Community Solar Projects and Their Impact on Local Real Estate

Written by Jack Shaw Posted On Thursday, 22 February 2024 14:10

Community solar presents a new path to sustainability. It helps low-income families who can’t install solar panels at home due to renting or living in unsuitable locations adopt renewable energy. Community solar farms, built off-site or on a structure’s rooftop, help dozens of households and businesses reduce their carbon footprints and utility bills.

Here’s how the community solar model works — the project owner installs, operates and maintains the array on vast land or a commercial building’s roof to catch and convert sunlight into electricity. They sell the power the solar farm generates to the local utility. People and businesses pay a subscription fee to shoulder a portion of the electricity generation. Subscribers stay connected to the grid and enjoy an almost guaranteed regular discount on their utility bills based on the dollar value generated.

In the United States, at least one community solar project exists in 43 states and Washington, D.C. The nation is getting on board with this business model — an impossible feat without positively affecting real estate.

What do property owners feel about community solar projects? The reaction is a mixed bag of praises and criticisms.

A Fresh Leasing Opportunity

Community solar has positively impacted commercial real estate (CRE) owners. They see property owners as desirable tenants — additional long-term sources of revenue.

The addition of a rooftop solar system can affect a property’s structural integrity. The lease agreement can spell out who’s responsible for what in case the installation results in damage. More importantly, the CRE owner doesn’t have to do anything to collect rent except for providing the space needed for the solar array.

About 55% of Americans feel the private sector should do something about environmental, social and governance (ESG) issues. CRE players can take a stance on climate change and contribute to sustainability by hosting a renewable power plant. This green facility makes good press because it helps the local community decarbonize and reduce reliance on fossil fuels.

Conflicting Effects on Property Values

The Commercial Real Estate Development Association says community solar can drive up the value of host properties because such lease agreements are transferable. Anecdotally, a former South Jersey landlord to a solar developer sold their building at a premium of 4%, for the buyer was happy to fork over more in exchange for the long-term rent.

Regarding residential real estate, researchers found a correlation between solar farms and home depreciation. They analyzed the sale prices of 1.8 million houses near utility-scale solar plants across six states sold from 2003 to 2020. They discovered the residences half a mile from the solar farm sold for an average of 1.5% less than those two to four miles farther.

A separate 2020 study found the value of about 400,000 homes within a mile of a solar project in Massachusetts and Rhode Island dipped by 1.7% on average.

Community Members and Solar Interests Butt Heads

Some residents dislike the presence of community solar facilities. Some may find arrays an eyesore, though this sentiment should die down over time with the advent of solar architectural design.

Incorporating solar panels into buildings more creatively provides all the same benefits while addressing concerns about visual appeal. For example, installing solar canopies to add shade to open areas, such as parking lots and outdoor seats, is a creative way to beautify spaces and generate clean electricity.

Moreover, eco-warriors, agricultural groups and farm bureaus oppose community solar power plants because they occupy vast areas. Solar energy proponents counter that installing solar arrays in empty terrain conserves the land. These projects help protect rural areas from urbanization, allowing them to return to their original state once the panels reach their end of life.

Solar installations can disrupt a location’s ecological balance over the long term. However, they can provide economic benefits to farmers when set up on agricultural land with marginal value.

Community Solar — A Real Estate Asset, Not Liability

Community solar’s perceived drawbacks to real estate markets are negligible at best and premature at worst. Further research is needed to determine whether utility-scale solar farms drive down local property values. When installed in proper locations, these arrays represent a win-win solution for CRE players and homeowners.

Author Bio

Jack Shaw is a writer and editor for the lifestyle magazine Modded, as well as a car enthusiast and lover of nature. His writings on home design and renovations have been published on sites like CADdetails, A House in the Hills, House 2 Home Organizing and more.

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