Contributed by Matt I. Slavin, Ph.D.
The nexus between renewable energy and energy equity is gaining attention. Solar generation is central to electrifying and decarbonizing the country in the fight against climate change. About one-fifth of U.S. greenhouse gas emissions originate from residential energy use. Providing clean, renewable solar energy to historically marginalized households is imperative to maximize the effort to reduce carbon emissions.
What is energy burden?
A household’s energy burden is how much of its gross income is spent on heating, electric appliances and devices, and transportation. Understanding energy burden is the key to understanding renewable energy’s nexus with energy equity. It’s a vital measure, particularly given that economic inequality and income stratification has become a critical concern in domestic politics.
According to a Pew Research Center poll, about 60% of Americans say the country has too much economic inequality. During the last few decades — especially since the financial crisis of 2007-2009 — income inequality has widened in real terms. Households with high incomes have seen their incomes rise while most middle-income households have stagnated or even declined somewhat. The story is significantly worse for lower-income households. According to the Census Bureau, income inequality in the United States is largely driven by absolute declines in lower-income households, especially for lower-income Hispanics and African American households.
The growing equity gap is reflected in the household energy burden. According to the Department of Energy (DOE), the average energy burden for low-income U.S. households is 8.6%, about three times that for non-low-income households. An energy burden above 6% is considered a high energy burden. About a quarter of U.S. households have a high energy burden, and about 13% have a severe energy burden, paying more than 10% of their income for home energy. Many of these customers cannot afford to pay their energy bills. In California alone, customer utility bill arrearages exceed $2 billion.
Low-income, energy-burdened (LIEB) households face significant barriers to accessing solar energy. As a result, these households cannot access the solar energy ecosystem and participate in mitigating the climate crisis. LIEB households are also denied the opportunity to reduce monthly utility expenses by using affordable solar power or generate income by selling electricity back to the grid where feedback tariffs are in effect.
Barriers to entry to the home solar energy ecosystem
LIEB households face barriers to acquiring and installing solar panels. These barriers include insufficient capital to meet the cost of purchasing and installing a residential solar system and problems stemming from landlords’ inability to leverage benefits from solar investments in rental properties they own.
Insufficient Capital
High cost is the #1 barrier to installing a solar array in a LIEB home. Residential PV solar costs vary based on local wage rates, system size, and whether the panels are monocrystalline or polycrystalline. After accounting for the federal solar investment tax credit (ITC) of up to 30% of purchase and installation cost, it can cost anywhere between $14,000 and $40,000 to buy and install a 6-kW rooftop solar array, according to Consumer Affairs Buyers Guides. Premium systems reflect more highly rated equipment and installation of storage, inverters, and other supplemental technology. Roof upgrades needed to support an array also increase costs.
Federal guidelines define a low-income household as having an annual income of $14,580 for one person and $30,000 for a family of four. However, the ITC is non-refundable, and many LIEB households do not have tax liability to benefit from the credit. States, localities, and utilities offer tax credits and rebates to incentivize solar. But many of these are also non-refundable or require the consumer to purchase and install the equipment and then wait for the credit at tax filing or until a rebate is processed. Thus, in many cases, the incentives are not useful for covering the upfront costs of rooftop solar installation. By a similar measure, many LIEB households have low credit scores, making obtaining credit to install solar out of reach.
Renters, not owners
Many LIEB households rent their homes. According to the Pew Research Center, about 60% of Americans in the lowest-income quartile rent. Even if LIEB households who rent could afford solar, they face a more intractable barrier: where to install a solar array. They don’t own the roof of the dwelling or building they live in, and neither the renters nor the landlords are likely to want solar installed if they don’t own the module or the property. Further, many properties that rent to LIEB households are older, raising a need for costly roof upgrades that owners will not want to bear.
Community solar as a pathway to bringing the benefits of solar to LIEB communities
In most cases, Community Scale Solar (CSS) offers the most feasible pathway to integrating LIEB households into the solar energy ecosystem. With CSE, a solar farm is developed by a non-profit, local government entity, or utility, depending on what’s authorized under state law. The developer funds the project using grants, loans, ratepayer revenue, and other sources of capital.
The installations can be small, with a capacity as low as 20 kW, or larger, depending on economic feasibility. The electricity is wheeled to subscribers using existing transmission and distribution infrastructure. Subscribers pay a rate reflecting actual electricity use or a flat rate. Either may be subsidized.
CSS subscriber eligibility is income limited. Take the example of the CSS operated by PSE (formerly Puget Sound Power, serving much of metropolitan Seattle). The utility publishes a table showing the top income limit for households of varying sizes to be eligible for its CSS program. The annual income limit for a family of four is $53,000, reflecting 20 percent of the area’s household median income.
GO DEEPER: Renewable Properties founder and president Aaron Halimi joined Episode 33 of the Factor This! podcast to discuss the future of community solar in California which, to date, has lagged behind other markets, despite the state’s role as a leader of the energy transition. Subscribe wherever you get your podcasts.
Meeting the challenge
Extending the benefits of solar generation to LIEB households is a challenge that can be met. Leveraging CSS’s economies of scale, relying on existing infrastructure, and low-cost financing allows energy-burdened, low-income communities to access affordable solar energy whether they own or rent their homes. However, CSE is not a panacea. As pointed out in Renewable Energy World (3/7/23), the biggest obstacle may be reaching, educating, and convincing non-energy literate populations to try a new, unfamiliar approach to electricity, a necessity in their daily lives.
There’s also the issue of capital availability. The National Renewable Energy Lab (NREL) has identified several sources of capital that might be used to build CSS solar farms or subsidize subscriber costs. These include LIHEAP, the federal energy assistance program; state energy assistance programs like the Oregon Energy Assistance Program, for example, low-income weatherization funding; and Community Development Block Grants (CDBG).
Anthropogenic climate change poses a huge threat to the health and well-being of all Americans and global humanity. If we are to mitigate the worst effects of the climate crisis, we need to enlist everyone in the fight. That includes LIEB households. It’s time to get serious about bringing the least privileged among us into the solar energy ecosystem and, in doing so, help even the score on energy equity.
