Community Solar Investment on the Rise for CRE

Solar power in the U.S. has continued to grow, and a type of installation and use called community solar is increasingly important to commercial real estate, says CBRE.

Community solar is a concept developed in 2010 to expand availability of solar power to low-and-moderate-income (LMI) households — frequently renters who don’t have the choice to add solar where they live — and small businesses that couldn’t afford to install their own solar systems. Community solar extends the reach of power from individual installations, rather than back through the power grid, to these people and companies that could use the cost savings.

“Over the past 10 years, community solar has experienced an average annual growth rate of 80%, reaching approximately 6.49 GW at the end of 2023,” they wrote. “Looking ahead, community solar is forecast to double by 2028,6 reaching 14 GW.” Each project is essentially an arrangement where households or businesses have shares in a solar power installation. That could be on a solar farm, a CRE building, or a multifamily property. Each gets power from the source and

Last year saw the installation of 32.4 gigawatts of direct current capacity, according to the Solar Energy Industries Association. That was 51% larger than in 2022 and a record year. “Every single segment set annual installation records except for community solar, which was within 5 MWdc [megawatts DC] of an annual record,” they wrote.

There are benefits to the CRE property owner as well. “By subscribing to a community solar project, property owners can reduce their carbon emissions and electricity costs without making any changes to their rooftop or home,” CBRE wrote. A property owner can lease space out to companies that will install solar systems, run them, and make power available to residents or others, possibly including the business owner. That adds income from space not being used for other reasons.

Another potential benefit is the opportunity to gain tax credits from the Inflation Reduction Act of 2022. It extended the Investment Tax Credit that can provide dollar reductions in tax liability, which can be more financially desirable than reductions in taxable revenues.

“The benefits include more clean energy for local communities and, for property owners, more revenue opportunities, less dependence on fossil-fuel energy sources, and compliance with government Building Performance Standards (BPS) or other climate mitigation measures,” CBRE wrote.