When the White House announced a multipronged solar commitment that benefits low-to-moderate-income communities, the decision did not take place in a vacuum. Although most news coverage has simply focused on the federal statement, a more in-depth look shows this thorny challenge has blocked progress for the solar industry for a long time. According to some researchers, this commitment does not provide a complete solution.
The federal commitment includes a National Community Solar Partnership to provide access to renters and homeowners who do not own roofs with reliable solar exposure. It also includes measures to support solar installations by housing authorities, rural electric cooperatives, and power companies. Substantial philanthropic commitments and industry partnerships are part of the picture. The U.S. Department of Housing and Urban Development is releasing a renewable energy toolkit for use by its grantees. Steps are underway to facilitate Federal Housing Authority financing of solar power. Many private companies have made various commitments.
Increasing the diversity of the solar industry is another federal objective. Some funding will be available for jobs training through Americorps. Other companies and nonprofits are also participating in the effort.
“I definitely think this is on the right track for what the president can do within his power,” said Anthony Giancatarino, director of policy and strategy at Center for Social Inclusion. But he also expressed some reservations about the overall approach the White House is taking.
After researching the barriers to solar access in low-income and minority communities, Giancatarino said it appears the White House is not focusing on health benefits or community financial assets. This, he said, is common elsewhere in the industry. But he said reframing this viewpoint could change the rules of the game – and benefit communities much more.
By emphasizing sharing the profits of solar ownership with community residents, Giancatarino said, the solar industry could play a role in community revitalization.
The business models of the different programs participating in this initiative will vary. But there seems to be an overall lack of importance placed on funneling income back to local residents who can then invest it in their communities, Giancatarino said.
Specifically, Giancatarino said he would like to see a greater emphasis on local hiring – as well as business models that generate income for customers. He underscored the high value of giving local residents a sense of ownership of the solar technology and its income.
Giancatarino said he is particularly supportive of the White House’s interest in working with rural cooperatives. He said there is a substantial need for funding to build solar installations in rural areas using cooperative business models.
Health Benefits Are Considered Separately from Energy Benefits
Giancatarino said his recent work indicates an urgent need for energy programs and businesses operating in lower-income communities to consider health benefits in their work and budgets. This would include, for example, considering health benefits along with energy efficiency and renewable energy when recommending building retrofits. It would also include accounting for health benefits as part of the return on investment of programs.
According to online information from Union of Concerned Scientists, solar power improves public health by eliminating pollution from fossil fuel combustion. The health problems that renewable energy can reduce include “breathing problems, neurological damage, heart attacks, and cancer.”
On the energy-efficiency front, researchers from Harvard School of Public Health have estimated the financial value of the health benefits of energy-saving insulation retrofits on a national level. This does not include the health benefits of reducing drafts and improving building quality.
In a recent controversy, researchers claimed a low-income weatherization program yielded poor returns for the energy efficiency investment. American Council for an Energy-Efficient Economy (ACEEE) has pointed out since then that health benefits were not taken into account.
According to ACEEE, the U.S. Department of Energy conducted a meta-evaluation of the Weatherization Assistance Program’s non-energy benefits (including health benefits). The direct energy savings averaged $3,917 and the non-energy benefits provided a value of $3,466.
Lack of accounting for the value of health improvements may be holding back the work of energy professionals in lower-income communities.
Giancatarino recommends a holistic approach that also looks at food access and transportation. It is unclear how a strategy like this might be implemented comprehensively in practice.
Historically, lower-income communities have faced a variety of barriers to solar investment. Credit scores and available capital tend to be low. Access to financing has been limited. There has also been a shortage of effective outreach.
Companies such as PosiGen that have experience with solar affordability may be able to provide insights to others entering the market.
Policy Development and Financing Tools Are Essential
In a 2012 report titled “Energy Democracy: Supporting Community Innovation,” Giancatarino pointed out that both net metering caps and community aggregation restrictions tend to limit low-to-moderate-income communities’ access to solar. With net metering currently under debate in many states, it is uncertain what the future will hold for this approach to solar policy – or whether new alternatives will be similarly inclusive of lower-income communities.
Giancatarino mentioned value-of-solar policies as another potentially promising avenue to open access to solar to a greater spectrum of the population. The success of these policies to date, however, has been mixed; Minnesota’s optional value-of-solar tariff has seen little uptake by utilities.
The 30-percent federal solar investment tax credit (ITC) – another policy with an uncertain future – also helps to increase access to solar for a broad range of customers.
According to Giancatarino’s report, the clean energy industry’s focus on homeowners leaves out many renters – 25 percent of the United States’s white population and 50 percent of its black and Latino populations. This is an immense missed business opportunity.
A report by GW Solar Institute, “Bridging the Solar Income Gap,” has recommended substantial innovations that go beyond the federal initiative’s scope. “Solar energy could alleviate the financial burdens of lower-income communities, but targeted policies will be necessary for solar to expand into this underserved market segment.”
“The 49.1 million households that earn less than $40,000 of income per year make up 40 percent of all United States households but only account for less than five percent of solar installations. 49.1 percent of lower-income households are renters versus 21.8 percent of households with incomes greater than $40,000,” the report said.
GW Solar Institute’s list of recommendations includes:
- Integration of solar into existing energy efficiency and energy assistance programs such as the Weatherization Assistance Program (WAP) and the Low-Income Home Energy Assistance Program (LIHEAP)
- Expansion of net metering and community shared solar
- Continuation of the 30-percent federal ITC
- Community development programs such as the New Markets Tax Credit (NMTC)
- Financing tools to enhance credit, reduce risk, and leverage private capital (such as green banks, commercial property-assessed clean energy, and on-bill financing programs)
- An education and outreach program that is federally-mandated and industry-funded
- Partnerships with utilities, most likely directed through state legislation and utility commissions
The perspectives of these researchers show that there is more work remaining to build lower-income solar into the portfolio of products that are broadly available in the United States market. While this initiative is a step in the right direction – and a large-scale commitment – policy and financing tools will determine how far the industry can reach to expand the spectrum of its customer base.
This article was initially published by Yale University’s Clean Energy Finance Forum news website, which offers a biweekly email containing original articles and research. You can join our LinkedIn group to discuss this article. You may also email the author directly using our contact form.