There are 6 million affordable housing units and 22 million households defined as low-income in the United States. Bringing solar to these homes stands to benefit many Americans -- but experts say it isn’t easy.
The falling cost of solar equipment and increased scale of the industry have created opportunities for solar to provide financial relief, stable employment, and improved environmental health in underserved communities. But these communities also face a unique set of challenges, according a new report from Grid Alternatives, Vote Solar and the Center for Social Inclusion.
The Low-Income Solar Policy Guide, released this week, shows how targeted policies and specific guiding principles can help lawmakers and other stakeholders overcome barriers and drastically expand solar access.
With solar, “There’s a tremendous opportunity to address some of the greatest challenges faced by low-income communities -- the high cost of housing and utilities, unemployment, and adverse impacts of pollution, which are felt much more strongly by low-income communities,” said Sean Garren, Northeast U.S. manager for Vote Solar.
A driving force behind the guide is helping to ensure "that all communities are active participants in the clean energy transition,” said Stan Greschner, vice president of government relations and market development for Grid Alternatives, a large nonprofit solar installer.
Low-income households can be prevented from going solar because their credit scores aren’t high enough to secure leases or loans, or their income is too low to take advantage of tax credits when purchasing a solar system. They may also face physical barriers, such as tree shading or poor roof quality. Or they may share a roof, or may not own their home.
Market disinterest is another issue. The complex nature of serving low-income solar customers has limited the number of companies working in this space. So without a concerted effort, millions of households could miss out on realizing solar benefits.
“This market sector will not develop or scale under the same incentive structures designed for the general market,” the report states. “In fact, without targeted, intentional incentives for investments, the low-income solar market [is] unlikely [to] develop or scale at all. Solar developers, nonprofits and other partners seeking to drive the low-income solar market will need to find new and innovative ways to structure solar projects to work for low-income communities if it is to be viewed as a viable long-term market.”
Leading states see success
The Low-Income Solar Policy Guide outlines a suite of policy tools, including net metering, community shared solar, tax incentives, rebates, renewable energy credits and green banks. Several states have already implemented successful versions of these programs.
Under New York’s Affordable Solar Program, for instance, low- to moderate-income customers can receive double the standard residential solar rebate. In addition, New York’s NY-Sun Incentive Program offers low-income customers low-interest loans to pay for their solar installations.
In Washington, D.C., customers can benefit from the Solar Advantage Plus Program, which provides authorized solar installers with a rebate of $2.50 per watt, with a maximum of $10,000 per system.
And in California, the Single-Family Solar Affordable Homes Program -- the first program of its kind in the country -- provides a direct incentive of $3.00 per watt, as well as gap funding from Grid Alternatives to cover the entire cost of the system.
Municipalities in more than 20 states offer property-assessed clean energy (PACE) programs, which allow property owners to use municipal bonds to finance solar, energy efficiency and other qualifying retrofits, and repay them through their property tax bill.
In Colorado, lawmakers passed a first-of-its-kind statewide community solar bill that requires 5 percent of new shared solar projects to be reserved for low-income customers.
Connecticut launched a green bank to help finance renewable energy projects, and has restructured risk to bring down the minimum required credit score.
The report doesn’t advocate for a particular policy option. Instead, the authors advocate for a specific set of guiding principals, which includes the need to provide cost savings, foster community engagement and ensure consumer protection.
The authors also call for policies that allow for “different ownership and contract models to meet different consumers’ preferences and financial standing.” Flexibility also gives different providers the opportunity to serve low-income customers’ needs, which is part of a larger debate over whether regulated utilities should be able to own and sell distributed solar.
A handful of utility-run distributed solar pilot projects have been approved to date, many of which have a focus on low-income customers, such as National Grid’s demonstration project with the Buffalo Niagara Medical Campus and Arizona Public Service’s residential solar pilot.
Meanwhile, SolarCity launched a new solar service for affordable housing units in California last fall. Also, Sunrun and SunEdison have partnered with Grid Alternatives to provide solar projects and job training.
Beyond those guiding principles, policies need to be stable in order for the low-income solar market to truly get to scale, said Greschner.
“We are advocating for policies that look long-term...so that you can bring in stakeholders and participants to help facilitate a sustainable market and not just do one-off pilots,” he said.
Short-term incentives create a boom-and-bust effect, Greschner added. Firms are motivated to move in quickly, but when the policy expires, they exit as rapidly as they entered.
“A one-year or small-scale program does not create the opportunity for financing and installation models to mature,” he said. “There could be a need for testing something, but that can’t be the endgame.”
Massachusetts market at risk
Advocates for low-income solar in Massachusetts held a press call yesterday to highlight how the looming expiration of policy incentives threaten the state’s low-income solar market.
In 2008, Massachusetts created a distributed solar carve-out in the state’s renewable portfolio standard, which allowed installations serving low-income customers to receive more Solar Renewable Energy Credits (SRECs) than a typical project for each megawatt-hour of electricity produced. Massachusetts also offers net metering, which credits solar customers for excess generation at the retail electricity rate, as well as virtual net metering, which expands solar access to multi-family buildings.
Because of these policies, there are currently 75 megawatts of solar installed or planned under Massachusetts’ SREC program -- which represents 10 times the amount of solar in California’s low-income program, according to Vote Solar.
But many of those projects are now at risk as members of a legislative conference committee consider solar policy proposals that would lower net metering compensation, according to solar advocates.
“Low-income solar, for better or worse, is a more complicated and expensive market than the normal mid-range solar market, let alone for large customers like Ikea or Wal-Mart. Often, the cost of capital is higher and federal incentives are more complicated,” said Garren. “So when you start to cut the overall package of compensation for solar, you start to see how the low-income market will be hurt immediately and be one of the first to disappear.”
Emily Rochon, director of energy and environmental policy at Boston Community Capital, said her firm has already had to drop plans for two 1-megawatt projects in National Grid territory where the net metering cap was hit last March. Two solar projects led by the Worcester Green Low-Income Housing Coalition have also been put on hold, she said.
“The projects simply aren’t economic with wholesale net-metering credits,” said Rochon.
Thirty-two mayors and town managers in Massachusetts have called on legislators to reject proposals to reduce the value of net metering.
On a call with reporters, Michelle Wu, president of the Boston City Council, explained how a solar project at the Greater Boston Food Bank is freeing up dollars that go “directly to feeding the hungry.” At the same time, housing solar projects are making multi-family dwellings more affordable, and school solar projects are easing the pressure on tight education budgets.
“Like many other states…we are debating the future of the solar policy and incentives that are in place,” said Wu. “But from my perspective, and on behalf of my colleagues on the Council, we believe we’ve barely scratched the surface on clean energy.”