The Fallacy of the 100% Churn Guarantee in Community Solar

The Fallacy of the 100% Churn Guarantee in Community Solar

In community solar, where subscriber management is a critical component of project success, many developers and investors are drawn to the allure of a 100% churn guarantee. On the surface, this promise seems to eliminate the risk of subscriber churn, ensuring a project remains fully allocated without future additional costs. But is this guarantee as good as it sounds?

The truth is, it isn’t.

It is understandable why subscriber managers are offering it. They want to gain market share and in our industry where no one wants to take risk, a 100% churn guarantee seems to be an ideal solution (and boy, do credit committees love it). Unfortunately, it can instead provide a false sense of security that can leave developers and investors exposed to significant financial and operational risks. Let’s break down why.

1. Providers Have Failed to Honor Their Guarantees

Subscriber attrition is an inevitable part of community solar. Customers move, change their utility accounts, or simply stop paying their bills. In some markets—especially those with dual billing—the complexity of customer engagement makes churn even harder to control.

Yet, despite these realities, some subscriber managers promise full churn protection to win business. But what happens when they can’t deliver?

The developer is left with two choices, both of which come at a cost:

• Pay out of pocket for subscriber replacements that weren’t budgeted for because the original provider failed to fulfill their promise.
• Find a new partner to acquire and manage the unallocated capacity—incurring both direct and indirect costs in the process.

In either case, the developer loses. What seemed like a safety net turns into an expensive liability.

This scenario is not hypothetical. Failure to honor these guarantees is happening as we speak and community solar developers are rightfully upset. It’s frankly why we are seeing an uptick in the transfer of assets between subscriber managers.

2. There’s No Real Backstop for the Guarantee

Even if a company genuinely intends to honor a 100% churn guarantee, the question developers should ask is: Will they be able to afford the costs to honor it?

Despite the flashy press releases about corporate investments made in subscriber management firms, there is the stark reality:

• Many subscriber managers are not cash flow positive.
• They are losing money on core operations.
• They rely on outside investment to scale and finance their operations—not to fund churn guarantees.

That means that when challenges arise and subscribers churn from the community solar projects, the provider simply can’t afford to pay for the real cost of reacquisition. The funds sourced from outside investment is intended for growth, research & development, and core operational expenses, not to fund the reacquisition of subscribers from legacy community solar projects. When push comes to shove, and the company doesn’t have the cash to replace subscribers as promised, developers are left holding the bag.

3. Diligence is Key

I’m not saying that a 100% churn guarantee is inherently flawed or that we, at PowerMarket, wouldn't offer one. In fact, we do offer substantial churn guarantees in New York, a mature community solar market where we manage over 800 MW and have been active since the program's inception 10 years ago.

All I am saying is that developers shouldn’t blindly rely on a 100% churn guarantee. Instead, they should rely on that organization’s:

• Track record of execution and subscriber retention;
• Operational history and financial stability;
• Experience navigating churn in real-world scenarios, not just on paper; and
• Strategy in acquiring subscribers, and why those acquisition methods provide long-term participation.

The best way to mitigate churn risk isn’t a guarantee—it’s working with a partner who knows how to keep subscribers engaged, navigate market complexities, and actually follow through when challenges arise.

One of my favorite movies of all time, Tommy Boy, has a scene that distills my sentiments:

• Tommy: Here's the way I see it, Ted. Guy puts a fancy guarantee on a box 'cause he wants you to feel all warm and toasty inside.
• Ted Nelson, Customer: Yeah, makes a man feel good.
• Tommy: 'Course it does. Why shouldn't it? Ya figure you put that little box under your pillow at night, the Guarantee Fairy might come by and leave a quarter, am I right, Ted?
• Ted Nelson, Customer: [impatiently] What's your point?
• Tommy: The point is, how do you know the fairy isn't a crazy glue sniffer? "Building model airplanes" says the little fairy; well, we're not buying it. He sneaks into your house once, that's all it takes. The next thing you know, there's money missing off the dresser, and your daughter's knocked up. I've seen it a hundred times.
• Ted Nelson, Customer: But why do they put a guarantee on the box?
• Tommy: Because they know all they sold ya was a guaranteed piece of shit. That's all it is, isn't it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I’ve got spare time. But for now, for your customer's sake, for your daughter's sake, ya might wanna think about buying a quality product from me.

A guarantee is just words on paper—it’s the partner behind it that matters. Do your diligence.