Nearly one-third of American adults live in a low- or lower-middle-cost housing area. And that number is growing as the middle class shrinks.
Meanwhile, community solar programs are budding around the country. These programs are often promoted as a way to spread solar to those who can't host a system on their roof. But are they reaching lower-income customers who may want to participate? So far, very few programs specifically target this customer segment.
And without a focused plan, lower-income customers won't get served by community solar.
The Interstate Renewable Energy Council (IREC) is out with a new report that centers on spreading shared solar programs to a broader range of customers. What’s needed is a targeted approach -- borrowing successful approaches in other sectors -- that takes into account the specific challenges of serving the lower-and moderate-income (LMI) demographic.
“Shared renewables are still a nascent market, and it’s now entering the next phase of growth,” said Sara Baldwin Auck, IREC’s regulatory program director. “The potential to reach a significant volume of customers is very real. That reality is spurring more people to figure out how to make programs work for LMI customers.”
Financing is a central issue. Low-income residents often don’t have access to the financial resources to pay upfront costs or make monthly payments. Paying for renewable energy isn’t a priority. With a sizable risk of default or low enrollment, developers and financiers may be wary of investing in a project on their own to service these customers.
One recommendation, which addresses both financing and programmatic hurdles, involves broadening the user pool.
"For shared renewable energy facilities focused on serving LMI customers, developers may need to rely on another customer or group of customers to serve as 'anchor' participants in a facility, who can also serve to mitigate some of the credit and other financial issues faced by LMI customers," writes IREC.
A shared solar program could include 40 percent of customers from the commercial and industrial sector, or a similar number of homeowners in the moderate- to upper-income bracket. These two groups bring better credit and payment histories, thus reducing risk.
For example, the first phase of New York's community solar program requires 20 percent of customers to be low-income. That next step would be to create shared solar programs with more than half of participants in the LMI bracket.
"The viability of a 60% LMI facility is inextricably tied to financing issues, however, and IREC emphasizes that these percentages will need to be adjusted on a program-by-program basis, depending on available incentives, financing tools and mechanisms, and other specific circumstances," concludes the report.
Those financing tools include upfront incentives and loan programs to help customers defray costs. Developers and financiers may also require help, particularly if a majority of the subscribers are LMI earners. Incentives, tax breaks, and loan-loss reserve accounts to cover shortfalls could be used to encourage an expansion of the customer base.
Another possibility is getting states to offer more attractive loans and interest rates. New York's green bank has awarded tens of millions of dollars in loans to companies offering low- to no-cost efficiency and solar options to homeowners in the state. These loans have encouraged banks to throw in many more millions for warehouse credit facilities to support projects serving this sector.
"While the current project pipeline does not include any projects devoted to shared renewable energy facilities for LMI customers, the NY Green Bank could foreseeably serve as a source of capital for an LMI-serving shared renewable energy facility," writes IREC.
Targeted incentives and loans are necessary to alleviate investor concerns. “If you don’t address the risk and offer creative financing mechanisms, you’re not likely to see this market segment scale,” Auck said.
Outreach and marketing need to be taken into account as well. For many LMI customers, language, internet access and time are constraints. The combination of such factors can lead to a lack of awareness and understanding of programming options. They also feed into a skepticism about new offerings.
"LMI customers may require specialized, culturally sensitive marketing, education, and outreach, both as far as the method used (e.g., language, medium, etc.) as well as the substance of the materials."
In order to address this barrier, policymakers and regulators could design programs that leverage organizations and networks that already work with LMI residents. Partnering with an organization already working in the sector would engender trust. It would also cut down on inefficiencies in staffing and deploying marketing resources -- developers wouldn’t have to worry as much about administrative costs.
Finally, partnerships would make participation less onerous. If a customer were deemed eligible through one assistance program, they could be deemed eligible for a shared solar program.
The policy and financing suggestions made in the report already exist today. They just need to be applied to community solar, said Auck.
“Many of the concepts and mechanisms are already in place and have been demonstrated to work,” she said. “The thing that’s needed is for policymakers and stakeholders to work together to coordinate those pieces. There isn’t the need to reinvent every wheel.”