Low- and Moderate-Income Community Solar Policies
NREL provides basic solar photovoltaic (PV) policy information and resources for low- and-moderate income (LMI) communities.
Solar Policy Background
Distributed solar PV systems have been more widely deployed in recent years. However, not all communities have benefited equally from the uptake in deployment, particularly LMI communities.
As communities aim for higher penetration of clean energy, pressures are increasing to expand into harder-to-reach markets. States, local jurisdictions, and tribes have led the charge in identifying and piloting approaches to bring the benefits of solar power to LMI consumers.
States such as California, Colorado, Massachusetts, Minnesota, New York, and Oregon have been at the forefront of developing policies and mechanisms to extend solar access to LMI populations. Numerous states have also enacted low-income provisions as part of broader community solar policies. An assortment of financing mechanisms and pilot programs designed to extend the benefits of renewable power generation to LMI communities have been developed and deployed at the state and local level, for example in California, Massachusetts, and Washington, D.C.
Nongovernment entities are prominent players in this space as well. Nonprofit organizations have developed approaches to LMI solar that include using volunteers to construct solar arrays and providing workforce development opportunities.
Community solar has broad applicability. Factors such as shading and inadequate roof conditions make residential solar systems unsuitable for nearly three-quarters of residential rooftops in the U.S., making community solar an attractive option regardless of income level. Some states that have enabled community solar have additionally created incentive programs to provide funding for projects that subscribe low-income customers. Other states have created low-income specific mandates, known as carve-outs, that require a certain percentage of a community solar project or program to be subscribed to by low-income subscribers or low-income-serving organizations. Most states that have enacted community solar legislation include low-income-specific provisions.
Challenges and Next Steps
The LMI solar policy landscape is evolving rapidly as all levels of government are experimenting with policies and financing mechanisms to expand access to solar power. Despite this increased attention, though, extending solar access to LMI communities remains challenging. Multifaceted approaches that simultaneously address the myriad challenges that LMI communities grapple with in pursuing solar power may offer a path forward.
Solar Policy Implementation Issues
Emerging policies and programs aim to address obstacles that impede LMI access to solar power.
Policy Financing and Funding Design Best Practices
To date, public sector participation and support has been critical in extending solar access to LMI populations, though the mechanisms and funding sources have varied significantly. As the LMI solar sector continues to develop, funding approaches are likely to evolve as well. Although the existing pool of research and literature on LMI solar best practices is relatively shallow, several potential financing mechanisms and funding sources are emerging.
Potential Financing and Cost-Reduction Mechanisms
The following financing and cost-reduction mechanisms have the potential to increase LMI access to solar.
A common practice in the energy efficiency sector, placing energy-related loan payments directly onto customers' electric bills, may offer advantages for both consumers and financial institutions, including fewer bills and transferability (i.e., to a new homeowner or renter). In addressing low-income solar access, on-bill financing can also be easier to understand—customers can see utility bill savings from solar offsetting loan payments—and is not as dependent on credit scores.For more information, see On-Bill Financing and Repayment Programs on the U.S. Department of Energy website.
Potential Funding Sources
The Community Development Financial Institutions Fund (CDFI Fund) and community development entities (CDEs) are prominent players in developing affordable housing and businesses in LMI communities and can serve an important role in expanding access to solar in these neighborhoods as well. CDFIs and CDEs can assist communities in accessing other financial mechanisms (such as through the Community Reinvestment Act, New Market Tax Credits, or the Community Development Block Grant program) to increase local solar deployment. In other cases, CDFIs and CDEs can directly facilitate integrating solar into their projects (e.g., affordable housing development).For more information, see Community Reinvestment Act on the Federal Financial Institutions Examination Council website and New Markets Tax Credit Program on the CDFI Fund website.
Some states and communities are forging more strategic partnerships to invest in community solar as a means for creating local job opportunities and growing community wealth. Community organizations in some states are identifying "green zones"—areas that currently shoulder high pollution burdens but could be transformed into healthier, community-driven, environmentally protected areas—and targeting them for investment. Solar could be a critical piece of these types of place-based programs in terms of promoting both environmental and economic benefits.
For more information, see the California Green Zones website.
NREL Low- and Moderate-Income Solar Flexible Financing Credit Agreement Rubric, NREL Technical Report (2022)
Affordable and Accessible Solar for All: Barriers, Solutions, and On-Site Adoption Potential, NREL Technical Report (2021)
Equitable Access to Community Solar: Program Design and Subscription Considerations, NREL Technical Report (2021)
Design and Implementation of Community Solar Programs for Low- and Moderate-Income Customers, NREL Technical Report (2018)
Modeling the Cost of LMI Community Solar Participation: Preliminary Results, NREL Presentation (2018)
Low-Income Community Solar: Utility Return Considerations for Electric Cooperatives, NREL Technical Report (2018)
Community Shared Solar: Policy and Regulatory Considerations, NREL Brochure (2014)
Directory of State Low- and Moderate-Income Clean Energy Programs, Clean Energy States Alliance
Low-Income Solar Policy Guide, Center for Social Inclusion, GRID Alternatives, and Vote Solar
National Community Solar Partnership, U.S. Department of Energy
Shared Renewable Energy for Low-to Moderate-Income Consumers: Policy Guidelines and Model Provisions, Interstate Renewable Energy Council
SLOPE: State and Local Planning for Energy, NREL Tool
Solar Demographics Trends and Analysis, Lawrence Berkeley National Lab
Solar Power in Your Community, U.S. Department of Energy
SolSmart Program, Interstate Renewable Energy Council, International City/County Management Association, and U.S. Department of Energy