Federal and local support grows for solar in LMI communities 2024 Trends in Solar

Solar for low- and moderate-income (LMI) communities is having its day in the sun. Demand for more equitable solar siting has never been higher, and federal and local incentives are supporting the action.

This past year was a major tipping point for LMI support in solar, said Vincent Potter, policy analyst at the NC Clean Energy Technology Center, which tracks solar policy happenings across the country. He said 2023 saw more LMI carveouts added to state renewable energy goals and community solar policies.

While community solar wasn’t always synonymous with LMI representation, the growing market is leaning more on the “societal” definition of this sector rather than the physical.

“The goal of community solar has always been to provide solar to people who couldn’t, wouldn’t or didn’t want to install it on their own property, whether that’s because they don’t own it or don’t want to cut down trees or what have you,” Potter said. “Seeing these LMI additions and seeing these programs evolve, it is just a more inclusive way to operate community solar.”

New Jersey, for example, established a permanent Community Solar Energy Program in 2023 that requires all submitted projects to serve a minimum of 51% LMI subscribers. The state will permit up to 225 MW of community solar projects each year and guarantee a minimum discount on utility bills for subscribers. The requirements ensure LMI residents — often with the highest energy bills — have access to more affordable options.

Potter said that LMI carveouts were seen in the United States as early as 2017, usually through virtual net metering that would allow LMI households to participate in proto-community solar subscriptions. A community solar wave began one year later, and advocates suddenly had an opportunity to promote solar equity for all.

“Back in 2018 when community solar was becoming a thing, you had entities advocating for it, and some utilities saw it as a business opportunity. They would just hoover up all these renewable energy credits,” Potter said. “But then you had this opportunity for public staff and ratepayer advocates to come in and actually get that equality or equity issue. These facilities are already permitted and approved, so you then have opportunities for these programs to expand and serve more of the community than just the wealthiest.”

At the end of 2021, 39 states hosted community solar projects, and 22 states and Washington, D.C. had community solar programs in place. Community solar is a great way to ensure everyone has the same access to clean energy, but, cynically, it wouldn’t be popular if it wasn’t also a good business decision. States are supportive of community energy often because it enables them to reach aggressive clean energy targets.

“Sometimes [community solar] is just a way of advancing clean energy writ large. By expanding distributed energy into new markets, to low-income households, you can meet your state goals more quickly,” Potter said. “If you have a large population, you likely have large population centers that are houses, condos that are not ideally sited for solar. You have this untapped demand, and that’s what drives the growth of community solar. When state legislatures permit this, they say, ‘Let’s make sure that we’re not leaving anybody behind.’”

Many installers now focus on the community solar market, and the competition is fierce. The federal government grants various bonuses to the investment tax credit for projects sited in energy communities for LMI residents through the IRA’s “Low-Income Communities Bonus Credit Program.” More than 46,000 applications representing 8 GW of capacity were submitted for the first year of the program — four-times the total capacity available. Although only 1.8 GW of projects will access the bonus credits, Potter said that’s still a huge amount of clean energy that will soon be accessible to LMI communities.

“Four-times as much capacity was applied for as there are incentives — that does not surprise me,” he said. “Some people get a little cavalier, and they just throw everything they have at it, and if that means that 75% of these projects cannot pencil, we still get that 1.8 GW and I think that’s a good position to be in. If we lose a bunch through attrition, and we still get the maximum for the category, maybe we’re doing OK.”

This story is part of SPW’s 2024 Trends in Solar. Read all of this year’s trends here.