Five Models can Boost Solar Adoption in Low- and Middle-Income Households

With the drop in rooftop solar prices, a majority of the households, irrespective of any income level, can now save costs by going solar.

Nevertheless, households with low- and moderate-income levels are still less likely to adopt solar when compared to households with high-income levels.

Therefore, scientists from the Lawrence Berkeley National Laboratory (Berkeley Lab) of the U.S. Department of Energy (DOE) set out to investigate whether specific business and policy models could increase the adoption equity with respect to the household income.

In the latest study reported in the Nature Energy journal, the researchers from the Berkeley Lab examined policy and business models and learned that three of the five models—including leasing models and targeted financial incentives—indeed increased the adoption of solar photovoltaics (PV) among households with low- and middle-income levels. This, thus, improves the adoption equity, which the study’s authors defined as the extent to which the income of the adopter reflects the income of the overall population.

The researchers’ study titled, “The impact of policies and business models on income equity in rooftop solar adoption,” utilizes PV adopter income data at the household level, covering over 70% of the residential PV market in the United States.

I think most people are aware that the benefits of solar energy have not been equitably distributed with respect to income. And the key takeaway of our study is: It doesn’t have to be that way—especially now that solar is getting cheaper. The results were pretty robust. There’s no reason solar has to be an exclusive domain of high-income households.

Eric O’Shaughnessy, Study Lead Author and Affiliate Researcher, Lawrence Berkeley National Laboratory

The study’s co-authors were Galen Barbose, Ryan Wiser, Sydney Forrester, and Naïm Darghouth, all from Berkeley Lab’s Electricity Markets & Policy Group, which performs studies to inform decision-making in the U.S. electricity industry.

The team also publishes a yearly report, known as Tracking the Sun, relating to trends in the U.S. PV market, and has also developed an online tool to study the demographic features of county-level solar adoption, available at solardemographics.lbl.gov.

On the whole, the prices of PV systems are dropping and the number of installations is rising stated Barbose.

“In the residential market, looking at the national level over the last decade, there’s been pretty significant growth in the rate of new adoptions, And most projections show significant growth over the next five to 10 years,” Barbose further added.

Different locations have different programs and policies to drive the adoption of PV systems. The researchers assessed the impact of five types of business or program models on adoption equity:

• Leasing, which decreases the upfront costs.
• Financial incentives targeted at households with low- and middle-income levels.
• Property Assessed Clean Energy Financing (PACE)—a program to financially support the PV systems via property tax payments, which is available only in Missouri, Florida, and California for residential installations.
• Financial incentives—often rebates or other incentives to decrease the upfront costs—provided to customers of all income levels.
• Solarize—a community initiative to recruit a coalition of potential adopters of PV systems.

The new study covered the period between 2010 and 2018 and included data on over 1 million residential rooftop PV systems set up on single-family homes in as many as 18 states. Based on the U.S. Census data, modeled household-level income estimates for PV adopters were compared with area median household incomes.

The researchers’ analysis observed that the first three kinds of interventions—that is, leasing, targeted incentives, and PACE—are effective at improving the adoption equity.

“The results for those three interventions are pretty strong,” added O’Shaughnessy. “And the research also provides evidence that these interventions are leading to both deepening, or expanding in existing markets, and broadening, or moving into new markets—low-income areas where there traditionally was not solar.”

One implication of the expansion of solar adoption into new neighborhoods and markets is that it can have a spillover effect.

If a system is installed in a neighborhood that had no solar before, then the neighbors are going to see that system, and that makes them a little bit more likely to adopt themselves. There’s lots of research on these peer effects. So, if the market broadens and solar deployment moves into new markets, the potential indirect effects are more significant than if the market only deepens by installing systems on lower-income households in existing markets.

Eric O’Shaughnessy, Study Lead Author and Affiliate Researcher, Lawrence Berkeley National Laboratory

More extensive adoption of solar PV systems, particularly in regions with low- and middle-income households, can speed up the clean-energy advantages of solar. As the study’s authors stated, “By one estimate, low- and middle-income housing accounts for 42% of PV-viable rooftop space in the United States.”

With the rise in the solar market, the decision to set up a system is fueled more by the financial benefits and less by “going green.” “Surveys indicate that around 50% of individuals who are currently adopting are actually doing it mainly for economic reasons,” added O’Shaughnessy.

Such benefits make more of a difference for low- and middle-income households.

Many low- and moderate-income households have a large ‘energy burden,’ which is the fraction of a household’s income that gets spent on energy and utility expenses. There’s growing interest now in solar PV as being another arrow in that quiver of helping to reduce the energy burden of low-income households.

Galen Barbose, Study Co-Author, Electricity Markets & Policy Group, Lawrence Berkeley National Laboratory

Although solar PV systems are not a solution for homes that have a high energy burden, Forrester emphasized that making energy more economical continues to be a central tenet of local government regulators, community groups, and other stakeholders.

“Affordability is an important issue that everyone cares about,” Barbose concluded.

The DOE’s Solar Energy Technologies Office funded the study.

Journal Reference:

O’Shaughness, E., et al. (2020) The impact of policies and business models on income equity in rooftop solar adoption. Nature Energy. doi.org/10.1038/s41560-020-00724-2.