The DDOE can do better than their current rebate structure to efficiently implement low-income solar.

The DDOE can do better than their current rebate structure to efficiently implement low-income solar.

While the cost of solar has come down, the initial cost of installation is often too much for low-income residents. In order to ensure that low-income residents benefit from low cost energy, the District Department of Environment (DDOE) released their Solar Advantage Plus program. This program provides rebates to the cities’ low-income residents in order to allow them to install solar on single family homes.

The rebates from the Solar Advantage Plus program are $2.50/watt AC with a maximum of $10,000 per system. This dollar-per-watt rebate is similar to another successful low-income solar program, Single-Family Solar Affordable Homes (SASH) in California. SASH is facilitated by GRID Alternatives, who Sol Systems has worked with on SREC sales and other initiatives. One unique characteristic of the D.C. program is that Solar Advantage Plus applies to both low-income residents who own their homes, and those who rent. This is unique because many solar programs focus only on homeownership, which neglects a significant portion of the population, especially in a city like D.C.

Unfortunately for this program, with more money may come more problems. In the instance of a $2.50/watt rebate, installers can, and often do, install the system at no cost to the customer and then maintain control of the solar renewable energy credits (SRECs). These SRECs may have a higher value over time than what the customer would have paid upfront for the system.

Under some basic assumptions, the net present value of 10 years of SRECs is greater than the margin between the total installed cost and the $2.50/watt rebate that the customer paid up front. This raises the question, would it be better if the customer paid more upfront, but benefited long term, or is it better for the customer to get their system for free but have some longer term benefits transferred to the installer?

It may be more equitable to all involved to reduce the amount of the rebate, inviting the customer to put up a highly reduced amount, and allowing them to be active in the investment. This would keep more of the benefits on the customer side, as the intent of the low-income program is not to provide extra profits to installers. While paying some amount up front may not be feasible for each and every customer, it will make the rebate program more efficient and it will allow for much more solar to be installed within the district. The funding for the rebate program comes directly from alternative compliance payments (ACP) which are levied against energy suppliers who do not meet their renewable portfolio standard (RPS) for solar within the District of Columbia. The funds will be distributed on a first-come first-serve basis to residents who are eligible under the program guidelines.  The total amount of funds varies annually, with DC Solar United Neighborhoods (DC SUN), a local nonprofit, estimating the total for 2014 will fall between $500,000 and $12 million. DC SUN also estimates the total for 2015 will be several million dollars.

The direct dollar-per-watt model follows a recommendation from the Low-Income Solar Roundtable put on in April 2014 by the GW Solar Institute and DC SUN. Absent however from the District’s Solar Advantage Plus program was the recommendation from the roundtable for a loan guarantee program as well as a sliding scale for the rebate that may alleviate the issues noted previously. Regarding the loan guarantee program, DC SUN and the GW Solar Institute estimated that a $4 million investment from the government in this guarantee program could help to finance over $36 million in loans to low-income solar. While the Solar Advantage Plus program is surely a step in the right direction for D.C., there is still untapped potential for low-income solar implementation.

The rebate program joins options such as community solar or leasing which have brought solar to broader segments of D.C. residents. The Community Power Network notes that low-income households spend between 15-20% of their income on energy, constricting their budgets, and making them very susceptible to changes in energy costs. Low-income solar is certainly a worthy cause, and the District of Columbia has a long way to go to fully realize the potential of this market segment, allowing low-income residents to actively participate in the sustainable future of their city.

About Sol Systems

Sol Systems is a solar energy finance and investment firm. The company has facilitated financing for 180MW solar projects on behalf of Fortune 100 corporations, insurance companies, utilities, banks, family offices, and individuals. Sol Systems provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. The company’s tailored financial services range from tax structured investments and project acquisition, to debt financing and SREC portfolio management. Inc. Magazine named Sol Systems on its annual Inc. 500 list of the nation’s fastest-growing private companies for a second consecutive year, ranking it No. 6 in the nation’s top solar companies in 2014. For more information, please visit www.solsystemscompany.com.