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The Energy Choice Is Yours: How ESCOs Differ from Community Solar

As awareness and concern for sustainable energy grow among consumers, so does the array of available energy options. This expanding market brings a wealth of opportunities but also a fair share of questions and confusion. At AC Power, we are often asked to explain what it means that Community Solar projects yield local benefits, and how that differs from the offerings of Energy Service Companies. In order to unpack this, there are a couple terms that first need explaining.


Electricity generation, or power generation, encompasses the methods by which electricity is produced from various sources. These can range from fossil fuels (coal, oil) to renewable sources like hydro, wind, and, of course, solar power. The electricity generated is then converted into a form usable by homes, businesses, and industries — facilitating all activities that require electrical power.


Then, there’s transmission. As a utility customer your home is connected to the electric grid through a network of wires responsible for delivering electricity. This process involves the high-voltage transportation of electrical power from generation sources to distribution systems and ultimately to consumers. Your local utility is responsible for the transmission of that electricity to your home.


The late 1990s saw a movement towards deregulating energy markets in several states, a shift from the era when vertically integrated utilities managed the generation, transmission, and distribution of electricity. Deregulation separated these functions to foster competition, enhance consumer choice, and potentially lower energy prices. This change introduced market dynamics, including supply and demand, fuel costs, and weather conditions, as the primary determinants of energy prices.


Deregulation also allows consumers to select from multiple energy suppliers and ESCOs, or Energy Service Companies, are a product of this deregulation. These companies purchase electricity from the open market and utilize the existing utility's transmission lines for delivery. They base their energy sourcing on a variety of factors, including customer preferences, cost and location.


Many ESCOs procure electricity from clean energy generators, thereby giving consumers the opportunity to support renewable energy. However, there is no guarantee that the electricity that consumers sign up for is supplied by clean energy projects that are local to them. In fact, some ESCOs participate in regional energy markets where the energy may come from a mix of local and distant generation sources. ESCOs can also utilize Renewable Energy Certificates or Renewable Energy Credits (RECs) to support their clean energy claims, and while these agreements allow ESCOs to support renewable energy on a regional or national level, it does not mean that a consumer is supporting LOCAL clean energy generation.  


In contrast, all the electricity produced by Community Solar projects is fed into the local utility grid, generating credits for subscribers to the solar project. The credits appear on a consumer’s utility bill and help offset supply charges. Subscribers typically reside within the same utility zone as the solar project, ensuring they support and benefit from local renewable energy initiatives. That means that while the electrons produced by the community solar project are not travelling directly from the community solar facility to your home, they are being generated within the consumer’s utility zone, therefore both promoting clean energy and strengthening community ties to sustainable practices.


While both ESCOs and community solar projects aim to enhance renewable energy usage, they operate differently. ESCOs provide a broader choice in energy sourcing, including green options, whereas community solar focuses on local generation and direct community benefits. In many states, consumers can combine the advantages of both by subscribing to an ESCO's green energy plan and a community solar project, maximizing their support for renewable energy.


Understanding the distinction and complementary nature of ESCOs and community solar projects empowers consumers to make informed choices about their energy consumption. By navigating these options wisely, individuals can contribute to a more sustainable and locally-focused energy ecosystem.


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AC Power helps resolve the unforeseen challenges of developing solar projects on brownfields. AC Power is your partner, and our team of experts is there to support each stage of your solar development journey. Our mission is to reenergize communities with solar — one brownfield at a time.


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