Distributed Energy Resources

The sun shines for all: Community solar for low-income populations

In recent years, many programs and funding options have opened up to extend the benefits of solar power to low- and moderate-income consumers. One of the most popular options is community solar. Community solar — sometimes described as shared solar or locally controlled solar — includes any solar project or purchasing program in which the benefits flow to multiple community participants such as individuals, businesses, and nonprofits.

The Solar with Justice report from the Clean Energy States Alliance notes that participation in the solar economy can help ease the disproportionate social and economic burdens that low- to moderate-income households bear by helping to reduce electricity bills, provide jobs, and build sustainable communities. “Solar can also make decision-making more democratic by giving residents of under-resourced communities more control over their energy choices,” the report states.

Impetus to do good and save

Community solar programs have been established in 30 states across the country. California, Colorado, New York, and Oregon have incorporated low income carve-outs as part of their community solar policies. Colorado, New York, and Oregon mandate certain percentages of low-income subscribers, whereas California requires 100 megawatts of their 600-MW solar program to be located in “disadvantaged communities.” California, Massachusetts, and Washington, D.C. offer various financing mechanisms and pilot programs to extend the benefits of renewable power generation to low- to moderate-income communities.

Jenny Heeter, senior energy analyst at the National Renewable Energy Laboratory, said the impetus for states to pursue community solar is making sure everybody has access to solar and the associated bill savings. “It’s an equity issue. If some people who own their homes and have clear roofs on which they can put solar and save money, it’s not really fair to other people who don’t have that.”

If states are offering grants or rebates, or requiring utilities to offer them, they want to make sure people across the board — and not just those who own homes — are able to take advantage of such options, explained Heeter.

In September 2019, the U.S. Department of Energy announced the National Community Solar Partnership, a coalition of stakeholders working to expand access to affordable community solar to every American household by 2025. This partnership provides the tools and information to design and implement successful community solar models to state, local, and tribal governments; utilities; businesses; nonprofit organizations; and others.

Nonprofit organizations like GRID Alternatives, the Rural Renewable Energy Alliance, and Citizens Energy Corporation are also piloting new approaches to solar.

“Low-income households need to save money and want to be responsible environmentally. Providing them an opportunity to participate in a community solar project can provide a ‘benefits trifecta’ — it saves them money, addresses climate change, and improves their relationship with the host utility,” said Peter Smith, CEO of Citizens Energy Corporation, a nonprofit that partners with utilities to help low-income families pay their electricity bills and access renewable energy.

WPPI Energy, a public power joint action agency, conducted social engineering feasibility studies for community solar projects in two of its member communities. The feasibility studies were funded by a grant from the American Public Power Association’s Demonstration of Energy & Efficiency Developments research and development program. Brett Niemi, senior energy services representative at WPPI, said, “We found positive feelings and support towards the community solar programs. In general, people thought it was a great idea — good for community pride. If they could generate their own electricity, they thought that was a good thing.”

Niemi said the research team — which included the neighboring WPPI member communities of Baraga and L’Anse in Michigan’s Upper Peninsula, representatives from the state’s Western UP Planning & Development Region, and researchers from nearby Michigan Technological University — found that exploring public sentiment about a proposed community solar project provided a great opportunity to educate customers. As many customers did not know they owned their utility, the opportunity to engage them and brand the public power utility was a bonus.

Subscription options

Customers who might already find it difficult to pay their monthly bill are unable to pay a premium for electricity generated from renewables. So, utilities hoping to make community solar a viable option for low- to moderate-income customers must be able to show savings potential.

Based on the study’s conclusion, and with support from WPPI, the Village of L’Anse built a community solar program for the entire community, targeting all income levels. However, the public power utility focused on increasing access to the programs for low-income customers. The feasibility studies revealed that customers wanted options for how they could buy into the program and that they were worried about transferability of panels.

Therefore, WPPI helped its member utilities design three payment options. One option was full up-front payment. The second option had a lower up-front payment, along with on-bill financing. The third option — exclusive to income-qualified households — was on-bill financing with no upfront payment.

While regular customers would pay $1.75 a panel per month for 10 years (with an upfront payment of $250), qualified low-income customers would pay 90 cents a panel per month for 25 years (with no upfront payment). The subscription was limited to 10 panels per household. Robust transferability clauses were also worked into the subscriptions to address customer concerns.

“We designed it so the energy credits from the community solar program would always yield a net positive cash flow for these customers,” said Niemi. “We didn’t want to have any months where their bill would actually increase.”

WPPI’s financial analysis looked at energy production over the 25-year life of the community solar program and also on a monthly basis. The agency determined the net present value of utility as well as subscriber investments. It also factored in the costs of construction, financing, interconnection, system maintenance, insurance, marketing, and program administration. Grant money helped lower the cost, which increased access for income-qualified people without cross-subsidizations, explained Niemi.

Heeter observed that some states like Colorado are transitioning from requiring an individual project to have a certain percentage of low-income customers, to having a portfolio of projects with an overall percentage of low-income customers. In other states, like Massachusetts, said Heeter, “Everybody can save money from day one. Some of those contracts are starting to be shorter term, with easier in and out provisions. So they’re just more customer-friendly in general which makes them more likely to be adopted by low-income customers.”

Getting creative about funding

In fall 2019, Imperial Irrigation District, a public power utility in California, commissioned a 30 MW community solar project built by Citizens Energy. IID buys the majority of the project’s output at about $23 per megawatt-hour and Citizens contributes an additional 10MW through a unique agreement between the agencies.

The utility virtually applies a credit for a portion of the solar energy generation to all of its qualified low-income customers, who automatically see savings on their bill each month. Each of these 11,000 customers gets incremental savings of 2 cents per kilowatt hour and the savings are locked in for the 23-year duration of the program.

IID was able to get these prices because Citizens came up with a creative option. Citizens paid for about $100 million of an $1.8 billion transmission line that the nearby investor-owned utility, San Diego Gas and Electric, built partly in IID service territory. “Since about 2012, we’ve been earning profits from the transmission line and giving away about $1.5 million a year to low-income ratepayers in the Imperial Valley,” explained Smith.

Smith said it was easy to work with IID “because they’re a public power entity, and they can be flexible and creative.” Investor-owned utilities find it harder to offer simple programs and billing options, owing to regulatory constraints. IID leased its own land to Citizens to build the project and paid the interconnection costs.

Finding a solar developer that can complete a project as inexpensively as possible and then designating that output for low-income customers keeps costs down for the utility and makes the process easier for customers, who won’t get multiple bills and can see the savings, according to Smith.

WPPI leveraged grants and incentives to build its community solar programs at the lowest cost to customers and also obtained in-kind assistance. The Association’s DEED program, the Michigan Department of Agriculture, and the Department of Energy’s SunShot program provided grants. The Western Upper Peninsula Planning and Development Region Commission, which does economic development work in the region, helped with grant writing and project organization. Michigan Technological University’s social engineering department helped with the feasibility studies and analysis of results.

Avoiding potential roadblocks

Educating customers is critical as there is a lack of awareness about community solar and misconceptions about pricing. Niemi said that during the feasibility studies, the WPPI team encountered people who just did not think solar was going to work. They were also skeptical about who would benefit — the utility or the customers.

Heeter and her colleagues heard during stakeholder interviews that some customers were skeptical of the bill savings, especially if they’re told they can save money from day one with no upfront payment. “People think ‘it’s too good to be true,’ or that there’s something in the contract that is not being presented fairly,” she said. It’s important to communicate how the contract is structured and help customers understand that bill savings are real.

Both Heeter and Niemi emphasized the power of local relationships. The social feasibility studies that WPPI conducted were valuable in this regard, said Niemi. “We didn’t just want to build a community solar program for the community, we wanted to build it with the community. We helped the communities shape the program for us.”

Heeter said if the solar developer is the one in charge of subscribing low-income customers, the developer should be working with energy efficiency organizations or nongovernmental organizations that help low-income populations. “Organizations that already have working relationships with the locals could sign them up for the community solar program. Hearing the message from a trusted source is important for customers.”

Partnering with energy efficiency organizations also makes sense, suggested Heeter. “If you target homes that have been weatherized already as first pass for community solar subscriptions, then customers won’t need to buy as large of a subscription because their homes are already efficient.”

Another roadblock is figuring out how people qualify for low-cost solar programs, pointed out Heeter. “Can you use something other than a credit score to approve customers for solar programs? Metrics like utility bill repayment might be a better predictor of whether people will pay their community solar subscription.”

There is no cookie-cutter design for a community solar program, cautioned Heeter. There is tremendous variation in state policies, the economics of solar, the underlying electricity bill structure, incentives, and energy assistance programs. Utilities thinking about a new program can’t just say, “There was this good program in Massachusetts, so let’s do that.” Every program needs to be created with local context.

Niemi emphasized that engaging with the community is the most critical factor in the success of a community solar program. “As a utility person, I’m really good with poles and wires and electrons — the physics of a project. What really helped us was bringing in people that can figure out the feelings and emotions of the community members.”