Resources to Support Local Solar & Energy Efficiency Initiatives in Low-to-Moderate-Income Households
As of September 2018, 43 percent of U.S. households were low to moderate income (LMI) – income levels lower than 80 percent of the median level income – according a recent report by the National Renewable Energy Laboratory (NREL). LMI households also usually have the highest energy burden – the ratio of energy expenditures to overall household income. Solar energy and energy efficiency can play a large role in combatting this issue.
Last month, SolSmart hosted a webinar titled Solar and Energy Efficiency: Resources to Support Local Initiatives for Low-to-Moderate Income Communities, where several of our experts discussed tools and resources that can help local governments plan for solar and energy efficiency in these communities. They also discussed financing challenges for LMI communities and how they can be overcome. The webinar concluded with case studies from cities that have created solar and energy efficiency programs to benefit LMI households.
The experts who participated in the webinar included:
- Meghan Mooney | National Renewable Energy Laboratory
- Alex Aznar | National Renewable Energy Laboratory
- Jeffrey Cook | National Renewable Energy Laboratory
- Stefen Samarripas | American Council for an Energy Efficient Economy
Useful resources for local governments include the following:
Solar For All Tool
Solar for All, developed by NREL, allows users to explore, analyze, and download local energy data in an interactive platform. Key layers of this platform include:
- Estimated rooftop solar technical potential for residential buildings within regions, with census tract statistics by income, building type, and tenure
- Average cost of electricity
- Offsettable electric consumption
- Energy expenditures
- Energy efficiency potential
- Energy burden
- Location of LMI communities
Low Income Energy Affordability Data (LEAD) Tool
The Department of Energy created the Low-Income Energy Affordability Data Tool in 2016 to assist partners with understanding their LMI community characteristics. The LEAD tool provides worksheets with graphs and data on key energy affordability metrics. Datasets are available for all 50 states, census divisions, and census tract levels. It’s a spreadsheet-based tool accessible through open EI.
There are many types of data sets available on the LEAD tool based on different geographic areas. Combined, these data sets can help answer a variety of important questions about energy use, energy burden, and LMI populations. Data primarily comes from the Energy Information Administration (EIA) and the Department of Housing and Urban Development.
Using the LEAD tool data, NREL worked with several communities to analyze and explore their energy data. In Rochester, New York, NREL found that the city has one of the highest rates of extreme poverty in the country. It also has cold climate and older residential building stock, which both affect energy bills, especially in the winter. NREL worked with the Rochester Mayors’ Office of Innovation and Strategies Initiative to explore the nexus of poverty alleviation and greenhouse gas emission reduction using this LEAD data. Rochester wanted to demonstrate that energy burden is a key part of poverty in their city. When focusing on energy burden, it takes into account the inefficiency of buildings and more expensive heating fuels, in addition to household income. From their analysis, NREL found that:
- Many extremely low-income households live in rental units in this community, way above ratios in New York State and the U.S. averages.
- 41 percent of rentals in Rochester were occupied by extremely low-income households.
- 31 percent of households have an energy burden greater than 10 percent, and 7.5 percent have an energy burden of over 25 percent.
- Three-fourths of low-income households in Rochester live in buildings with four or fewer units making multi-family efficiency intervention less effective than other communities where there are much larger portions of multi-family housing.
Overall, this tool can be helpful for:
- Goal Setting
- Policy and program design
- Information to support grants and other proposals
Unlocking Solar for LMI Households: A Matrix of Financing Options by Resident and Housing Type
Financing plays an important role in unlocking solar for the LMI market. For LMI households to benefit from solar energy, it’s important to understand the challenges they face.
- Key barriers to LMI household adoption of solar include:
- Upfront costs or high cost of participation
- Home ownership
- Unsuitable home conditions
- Key factors that influence the effectiveness of financing options for LMI customers:
- Housing type
- Renter vs homeowner
- Federal housing subsidies (e.g., HUD)
A key pathway to solve the issue of upfront costs is to develop innovate financing mechanisms that can help offset those costs and allow LMI households to adopt these systems and enjoy the benefits of them long-term. However, the effectiveness of these mechanisms can vary depending on the housing type and whether the individual is a renter or homeowner. The following chart outlines the top financing options based on building type.
These financing options can have tradeoffs that may be important to policymakers. The following chart outlines key state administration and LMI market considerations such as ease of implementation, up-front cost, and market potential.
Solar and Energy Efficiency: Opportunities for Low & Moderate-Income Households
Communities across the country have implemented strategies to help LMI households benefit from solar and energy efficiency. Today, there are three main approaches to city-administered LMI energy efficiency policies:
- Building-focused approaches
- Typically focuses on a specific building type (single-family or multifamily) to reflect construction and financing market segments
- Can involve partnerships with utilities and other government agencies
- Place-based approaches
- Involves cities conducting research to determine the potential effects of a policy or program on a community
- Community residents can guide program development and implementation
- Comprehensive housing policy
- Addresses every city action that can influence housing quality and affordability
- Can include both building-focused and place-based approaches
- Policy development involves all city agencies
Throughout the country, there are many examples of cities that have integrated energy efficiency and solar to benefit LMI households. The cities of Austin, Texas, and Minneapolis, Minnesota, are case studies of cities that have implemented programs that incentivized both building owners and LMI households to procure energy efficiency upgrades and solar energy.
Case Study: Multifamily Affordable Housing Shared Solar – Austin, TX
The city of Austin, Texas, under the direction of the city council, launched the Multifamily Shared Solar Pilot Program in 2018, that installed shared solar on several multifamily affordable housing buildings. To pair together solar and energy efficiency, incentives were offered.
- Owners received incentives of:
- $1.80/Watt-DC (for net-zero energy project solar)
- Residents received virtual Value of Solar credits from system generation
To evaluate project applicants, buildings that were more energy efficient were more competitive. Competitive scoring for applicants was based on:
- Total project cost (20 points)
- Number of residential units served (20 points)
- Affordability level and period (20 points)
- Energy efficiency of units (20 points)
- Austin Energy Green Building rating (10 points)
- Construction cost data sharing (10 points)
Case Study: Green Cost Share & 4d – Minneapolis, MN
Minneapolis’ Green Cost Share program aims to create a cleaner, healthier, and more sustainable city. The Green Cost Share program offers matching funds for commercial, industrial, and multi-family properties undertaking an energy efficiency, solar, or innovative pollution reduction project. These properties are eligible for:
- Property tax abatements available to preserve 20% of units as affordable to households at or below 60% of AMI for 10 years
- Energy efficiency gap financing (up to $50,000)
- Solar production incentive (up to $75,000)
Participants in the city’s 4d Affordable Housing Incentive Program, which offers apartment building owners property tax reductions if they agree to keep 20% or more of their rental units affordable, get priority consideration for Green Cost Share program funding.
- Energy efficiency funding complements utility incentives and a 10% owner match
- Solar commercial incentive available based on the 1st year’s estimated annual kWh production
- $50,000 of the city’s franchise fee funds allocated exclusively for 4d participants in 2019
- Staff anticipate serving 10-30 properties in 2019
To learn more about expanding solar and energy efficiency in LMI communities, check out our Resources page which includes the full-length webinar. If you’re interested in learning more about SolSmart technical assistance or the designation process, request a consultation here.