Unlocking Solar for Low- and Moderate-Income Residents: A Matrix of Promising Financing Options

March 26, 2018 by Jeffrey J. Cook

The residential solar market has seen robust growth through the expansion of rooftop photovoltaic (PV) and community solar projects. However, low- and moderate-income (LMI) customers have been under-represented among PV adopters, in large part because they face unique barriers including lower credit scores, limited savings to support upfront PV investments, and being more likely to rent than own their homes. Eliminating the impact of barriers could result in more equitable access to PV, while expanding the overall PV market.

Some states have adopted innovative financing programs to encourage LMI PV adoption and a new National Renewable Energy Laboratory (NREL) report helps state policymakers understand which financing options may be most promising for different LMI customers. The report examines 13 financing options—such as direct cash incentives, on-bill financing, and third-party leasing—and clarifies when these options may be most appropriate depending upon a customer’s homeownership status, housing type, and federal assistance. These three factors are important because they can shape not only which financing options are appropriate but what type of PV project a LMI resident might be able to pursue.

LMI homeowners are generally able to adopt either rooftop PV or community solar, while tenants may only be able to pursue community solar. However, a homeowner’s housing type can also play a role in whether the resident has the authority to adopt rooftop PV. In many cases, homeowners in multi-family housing do not have the authority to make decisions about the roof or related property. Like tenants, they may have to pursue community solar, unless their housing provider is willing to support a rooftop project. Finally, LMI residents can receive federal assistance for housing that spans housing types, which offers unique challenges. In many cases, federally-assisted LMI residents may be best served by community solar, but in certain situations these residents may not directly benefit from any PV deployment. 

As a result, some financing options designed to support rooftop PV deployment may be helpful for single-family homeowners, or other housing providers interested in supporting LMI PV objectives. In other cases, financing associated with community solar, either for customers or targeted at project developers can incentivize more LMI participation in these projects. Table 1 summarizes the first- and second-tier financing options states could use to support PV deployment among certain LMI customers or housing types.

For example, state policymakers interested in designing a rooftop PV financing program might attract the most LMI customers if they pursue third-party leasing programs or incorporate PV into a state’s existing weatherization assistance program. To reach additional LMI customers, especially renters, policymakers could consider financing LMI community solar. For these projects, policymakers might consider direct cash incentives to LMI end-users or provide LMI-related production incentives to community solar developers.

Matrix of Financing Options by Resident, Housing Provider, or Developer

Table 1. Comparison of Financing Options by Resident, Housing Provider, or Developer

(PACE refers to Property Assessed Clean Energy financing and Third-party leasing/ESA refers to Third-party leasing and energy savings agreements.)

Ultimately, the focus of the report is the first-tier financing options that could be used to target different segments of the LMI market. This is not to suggest that each of these options will always be the best approach as most projects may rely on a financing package that includes both first- and second-tier options. Therefore, this table is designed to serve as a screening tool to help guide policymakers as they make decisions about how best to achieve their LMI objectives.

The full report can be accessed at https://www.nrel.gov/docs/fy18osti/70477.pdf.