With states increasingly looking to provide low- and moderate-income (LMI) customers with access to community solar, the Department of Energy’s National Renewable Energy Laboratory issued a report outlining program options for utilities and policymakers.
Community solar allows multiple customers to participate in off-site solar facilities, often by making an upfront payment or monthly payments.
However, getting LMI customers to participate in community solar can be challenging, NREL said in its report, “Design and Implementation of Community Solar Programs for Low- and Moderate-Income Customers.”
“Programs may need to provide subsidies to LMI community solar subscribers to remove barriers related to up-front costs and to ensure the product provides immediate savings,” NREL said.
Also, various measures may need to be taken to sign up hard-to-reach LMI customers, according to the report.
Forty-two states had at least one operating community solar facility totaling nearly 1,300 megawatts as of the third quarter last year, according to the Solar Energy Industries Association.
Currently, Colorado, Connecticut, Hawaii, Maryland and Oregon have community solar programs with required carve-outs for LMI customers, NREL said.
Meanwhile, Colorado, Illinois, Massachusetts, Rhode Island and Washington, D.C. provide LMI incentives and Connecticut, Minnesota, New York and New Jersey are developing LMI programs, according to the report.
Generally, community solar projects with higher percentages of LMI customers are more expensive because of higher customer acquisition costs, the need for eligibility verification and increased project financing costs, NREL said.
“Developing a mix of LMI and non-LMI residential customers in the subscriber portfolio may reduce program costs; however, it may also increase complexity in terms of obtaining different types of subscribers,” the report said.
When considering overall program design, NREL said utilities and policymakers have several options for setting community solar participant mixes, including: LMI carve-outs; LMI-only projects or programs; having a non-residential anchor tenant; and offering LMI incentives.
Another key program design issue is how to bill and credit LMI customers for their subscriptions.
Options include utility billing and crediting; payment to a third party, with credits applied to the utility bill; and payment and crediting done through the building owner or solar aggregator, according to the report.
There are different ways to determine an LMI customer’s eligibility such as basing it on income or location, NREL said. Eligibility can be granted through an existing program such as state Low Income Home Energy Assistance Programs, according to the report.
Another issue utilities and policymakers need to address is how to reduce customer turnover and default risk, according to NREL.
“Solar developers typically specialize in up-front customer acquisition but are unaccustomed to ongoing subscription management,” NREL said. “For this reason, effective subscription management may require a partnership with a utility or community organization with an ongoing relationship with potential subscribers.”
Options for reducing customer turnover include using prepaid subscriptions that are funded by states, grants and other sources. “If the entire LMI subscription could not be prepaid, policies could at a minimum allow for some mix of pay-as-you-go and prepaid subscriptions to diversify the subscriber base and improve the project risk profile,” the report said.
Housing authorities, for example, could subscribe to a community solar project on behalf of their tenants, eliminating the risk of customer turnover or default, NREL said.
Incentives and financing are also key issues when designing LMI programs, according to the report, which noted that subscription models with up-front payments and multi-year payback periods may be less feasible for LMI customers.
Options for defraying up-front costs include on-bill financing and lower interest rate loans, NREL said.
Project developers can offer favorable LMI rates by using Community Reinvestment Act investments, New Markets Tax Credits and grant funding, according to the report.
Reaching potential customers is one of the biggest challenges facing LMI community solar programs.
Based on experiences with energy efficiency programs that target LMI customers, certain types of customers are especially hard to reach, including renters, foreign language-speaking households, rural households, seniors, undocumented immigrants and people with disabilities, according to NREL.
“For these reasons, piggy-backing on existing LMI programs or partnering with groups that are regularly interacting with the LMI community can be effective,” NREL said.