Cheaper solar power means low-income families can benefit too – with the right kind of help

Until recently, rooftop solar panels were a clean energy technology only wealthy Americans could afford. But prices have fallen, mainly thanks to lower hardware costs, as well as lower installation prices and other “soft” costs.

Today, hundreds of thousands of middle-class households across the United States turn to solar energy. But households with incomes below the median for their region remain less likely to opt for solar power. These low- and moderate-income households face several barriers to solar energy adoption, including cash flow constraints, low homeownership rates, and language barriers.

Our team of researchers from the Lawrence Berkeley National Laboratory in Washington examined how various policies and business models might affect the likelihood that people of all income levels will adopt solar energy. In a recently published studywe analyzed five common solar policies and business models to see if they appealed to low-income households.

We found that three scenarios did this: providing financial incentives to low- and middle-income households; rental of solar panels to owners; and lending money to buy signs, with the loan being repaid from property tax bills. All of these approaches have led people at a wider range of income levels to try solar power.

For more than a decade, our Berkeley lab team Electricity Markets and Policy Group has been keeping tabs on rooftop solar market trends through its annual report, “follow the sun.” It documents falling prices and increasing installations in US solar markets.

Over the past decade, rooftop solar has grown dramatically in the United States, expanding beyond the initial hotspots in California and Hawaii to states such as North Carolina, Florida and New Jersey. The industry expects rapid growth to continue for the foreseeable future.

More recently, our researchers combined this tracking report with data on household-level demographics and income of solar users, covering over 70% of the US residential solar market. Among the research products that we have created, there is a online interactive tool which shows the demographics of solar adoption up to county level.

With these price and growth trends, a growing number of state and local governments, utilities, and businesses want to help low-income customers switch to solar power. They believe solar power will lower energy bills, reduce money spent on bill payment programs, prevent pollution and create green jobs.

So far, 20 states are offering 38 programs to help low-income customers go solar. California, the largest, has earmarked more than $1 billion for such programs. The list includes the Solarize Philly Campaign of the Philadelphia Energy Agency and the new New Jersey Community Solar Pilot Program, where 45 community solar projects could generate enough electricity for more than 15,500 homes, at least half of them low-income.

Here are the five policies and business models we looked at to see which helped low- and middle-income households go solar:

  • Financial incentives targeted at low- or middle-income households, usually rebates or other incentives to reduce upfront costs.

  • Rent rooftop solar systems, reducing upfront costs.

  • Property Assessed Clean Energy financing, or PACE, which allows customers to finance energy improvements through the payment of their property taxes. Currently, Residential PACE is only available in California, Florida, and Missouri.

  • Financial incentives such as discounts offered to customers of any income level.

  • “Solarization” campaigns, in which customers come together in a group purchase to get a good price.

The study includes data on more than one million residential rooftop photovoltaic systems installed on single-family homes in 18 states from 2010 to 2018. We compared modeled estimates of household-level income for solar adopters with the median household incomes by area from US Census data.

We found that three of the interventions—targeted incentives, leasing, and PACE—effectively increased adoption equity. These approaches drive sales to low-income customers in existing markets and help solar companies enter new markets, such as low-income areas where solar sales have been low or absent.

Policies that do not address the needs and constraints of low-income households, such as the federal income tax credit, have had little effect on equity. And solarization campaigns are rarely presented to low-income buyers.

When solar power expands to new markets and neighborhoods, it can have a ripple effect. If a system is installed in a neighborhood that didn’t have solar power before, neighbors who see it will be more likely to adopt it themselves. Moving into new markets may have greater potential effects on adoption rates for low-income people than reaching low-income households in existing markets.

Expanding sales to low- and middle-income households can also tap into a broader base of potential customers. The US National Renewable Energy Lab (NREL) found in a study that 42% of roofs where solar power might work are on low- and middle-income housing.

As the solar market grows, decisions to install solar systems are increasingly driven by the prospect of saving money, rather than strictly green values ​​or buyer interest in new technologies. A survey by NREL found that about half of people who decided to install solar panels in California, New Jersey, New York and Arizona between 2014 and 2016 identified cost savings as a primary factor in their decision to adopt solar energy.

For low- to middle-income households, the financial benefits of solar power can make a big difference. Many low-income households are heavily energy-burdened, meaning that energy and utility costs eat up a large portion of their income. In the United States, low-income households spend around three times as much of their income on energy expenditure than other households. Solar energy can reduce these energy loads by providing on-site electricity at a lower cost than grid electricity.

Making homes more energy efficient is an established strategy for reducing energy bills, but there is growing interest in solar power playing a role. Deploying solar energy for low- and middle-income households can be a way to achieve political and social goals such as job creation and environmental improvement.

Galen Barbose, Eric O’Shaughnessy and Ryan Wiser work with the Lawrence Berkeley National Laboratory in Washington. The study described in this article was supported by the US Department of Energy’s Office of Solar Energy Technologies. O’Shaughnessy is also a renewable energy research analyst at Clean Kilowatts, LLC, and Wiser is a board member of the nonprofit Clean Energy States Alliance.

This article is republished from The conversation under Creative Commons license.

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