Closing the Solar Income Gap

by Cameron Walker

Energy can be costly for everyone, but for those with limited income, utility bills whittle away at already scarce resources. And while energy efficiency measures and renewable energy use—and incentives to encourage them—have been increasingly popular across the country, these technologies and programs may often miss people who could benefit most. Even with incentives and tax breaks, the up-front costs of solar can prevent low-income homeowners from receiving the benefits of lower utility bills.

For decades, a handful of federal, state, and local programs have been trying to address this gap. Some of the early attempts were focused on combining solar with the Weatherization Assistance Program. One of these was the Solar Weatherization Assistance Program, a partnership in the 1990s between the Florida Solar Energy Center, the Florida Department of Community Affairs, and the U.S. Department of Energy. It installed 801 solar thermal systems on homes around the state. At the time, each system cost the project an average of $1,550. Based on a survey of a small group of homes, these systems cut both annual energy usage and heating costs by more than half.

The dropping price of solar continues to make installation more affordable and more accessible to middle- and upper-income homes; but even with lower up-front costs, solar can still be out of reach for many lower-income households. As a result, there is a growing interest in ensuring that all segments of society can benefit from solar. A number of nonprofits, housing authorities, and state and local agencies have been pulling together strong partnerships and a host of incentives and funding sources to create solar projects to reduce energy costs for residents in need.

California has responded to the need for alternative energy in disadvantaged communities with two programs that put photovoltaic (PV) panels on the roofs of lower-income residents. The California Solar Initiative set aside a minimum of 10% of its funding for these two programs: one geared toward single-family homes, the other toward multifamily low-income housing.

Closing the Solar Income Gap
Common Ground is a sustainable, net zero energy project completed in 2009. Photo courtesy of Juan Hernandez

The Single-Family Affordable Solar Housing (SASH) Program includes customers within the service areas of three investor-owned utilities. Those whose income is 50% or less of the area median income (AMI) may qualify for a fully subsidized 1-kilowatt system, whereas those with incomes of up to 80% AMI may qualify for up-front partial subsidies.

“The California Public Utilities Commission [CPUC]’s California Solar Initiative has a goal to install 1,940 megawatts of solar capacity by the end of 2016 to help transition the solar industry to a point where it can be self-sustaining without subsidies,” said Edward Randolph, the CPUC energy division director. “Since the program was launched in December 2008, SASH has received [more than] 3,400 applications that have resulted in more than 8.5 megawatts of installed capacity on eligible homes.”

There’s a lot of political will to ensure that as clean energy continues to expand . . . that we’re not leaving any community out,” said Stan Greschner of GRID Alternatives, a nonprofit solar installer based in Oakland, California, that manages SASH on behalf of the CPUC. For these projects, GRID Alternatives acts as an installer and also subcontracts other installers because of the high demand. The installations must meet aggressive price targets and must also include job training or workforce development.

Private contractors who install solar panels as part of one of these programs must hire a job trainee from a local program to do the project. “Those that do—they love it,” said Greschner, who is the nonprofit’s vice president for government relations and director of the SASH program. “Some have hired two trainees per installation,” he said, and many have gone on to hire trainees as full-time employees.

The second program California offers is a solar program for qualifying low-income multifamily buildings called the Multifamily Affordable Solar Housing (MASH) Program. In the past, providing solar to tenants of multifamily buildings was complicated, as buildings often have individually metered units so that residents pay for their own electricity use, which required a separate installation and inverter for each tenant. But through virtual net metering, residents of multiple units can get the savings from a single solar installation, which doesn’t need to be directly connected to their meters. California and nine other states currently allow virtual net metering.

The MASH Program offers fixed rebates to affordable multifamily housing developments for solar, based on system capacity; rebates are higher for projects that share solar savings with tenants. According to a July 2013 report, 278 projects across the state have added nearly 18 megawatts of capacity to the grid through MASH, and there are waiting lists for the program in all three participating utility service areas.

One of the most recent PV installations funded through the MASH Program is a 34-unit complex in the San Diego neighborhood of Normal Heights. Townspeople, a community-based housing development organization, bought the property in 2010 and did an extensive renovation, adding energy-saving appliances, HVAC, and windows, among other new features.

Though the organization had budgeted for solar installation as part of the renovation, they came up a little short, said Jon Derryberry, Townspeople’s executive director. So Townspeople applied for the MASH program and for a Community Development Block Grant from the city of San Diego. The result is a 58-kilowatt installation that will decrease residents’ utility bills through virtual net metering. Although they’ll have to wait to see how the project, scheduled for completion in October 2013, affects building energy use and residents’ lives, Derryberry said, “We might even look at one of our other properties to see if we can do more like this.”

Initially, the MASH and SASH programs were set to sunset in 2015, but their popularity led to a California Assembly bill to extend the program. On October 7, Governor Jerry Brown signed AB 217, which keeps these programs in place until 2021.

Nonprofits Take Solar Nationwide

Both as part of the SASH program and through its own pioneering efforts to bring solar to neighborhoods and residents that might not otherwise have access to it, GRID Alternatives has installed more than 11 megawatts of power, with savings estimated to reach $100 million. The nonprofit is now aiming to widen its reach to other states, particularly ones with solar-friendly policies and communities in need. “We want to be in states that have strong and growing solar industries, because a big part of our mission is job training, and we want to train people to get actual jobs,” said Julian Foley, a GRID Alternatives spokesperson.

A $2 million, five-year investment from Wells Fargo is fueling a nationwide expansion, starting in Colorado. Last fall, GRID Alternatives ran a pilot program in Lakewood, Colorado, to install panels on 12 Habitat for Humanity homes. In 2013, they opened a Colorado office, and a $200,000 grant from the Colorado Energy Office funded their first projects in the state. GRID Alternatives also ran several pilot programs in New York and New Jersey this fall—several for families affected by Hurricane Sandy—and plans to open an area office there in 2014.

Nonprofit Habitat for Humanity has also been working with low-income residents in many states—as well as globally—to install alternative energy systems, including PV panels and solar hot water heaters. Florida Power & Light has partnered with several Habitat for Humanity chapters and local community development organizations to install free solar water heater systems on more than 400 homes in 14 counties by the end of 2014. In Wisconsin, the 18-home Eco Village will have both PV panels and solar water heating systems as part of a planned net-zero affordable housing community.

Solar Hot Water

Organizations are also looking to solar thermal systems to provide whole-building savings for low-income housing developments. The systems collect heat from the sun with rooftop collectors to heat a building’s water, offsetting the natural gas or fuel oil often needed by a boiler.

Although solar hot water heaters have been around for decades, advances in technology—along with incentives—have helped them gain some traction. In New York, the Community Environmental Center spearheaded several solar hot water retrofits around New York City between 2009 and 2011 using American Recovery and Rein-vestment Act funding, with tax credits and incentives from the New York State Energy Research and Development Authority going to building owners.

These projects can be logistically challenging—buildings over 10 or 12 stories aren’t good candidates, and installation of solar collectors can be tricky, though possible, on steep rooftops. The 42-panel system on New York City’s Wadsworth Terrace affordable-housing complex required an extensive support system to raise the system off the flat roof before each panel could be put in place.

But solar thermal can also create big savings. “You can get three times as much energy” from a solar water heating system compared with similarly sized PVs, said Ron Kamen, CEO of EarthKind Solar Energy, who worked with the Community Environmental Center on the Wadsworth Terrace project. The installation offsets 3,150 gallons of heating oil each year and generates savings of up to $30,000 annually for the building’s owner.

In Wisconsin, the Housing Authority of the City of Milwaukee pulled together state and local incentives to include solar thermal in the design and construction of a new senior development. The system puts money back in the pocket of the housing authority, said Glen Radford, a project manager for that agency. Though projects and incentives to fund them have lost ground in his state, he said, “as incentives are more available and gas prices increase, interest will definitely increase.”

Other states have offered incentives for these projects as well. Maryland recently expanded its solar incentive to include solar thermal, and California’s 2010 CSI Solar Thermal Initiative provides an up-front rebate based on a system’s size and anticipated performance.

Harbor House in Annapolis, Maryland. Photo courtesy of Tony Powell
Harbor House in Annapolis, Maryland. Photo courtesy of Tony Powell

Incentives like these have been a boon for Washington DC–based Skyline Innovations, which finances and develops solar thermal systems for midsize customers—including multifamily low-income housing. The company installs, owns, and operates the systems and charges the customer a fixed rate that is roughly 20% to 40% lower than the monthly price of natural gas, said spokesperson Sandra Lee.

Working with the Housing Authority of the City of Annapolis in Maryland, the company installed 10 systems for the Harbor House development last year, offsetting an equivalent of 486 megawatt-hours annually. This work is part of a larger project across 11 multifamily public housing buildings, which is anticipated to save the housing authority 30% on its utility costs—savings that will be passed on to both taxpayers and residents.

Partnerships that Make Solar Work

One challenge in developing solar projects is that housing authorities and other entities that don’t pay federal taxes miss out on the 30% federal tax credit and other credits. But by putting together a range of partners and financing mechanisms, residents and building owners can get the benefit of lower utility rates while investors can receive the full complement of incentives.

In Denver’s Whittier neighborhood, the Northeast Denver Housing Center worked with several organizations—including nonprofit Groundwork Denver and the National Renewable Energy Laboratory (NREL)—to finance a project that installed PV systems to power 30 units of low-income housing and provided job training to community members. Using a power purchase agreement (PPA), an equity investor took advantage of the federal tax credit, along with rebates and production incentives through the local utility. “We bundled every possible revenue source together,” said NREL senior engineer Jesse Dean.

One of the challenges in funding solar projects for housing developments with a PPA is that developers are often looking for larger projects, said Dean—and bundling together enough homes to make a project attractive to developers can be tricky.
The Denver Housing Authority is doing just that. Last summer, it announced a series of extensive solar installations—a 2.5-megawatt project that will feed renewable energy to 387 of the city’s affordable housing buildings through a PPA. “To bring solar energy to over 650 affordable homes adds a very exciting project to our traditionally more commercially focused portfolio,” said Rafael Dobrzynski, CEO of project financier Enfinity America Corporation, in a 2012 statement. Potential projects should develop partnerships early in the planning stages, said Sandy Bishop, executive director of the Lopez Community Land Trust (LCLT) on Washington’s Lopez Island. By finding support from people invested in the concept of affordable housing and sustainability, LCLT has constructed two affordable, net-zero energy projects that include PV panels and solar hot water for homeowners who average 50% of the AMI and contribute sweat equity to the project.

Chris Greacen and his family live in Common Ground, a 2009 LCLT development that includes 11 homes and two rental units. Along with strengthening the community by building homes and installing panels together, they’ve also greatly reduced their energy costs.

In a county where residents can get $200 utility bills during the winter months, the most Greacen has paid is $25.50, and his family also gets a yearly check from the Washington State Department of Revenue for generating electricity. “It can make a big difference in a household budget,” he said. A second net-zero neighborhood, Tierra Verde, was completed last year, and another may be in the works for 2014.

Both Greacen and Bishop urge other would-be project planners to aim high when it comes to affordable housing. “As affordable housing providers, we have to reach out beyond typical funders and partner with those who are committed to help both with affordable housing and energy efficiency measures as well as solar energy production,” Bishop said.

“It is up to us to usher in the changes we would like to see in the world, and that means we cannot just do business as usual. Finding and building new relationships with funders is as important as designing and building more efficient, comfortable, affordable housing.”