How Local Governments Can Advance Community Solar for Low- and Moderate-Income Households
Community solar projects, which allow participating subscribers to receive credits on their utility bills, can be powerful forces for fighting both climate change and inequity. While helping local governments achieve their climate goals, they can provide significant benefits for low- and moderate-income (LMI) communities, including lower bills and energy burdens for subscribers, tax benefits, jobs and access to solar for those who can’t install rooftop solar panels. But local governments in the U.S. often face challenges that limit their ability to pursue community solar projects. Limited staff capacity and resources can restrict their ability to develop and support relevant projects, programs and policies. High subscriber turnover, limited sitting opportunities and significant upfront costs can make it difficult for local governments to entice developers to build. And in some states, the lack of enabling legislation presents a significant obstacle for local governments to even get started.
Despite these challenges, the participation of LMI customers in community solar has grown steadily, and recently announced federal programs will provide further momentum (Definitions for what constitutes LMI communities and households vary widely across programs). In July 2022, the Department of Energy (DOE) announced a six-state pilot of the Community Solar Subscription Platform, which will connect community solar projects to households participating in the Low-Income Home Energy Assistance Program (LIHEAP) and other government assistance programs. The DOE also announced the Sunny Awards for Equitable Community Solar, which will recognize and financially reward programs and projects that provide meaningful benefits to LMI participants and communities.
Perhaps most significantly, the Inflation Reduction Act includes significant tax incentives for a variety of solar projects, including projects connected to low-income communities and community solar projects that provide economic benefits to low-income residents. Solar projects less than five megawatts located in a low-income community or on Indian land are eligible for a 10% investment tax credit (ITC) bonus in addition to the base-rate ITC. And solar projects that are located on public or affordable housing and benefit residents, or projects where at least half of the financial benefits go to low- or moderate-income households, will receive a 20% ITC bonus.
With support from existing and new federal programs and policies, cities now have greater opportunities to help their low-income residents benefit from community solar. There are several steps that local governments can take to build support, enable greater access and expand the range of benefits associated with community solar.
Proactively engage with LMI community stakeholders
Collaboration and open dialogue with community members and organizations are critical to developing successful community solar programs, policies and projects. But LMI residents don’t always have the time or resources to play an active role in these processes on their own. As a result, communities are best served when local officials devote the time and resources necessary to include relevant stakeholders, pay for the time and effort of those involved and account for feedback in project decisions.
There are many best practices for proactively engaging with communities around community solar. The Energy Trust of Oregon implemented an engagement strategy focused on community capacity-building and partnership development to expand opportunities for LMI households to access solar energy. The strategy included providing stipends to support community and nonprofit participation in listening and engagement sessions about LMI solar. The Energy Trust of Oregon also awarded grants directly to local community groups to help them develop their own LMI solar projects, including community solar projects benefiting local LMI households.
Advocate for LMI community solar policies and programs
As states and utilities develop community solar policies and programs, local governments can play a vital advocacy role to ensure that community solar is offered and that LMI participation is prioritized.
Support community solar enabling policies
Enabling legislation at the state level often paves the way for community solar markets. But fewer than half of U.S. states have enacted such legislation. In the states without such provisions, encouragement from local governments can spur policy development. Other forms of engagement, such as partnering with municipal organizations or coalitions, may be feasible and impactful too. The Connecticut Council of Municipalities and the Connecticut Council of Small Towns have advocated for community solar enabling policies such as virtual net metering in the Connecticut state legislature. And in Maine, community-owned energy cooperatives (co-ops) have pushed for revised community solar policies alongside co-op advocates.
Promote policies and programs that enable LMI residents to benefit from community solar
In states with legislatively enabled community solar markets, public comment periods offer an avenue for local officials to bring their unique perspective and heightened influence to bear on state regulations to advance LMI access to community solar. For example, the City of Hoboken, New Jersey submitted comments on the permanent version of the Community Solar Energy Pilot Program design docket in 2022, arguing that consolidated billing for community solar projects would simplify energy bills and make it easier for LMI residents to participate.
Local governments can also advocate for policies that mandate or incentivize LMI resident participation. Twenty-three states and Washington D.C. already have LMI provisions included in enabling legislation or utility-led programs. In some states, these provisions mandate a minimum amount of LMI subscribers, or a minimum percentage of capacity serving LMI residents, such as 10-30%. Other states subsidize subscriptions for LMI participants or provide financial benefits to community solar marketers that fill a minimum percentage of their projects with LMI subscribers. Both policy targets and financial incentives for LMI customer participation can be effective ways to ensure the benefits of community solar projects are equitably distributed.
In places where state-level enabling polices have not been established, utilities can often move forward with community solar programs on their own. Local governments can encourage utilities that serve them to develop LMI community solar programs through direct negotiations, public comments during utility proceedings and municipal franchise agreement negotiations. For example, the City of Sarasota and other municipalities submitted comments to the Florida Public Service Commission supporting the low-income provisions in Florida Power and Light’s utility-initiated SolarTogether community solar program.
Strengthen benefits of community solar for LMI residents
Once community solar programs are available, LMI residents often face difficulty participating in them if there are high initial subscription fees, costly penalties or fees if they terminate or withdraw their subscription, or a lack of a tangible economic benefit. There are several ways that local governments can help LMI residents overcome these barriers.
Provide direct financial support for LMI subscribers
Local governments can provide direct subsidies to LMI community solar customers. The City of Anaheim provides a billing discount of $10 per month to eligible program participants. Eligibility is based on income and the program is focused on helping those who otherwise would not have access to the benefits of solar energy. The discounts are funded by savings from solar energy produced on Anaheim public school buildings.
The Snohomish County Public Utility District in Washington is considering using the savings from a new solar array to support and expand the Project Pride program, which provides one-time grants to those who need help paying their energy bills and has historically only been funded through customer donations.
Expand benefits beyond subscriber bill savings
Local governments can develop other economic and quality-of-life benefits that come from community solar projects. The City of Pueblo, Colorado, along with Johnson Controls and GRID Alternatives, developed a two-megawatt community solar project that will provide energy to low-income households and allocate savings to a “community solar benefit plan, which will support job training, educational opportunities in addition to other program and financial assistance that will improve quality of life for our residents.” In this case, the subscriptions are primarily given to Housing Authority of the City of Pueblo’s (HACP) affordable housing properties, ensuring that its residents receive the benefits of the project; the broader savings from the solar energy produced will go to the community solar benefit plan.
The Housing Authority of the City and County of Denver (DHA), by managing and acting as the financial guarantor to a two-megawatt community solar project, minimizes developer risks while reducing energy bills for around 500 LMI households. The electricity consumed by DHA’s housing units are aggregated and paid by DHA, so the savings from the community solar project is reinvested in the facilities. Like the City of Pueblo, DHA also partnered with GRID Alternatives to provide solar job training to about 50 LMI individuals.
Identifying community needs can help local governments take advantage of community solar in a more holistic manner by identifying a variety of economic and quality-of-life benefits to fold into the program’s rollout and implementation. In this case, DHA supported residents by providing job training and improving the quality of public housing as an integral part of the way the program is run.
Minimize risks and reduce LMI community solar development costs
Beyond acting as a financial guarantor for a project, there are other was local governments can help reduce the risk associated with developing and operating community solar projects.
Mitigate the impact of subscription turnover
Community solar marketers often see LMI households as riskier customers due to higher customer subscription termination and turnover rates. Local governments can help address this issue by serving as an “anchor subscriber.” Anchor subscribers purchase a significant share of the community solar subscriptions and, if they are able to be flexible in their subscription size, can act as a backstop to customers who might unsubscribe from the project. The City of Mankato, Minnesota purchased a 15% share in a community solar project to ensure that subscriptions were flexible enough for LMI customers to be eligible. Mankato’s subscriptions will help power a local event center and the community solar project is now open to a larger customer base.
Lease or donate public property
Local governments can donate underutilized publicly-owned land or roof space or lease it at a discount to community solar developers. Local governments could condition the lease or donation of such real estate to ensure that LMI households in the surrounding areas can benefit from the project. In Washington, D.C., the new community solar project at Oxon Run is located on a publicly-owned brownfield site and provides free electricity to around 750 nearby households each year. The city maintains the community solar project, and in conjunction with the nonprofit Groundswell, manages the subscription to the array.
Establish a loan fund to support access for LMI residents
Some local governments might be able to administer a publicly supported solar loan program that would help lower the initial cost barriers and bridge any financial gaps when grants or other funding sources do not cover the entire cost. The municipal utility for the City of River Falls, Wisconsin hosts a community solar loan program that reduces the initial cost of participation and spreads the remainder of the cost over one to three years. Other local governments could tailor similar loan programs to LMI customers by reducing the initial cost, including an interest rate buy-down.
Local governments should also think creatively about other financing support options and consider adapting larger programs to their unique needs. Some states offer loan loss reserve programs that help mitigate some of the risk to lenders of providing loans to riskier customers by covering some portion of losses that the lender might sustain. For local governments that have established a community solar loan program, loan loss reserves could help cover losses associated with payment default or subscription turnover. Loan loss reserves – and other financial support programs – could be at least partially funded by the Department of Energy’s upcoming Energy Efficiency and Conservation Block Grant or possibly through the new $27B federal green bank in the Inflation Reduction Act, which is formally known as the Greenhouse Gas Reduction Fund.
Provide educational and technical support for marketing campaigns
Many community solar programs can be paired with other local government efforts to maximize the opportunities provided to LMI residents. Solarize campaigns are a concerted effort to gather as many customers as possible in one region to create economies of scale and reduce the overall cost of purchasing solar panels for each customer. While Solarize campaigns are often focused on rooftop solar for individuals, they can also be used for community solar. For example, the City of Denver has promoted its community solar program, the Renewable Denver Initiative, alongside its Solarize campaigns to reduce the educational and technical barriers associated with advanced energy technologies. Local government-led outreach campaigns can provide legitimacy to a program like Denver’s and ensure that potential customers have access to a trusted organization they can contact with technical questions.
These examples are not an exhaustive list; local governments across the country are testing out new programs and projects that could help LMI communities access the benefits of community solar. As community solar continues to grow and evolve, local governments can act as clean energy and environmental justice leaders by expanding access to community solar. By learning from peers, partnering with community-based organizations and taking any of the actions mentioned in this article, local governments can bring clean energy to LMI communities who otherwise would not be able to afford it.
This is the third installment in a three-part series on low- and moderate-income community solar. The first article in the series explores how community solar works and how it can deliver benefits for low- and moderate-income customers. The second piece focuses on how partnerships with utilities, non-profits, financial institutions, developers and other parties can catalyze low- and moderate-income participation in community solar.