Residential rooftop solar projects in the U.S. have historically been installed on wealthier, single-family households, meaning companies typically target higher-income households with their marketing efforts. Residential solar installations continue to grow across the country, but this focus is overlooking a massive growth opportunity: Low-to-moderate income (LMI) households.
A new first-of-its-kind report from the National Renewable Energy Laboratory (NREL) finds nearly half of all U.S. residential rooftop solar technical potential is on LMI households, and LMI solar capacity could total 320 gigawatts (GW) of potential solar installations across America.
For context, the U.S. installed 10.6 GW new solar in 2017 to reach 53.3 GW total installed capacity – meaning LMI solar represents up to a six-fold untapped market expansion for the U.S. solar industry.
LMI solar’s growth potential extends to nearly every corner of the U.S., and in addition to generating new projects for solar companies, tapping into this market as solar could connect LMI households to increasingly cheap clean energy.
But there’s a catch: Tapping the LMI solar opportunity will require innovative approaches to solar projects and market policies.
Connecting Solar Developers With Low-Income Communities
While residential solar has boomed across the U.S., installations have primarily occurred on higher-income households. Lawrence Berkeley National Laboratory recently estimated the median income of all households with solar installations across 13 states was roughly $32,000 higher than the median household income in those states.
However, as renewable energy prices fall below fossil fuel prices, residential solar is increasingly within the price range of many new potential households. LMI households, or those earning 80% or less of the area median income, represent 43% of the U.S. population. By focusing on LMI households, solar developers can profit from this underserved market segment while expanding solar access.
NREL’s research into LMI residential rooftop solar technical potential is part of a three-year research project conducted with non-profit solar installer GRID Alternatives, the University of Chicago, the University of Michigan, LBNL, and others; the project was funded by the U.S. Department of Energy.
Researchers incorporated large data sets and sophisticated mapping and modeling tools to establish how much solar could be located on LMI rooftops, and analyze the electricity generation potential for different income groups, building types (single- or multi-family), and tenure types (owner- or renter-occupied).
Low-Income Solar Opportunities Abound In Every Corner Of America
Along with the technical report, NREL released the Solar for All map displaying LMI solar rooftop technical potential, the amount of electric consumption and energy expenditures that can be offset by rooftop solar, average cost of electricity, and LMI demographics, among others.
NREL’s research shows that most rooftop solar technical potential is highly concentrated in the states and urban areas with significant building stock and high levels of existing residential solar deployment: California, Maryland, Massachusetts, and New Jersey.
California pioneered LMI solar development through its California Solar Initiative, which allocated 10% of the initiative’s overall budget to the LMI-focused Single-family Affordable Solar Homes (SASH) and Multi-family Affordable Solar Homes (MASH) programs. SASH and MASH were the first dedicated LMI programs in America, responsible for more than 80 megawatts of capacity as of June 2017.
“California recognized the importance of including all consumers in the clean energy transition when we first launched the California Solar Initiative in 2007,” said Edward Randolph, energy division director with the California Public Utilities Commission. “This new study shows us with data for the first time what a critical role our investments in low-income solar are playing in making that transition successful.”
However, NREL reports several high-population states such as Illinois, Ohio, Florida, Pennsylvania, and Texas have high technical potential but low levels of solar deployment. Illinois’ recently enacted Future Energy Jobs Act has dedicated provisions to include solar to serve LMI households as part of its 3GW solar energy by 2030 target, but the majority of these underserved states have not enacted policies to open up their states to residential solar, let alone LMI projects.
NREL also mentions LMI solar’s potential in more rural states with poorer populations. “In many counties, particularly those in the Southeast (e.g. Alabama, Mississippi, Arkansas, and Louisiana) the majority of rooftop solar potential lies within LMI communities,” the authors found.
States with high LMI solar potential may be demographically different, but they have one thing in common – the broader policy effort required to realize LMI solar’s potential.
“State governments in places like California, Illinois and Massachusetts have already recognized, and are working to open up this important market segment, but this report makes it clear that the potential is bigger than just individual states,” said Stan Greschner, VP of government relations and market development at GRID Alternatives. “ The federal government needs to be a more proactive partner in making clean energy accessible to all Americans and in strengthening the resiliency of our local communities.”
Tapping This Massive Market Will Require New Approaches From Policymakers And Solar Developers
To tap LMI’s full solar potential, policymakers and solar developers will both have to go beyond the traditional single-family rooftop model. Beyond federal action, policymakers in states without large existing residential rooftop solar installations could help open up the market through policies that consider the potential for solar to reduce costs and improve energy access for LMI households.
The Low-Income Solar Policy Guide highlights policy tools that can open up LMI solar, like direct incentives through tax credits or technical assistance, financing mechanisms like Property-Assessed Clean Energy or community purchase programs, or energy assistance programs and best-practices sharing between different levels of government.
Solar developers can play a role tapping this market. NREL reports 60% of LMI residential potential exists on renter-occupied and multi-family buildings where long-term contracts may not work for residents – in other words, not single-family homes in affluent neighborhoods.
This means community solar or shared solar projects could be installed on large buildings like government facilities, community centers, or churches and then opened up to LMI households through community solar, virtual net metering, or other shared subscription programs. NREL says community and public buildings can tap LMI solar potential by installing oversized rooftop arrays to serve nearby LMI homes, and specifically touted schools in LMI communities as “unequivocally” having the most rooftop solar potential.
While there’s no one answer for how to unlock LMI solar’s potential in the U.S., the imperative to open up this market is crystal-clear: Solar developers can reach an entirely new class of customers, and policymakers can help their constituents lower electricity their electricity bills.
By Silvio Marcacci, Communications Director at Energy Innovation, where he leads all public relations and communications efforts.