last 25 years or more, so who installs it matters. Solar Insure Certified Providers can offer an SI-30 warranty covering panels, inverters, optimizers, batteries, and parts and labor for 30 years, and that coverage stays in place even if the installer or manufacturer goes out of business. You can find a certified provider in your area on our website: https://www.solarinsure.com/find-a-certified-provider
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