TODAY’S STUDY: Solar For Everybody
Bringing the Benefits of Solar Energy to Low-Income Consumers A Guide for States & Municipalities
Bentham Paulos, May 2017 (Paulos Analysis)
The declining cost of solar energy is creating opportunities for all Americans to save money on their energy bills. And no one benefits from energy savings more than low income consumers, who pay a much higher portion of their income for energy than middle- and high-income consumers.
But being poor creates barriers to accessing solar power and its economic benefits. Low income consumers lack sufficient savings that can be used to buy solar systems, and they may have low credit scores or a lack of credit history that may impede their ability to finance a system. They are often renters, or live in multifamily housing, without ownership of their roof.
Many programs and policies that encourage solar deployment rely on leveraging public dollars with private investment, where a small contribution of public funding can trigger a larger contribution from the market. A 30 percent tax credit on a solar investment, for example, is matched by a 70 percent investment by a homeowner. But low-income consumers are less able or likely to respond to this kind of offer, so some policy incentives fail to reach low-income populations. One alternative is to provide a greater portion of public funding directed toward low-income consumers, but that means limited public budgets don’t yield as much private investment or as many solar projects.
Policymakers have been trying a range of approaches to bring solar to low-income consumers. This guide surveys the field and recent studies to give a sense of what is being tried, and what could be tried. It examines what has and hasn’t been working, and what factors determine whether a given policy or program might work in a given circumstance.
There are many existing government programs and policies aimed at reducing poverty, providing housing, and promoting clean energy. These provide a strong starting point for how to bring the benefits of solar power to low-income households. But there are also many new and emerging ideas, including government policies and programs, new business approaches, and philanthropic and volunteer initiatives.
Summary of solutions, by category
Much of the activity around low-income solar access has been aimed at financing to solve the first-cost barrier that low-income households face. Financing ideas either adapt existing techniques or develop new approaches. Property Assessed Clean Energy (PACE), Pay As You Save (PAYS), and third-party ownership arrangements are just a few of the many financing ideas discussed in this paper.
There are also many government policies and programs that are being adapted or created for low-income solar to make it more affordable. Some of these are compensation mechanisms, which allow customers to capture the full value of their solar investment. The most common examples are net metering for solar generators located on the customer’s side of the meter, and virtual net metering, which enables community solar by tracking output from off-site generation. Compensation mechanisms are distinct from direct incentives, whereby government policies provide explicit financial or other inducements.
Energy assistance programs are also starting to see the value of low-cost solar as a way to reduce energy burdens, often in combination with energy efficiency measures. The LowIncome Home Energy Assistance Program (LIHEAP) and Weatherization Assistance Program (WAP) are starting to include solar as cost-saving measures. Many states have existing utility rate discount or bill payment programs that could harness solar to generate savings for consumers
While much attention focuses on solar’s direct benefits to low-income customers by reducing energy bills, solar can also provide indirect help by cutting costs for low-income support services. The U.S. Department of Housing and Urban Development (HUD), especially, is starting to use solar to improve energy security for the millions of low-income Americans it serves, while saving taxpayers some of the $5 billion HUD spends annually on utility bills. By installing solar technologies, shelters, food kitchens, churches, and service organizations of all kinds could redirect energy savings toward their primary mission.
Summary of recommendations
This guide is primarily for policymakers interested in bringing the benefits of solar to low-income consumers and communities. While this guide makes some policy and program recommendations, it recognizes that not all policymakers face the same constraints, policy environments, stakeholders, economics, and opportunities.
To be helpful to all readers, regardless of their specific situation, the guide suggests some design principles for developing a successful low-income solar program. It highlights some options that seem especially relevant, universal, or promising; and it describes a simple segmentation of audiences—homeowner, tenant, and support service—and the implications of reaching each of them. Finally, the guide presents several scenarios that may apply to states in certain situations.
Of course, the recommendations presented in this guide may not be best in any given circumstance. The lengthy discussion of other solutions is intended to help guide possible alternative actions.
In short, successful low-income policies and programs share some design principles: they are tailored to low-income consumers; they are cost-effective and financially sustainable; they have measurable results; and they are flexible enough to adapt to changing conditions and new learning.
The guide offers several suggestions for policies and programs that seek to expand solar to low-income consumers:
• Leverage existing state energy policy to support low-income solar deployment, such as by adapting net metering, portfolio standards, and financial incentives for renewables.
• Incorporate solar into low-income energy efficiency programs to reduce implementation costs and provide deeper savings for households with very high energy burdens.
• Adapt existing housing and anti-poverty programs to include solar, such as LIHEAP and WAP, public housing, and economic development incentives.
• Set up a financial vehicle that can develop, test, and deploy innovative financial strategies and provide leadership and technical expertise to other agencies.
• Promote volunteerism to provide low-cost solar to low-income communities, such as new solar homes built by Habitat for Humanity—and reinforce it through supportive incentives and policies.
• Partner with trusted allies in reaching out to low-income communities to ensure greater buy-in and program enrollment.
• Ensure any low-income solar policies and programs will actually provide tangible benefits to low-income households and communities.
In choosing which policy approaches to take, it may first be useful to consider the specific solar consumer you are trying to assist, and the current policy and market environment.
Not all low-income solar customers are the same. They face different challenges and may need different solutions or different combinations of solutions to overcome them. For example, low-income homeowners can see clear benefits from owning solar systems, but may face first-cost hurdles. Tenants of apartment buildings may not be able to own a rooftop system, but they may be able to benefit from a flexible community solar program. Low income housing landlords may be able to benefit from tax credits, energy savings, and increase in property value from going solar but may be unwilling to share those savings with tenants. Groups that provide support to low-income communities face their own hurdles and opportunities. As nonprofit or governmental agencies, they may enjoy low-cost financing, but may not be able to access tax credits and other incentives.
The very definition of “low-income” varies widely, from one government agency or jurisdiction or program to another. Some programs, for example, include all households earning less than 60–80 percent of the area median income as low income, while others use income relative to the federal poverty level. Definitions can have a significant impact on program design and implementation. Being consistent with other programs may be important, or it may be helpful to target particular customer segments within the low-income customer class. “Moderate-income” households may best be served by different programs and policies tailored to fit their needs. This guide largely avoids these definitional complications to provide general guidance that can be adapted to specific situations.
Lastly, to help inform programmatic options, the guide presents a few sample scenarios that state and local agencies may face when thinking about low-income solar program development. These scenarios vary by the state policy environment for renewables, the type of audience to be reached, energy costs, and other low-income energy policies.