While Maryland ranks 14th in the nation in solar capacity installed and the state has established solar goals in it’s Renewable Portfolio Standard, significant barriers to entry persist which marginalize low and middle income Marylanders in accessing the benefits of solar power. Inclusiveness in the state’s growing solar industry is essential as low income residents often spend 15 to 20 percent of their income on electricity bills, and the value of solar increases in conjunction with the price of electricity. MD SUN has worked to identify these barriers and propose potential solutions for expanding the benefits of solar power to all Maryland residents.
Click here to read the full report we submitted to the Maryland Energy Administration in May 2014, or use our abbreviated guide below.
Barriers to Entry
Based on MD Sun’s experience with neighborhood bulk purchases in Maryland and across the region, the average price of a 3kW residential solar system is approximately $12,000. While significant tax credits and other incentives exist to facilitate the purchase of solar panels, these do not apply to some models (such as Power Purchase Agreements) and they are also limited by a resident’s tax appetite. And beyond just the costs of installation, SRECs produced on a commercial scale are presently valued equally to SRECs produced by residential suppliers. This reduces the marginal value of the SRECs for homeowners in Maryland.
2. Credit score.
A credit score (FICO) of greater than 650 is generally required to obtain financing for either purchasing a solar system or leasing one, with requirements closer to 700 for many lenders. Many might assume that a “no money down” Power Purchase Agreement (PPA) would be ideal for low income homeowners but this choice is not available to homeowners with low credit scores. Furthermore, the somewhat predatory pricing of most commercial residential PPAs (3% annual escalator in price) makes commercial PPA’s a bad choice for low income homes that are extremely price sensitive.
3. Tax appetite.
While Maryland offers a $1000 grant for residential solar installations, the Federal tax incentive of $4500 is non-refundable. Four counties offer non-refundable tax credits but significant waiting lists may apply (for example, Prince George’s county offers a non-refundable $5000 tax credit but the incentive has a cap of $250,000 per year which necessitates a waiting list through the year 2017).
4. Prohibition on virtual net-metering/Community Net Metering
Current law in Maryland prohibits virtual net-meting “community solar,” which would allow tenants, those renting homes, people with shady roofs, and residents living in multi-family apartments to share the benefits of solar power through buying a share in a solar system located on or off site and net-metering it virtually to offset their monthly electricity bill. In California, for example, virtual net metering provisions for multi family low-income housing have been a huge success for many years.
Low-income housing finance is complicated and relies on a complex layering of state and federal tax credits, grants, and investments. Solar finance is also complex, often relying on a combination of tax equity, debt, and other financing. Combined, the two financing structures are even more complex, with potential interactions between different tax credits unique to each project. Each has unique loan horizons, credit sensitivities, and specialized investors. There are a number of ways to address these challenges, including power purchase agreements (PPAs), including solar investment in mortgages, incorporating solar projects into the Low Income Housing Tax Credit (LIHTC), and by applying money used to compensate utility payments for Section 8 Housing Voucher recipients to invest in solar which will dramatically reduce electricity costs over the long term.
2. Sliding scale incentives.
Maryland’s Residential Clean Energy Grant Program presently awards $1,000 per house to offset a portion of the cost for residential photovoltaic installations. A sliding scale accounting for both the relative impact of electricity costs and the barriers to entry noted above could help to address this. An example would be increasing the Residential Clean Energy Grant to $3,000 if for residents earning 60% area median income (AMI) or less, or include systems installed in low-income rental housing. One suggestion would be to offer a $6,000 residential grant for low income households or low income rental properties for a year to entice the solar sector and low-income housing sector to explore collaboration in this area.
3. Community Solar/Community Renewable Energy Facilities (CREFs).
Legislation on community solar (SB 786/HB1192: Community Renewable Energy Generating Systems – Pilot Program) was defeated in the MD State Senate Finance Committee this March. This bill would have created a pilot program allowing renters, apartment tenants, and people with shady roofs to purchase a share in a solar system installed elsewhere in their community. They would then get a credit on their utility bill for the electricity produced by their share in the system.
4. Dollar Per Watt Incentive
In this option MEA would provide a dollar per watt after installation rebate or sliding scale. Currently MEA does not finance PPAs. A sliding scale payment for pre-paid PPAs might help jump start this sector. Also, a direct payment possibly $3/watt, could be provided for low-income projects. This model was used in the D.C. Department of Energy’s low-income pilot program last year. A key provision, for an after construction rebate would be to make it possible for homeowners to sign over the rebate to installers. In DC installers bore considerable risk developing no money down projects in hope that the homeowner would be forthcoming in signing over the incentive payment. Creating an option to “pre-sign over” the incentive payment will significantly decrease the costs to the program and costs to homeowners.
5. Solarizing critical infrastructure to protect vulnerable LMI populations.
Heat waves in 2012 and 2013 demonstrated that vulnerable populations such as the elderly and low-income residents are disproportionately impacted by disruptions to the power supply caused by extreme weather events. A report funded by the Abell Foundation entitled “Clean Energy for Resilient Communities” recently recommended investing in equipping critical infrastructure with PV off-grid, on-site power generation capability through models such as solar with on-site battery storage to ensure that vulnerable populations will be better protected from such events in the future.
6. Incorporating Solar into Existing Low Income Housing Assistance Programs
Incorporate solar into existing programs benefitting LMI Marylanders such as MEAP or the Baltimore Housing Authority’s Senior Roof Repair Program. For example, MEAP provided electricity bill assistance to more than 270,000 Marylanders in 2013, accounting for a budget allowance of more than $44 million. Using a portion of these funds to finance solar installations for low income Marylanders could save both the residents and the state tens of millions of dollars in coming decades.
7. Introduce a sliding scale SREC market.
The marginal value of SRECs in MD increases dramatically with scale. Introducing a stepped valuation based on volume would ensure that residential producers could reap benefits more proportionate to their investment, and supplement a revenue stream that is essential to the economics of solar power at the homeowner or tenant level.