Solar for All: Reaching Low-Income Customers
Heating and cooling are not “nice-to-haves” in most areas of the U.S. – they are a necessity. However, this basic need creates a disproportionate burden on low-income families. Statistics vary on how much low-income families typically spend on their energy bills, but it’s in the range of 6-20 percent of their annual income, much higher than the national average of 3 percent. As a result, government agencies and utilities have a long history of helping low-income customers meet their electricity needs.
Heating and cooling are not “nice-to-haves” in most areas of the U.S. – they are a necessity. However, this basic need creates a disproportionate burden on low-income families. Statistics vary on how much low-income families typically spend on their energy bills, but it’s in the range of 6-20 percent of their annual income, much higher than the national average of 3 percent.
As a result, government agencies and utilities have a long history of helping low-income customers meet their electricity needs. The federal Low Income Home Energy Assistance Program (LIHEAP) has been funded to the tune of $3-8 billion per year over the past decade, funding state and tribal programs to help low-income residents pay their energy bills. Utilities often have additional assistance programs that provide financial support, usually through voluntary customer donations or a statutory directive that allows utilities to rate-base a subsidy.
So here’s a thought: what would happen if we were to take just a tiny fraction of the funds allocated to low-income assistance and enroll some of these same customers in a shared solar program, whereby participants could receive bill credits from an offsite, shared solar energy system?
By our thinking, often these energy assistance funds could be more wisely invested in solar shares that provide real, long-term utility bill savings for low-income customers, while also helping to spur job creation and a wider deployment of clean energy resources. Importantly, they would also provide low-income customers – a group historically without access to renewable energy – a way to engage directly with distributed generation.
Last year, I wrote about IREC’s CleanCare proposal, which would essentially create this type of structure in California by adding on to the state’s existing California Alternate Rates for Energy (CARE) program. This approach makes economic sense too, as it would ultimately drive down rates for all consumers through a more efficient use of ratepayer funds for low-income customer assistance.
Short of a wholesale shift in how we approach energy assistance funding, we can still aim to design new and modify existing shared solar programs to better encourage and accommodate low-income customer participation. To do so, we must adjust our thinking a bit on program design, to make sure programs are accessible to a broader range of income levels. Here are some issues to consider.
Upfront cost – An upfront payment is often a non-starter when money is tight. Access to reasonable credit options can also be challenging. Programs that allow customers to make payments on their utility bills over time, while still receiving credits that reduce their overall bill, can make shared solar more accessible to low income customers. Indiana’s Tipmont electric cooperative recently launched a program with an “Easy Pay” option that allows members to pay for their solar panels over one, two or three years, to make up-front participation costs more manageable. In other recent news, the Los Angeles Department of Water and Power (LADWP) has requested comments on its proposed outline for a Community Solar Program (CSP). In its program description, LADWP specified that it anticipates allowing low income and “medical lifeline” customers to use their monthly subsidy to subscribe to the proposed CSP. If these customers see bill savings as a result of their participation in the CSP, then this might be an especially attractive option to them.
Bill credit valuation – Ensuring fair and accurate bill credit valuation is always critical to shared solar program design. IREC’s Model Rules for Shared Renewable Energy Programs offers a detailed discussion of the importance of this program component and how to achieve it. To reach low-income customers, it is especially important to pay close attention to this program element. The financial proposition of shared solar participation is usually a key consideration for these customers, who typically have less financial flexibility than other customer classes.
Participation threshold – Many shared solar programs have a participation threshold (e.g., a 1-kilowatt (kW) minimum), which can be difficult for low-income participants, who may wish to subscribe in smaller increments. Allowing a wide range of participation levels may be more administratively burdensome, but it can facilitate access to a broader range of income levels. In Colorado, for example, the state’s community solar garden rules explicitly state that the 1-kW participation minimum does not apply to low-income customers. Clark Public Utilities in Washington recently launched a program in which customers can purchase shares starting at just one-tenth of a panel (27 Watts).
Allocation of shares – To ensure a diversity of participation, some states and programs have reserved a percentage of solar shares to be allocated among low-income customers. There are several ways to accomplish this. Back to Los Angeles, the municipal utility LADWP’s program outline noted that, in the event of limited capacity, low income and lifeline customers would be given priority.
For another example, rules for Colorado’s Community Solar Garden (CSG) projects require 5 percent of CSG shares to be reserved for those eligible for the state’s Low-Income Energy Assistance Program. Meeting this requirement has taken on a number of forms in Colorado. The Clean Energy Collective (CEC) has allocated a portion of power produced by all of its CSG arrays to be low-income residents in Denver Housing Authority facilities. According to CEC, for the three facilities that were being planned in 2013, this translates to 70 kW, or about 100 panels from each array being allocated to low-income customers. Moreover, it amounts to $7,700 in bill credits for DHA housing residents in the first year, or nearly $230,000 over the 20-year program.
SunShare, another Colorado CSG provider, has worked with families whose children attend Academy 360 in Denver’s Montbello neighborhood, where 80 percent of children qualify for free or reduced lunches. SunShare has opted to donate subscriptions of six-tenths of a kW to the families of each of the 125 children enrolled in the school.
Weatherization and energy efficiency – Low-income customers often live in less efficient buildings and rely on older, less efficient appliances. Even if solar isn’t located onsite, it still makes a lot of sense to weatherize or adopt energy efficiency improvements first, in order to have a greater bill impact and avoid allocating solar shares to heating and cooling that literally flies out the window. So, to the extent possible, it makes sense to encourage low-income shared solar participants to access available utility and state weatherization and energy efficiency services in conjunction with their solar shares.
Project siting – Shared solar projects have the potential to bring employment opportunities for participants’ communities through the installation, maintenance and administration jobs required of these facilities. Also, given that they have been disproportionately affected by much more polluting forms of energy generation, low-income communities have more than earned the right to transform their landscapes with clean shared solar assets. California’s Green Tariff Shared Renewables legislation (SB 43) requires 100 out of 600 megawatts of the program’s capacity to be located in “disadvantaged communities,” including those with socioeconomic vulnerability or environmental degradation. And because shared solar facilities can be sited where they have maximum grid value and minimum grid impact, they can produce a local grid-boosting effect during times of peak load.
There are certainly other issues on this front that may require some creative thinking, such as expanding information distribution channels or program sign-up methods to target low-income customer segments. It is also important to keep program structures flexible to allow shared solar project developers to develop innovative financing schemes that can drive their prices down as low as possible. However, time invested in program design can ultimately make these programs more accessible to a broader range of participants – which, in IREC’s view, is the principle goal of shared solar.