This story originally appeared on PlanPhilly.
Going solar becomes less expensive every year. Through federal and local programs and financing, homeowners might pay for solar installation in eight to 10 years of monthly payments equal to or lower than their typical electric bills. But the $15,000-plus needed up front to set solar panels on a roof and start producing energy still makes the cost prohibitive for many Philadelphians.
With an eye to improving access to sun-powered energy, Solarize Philly — a city group-buying program run by the Philadelphia Energy Authority — recently introduced a special pilot program bringing that upfront cost down to zero for 45 low- and moderate-income households. The program, rolled out in April, promises an additional 20 percent savings on monthly energy bills for those who participate.
“We know that many households can start saving money right away with solar,” said Emily Schapira, PEA’s executive director. “That’s why we launched the special financing option — to ensure everyone has access to this opportunity, not just the wealthy.”
The pilot program is part of the second phase of Solarize Philly, whose goal is to install solar panels on 500 city rooftops and create 75 green jobs by 2018. The citywide program, which seeks to entice homeowners by offering cheaper than market prices, consumer protections, and a faster process for obtaining city permits, is currently taking applications from households of all income levels, and is aiming for installations in the fall.
Of the 900 homeowners referred to solar installers through Solarize Philly last year, only 186 signed contracts. Although that number was still more than expected — and, according to PEA, meant 27 jobs created and placed Philadelphia as the fifth-fastest growing market in the U.S.— some homeowners could not move forward because they couldn’t qualify for financing.
“One of the main reasons to create this program is that low- and moderate-income households are the most energy-burdened in Philadelphia,” said Laura Rigell, PEA’s solar manager. “According to federal data, about 40 percent of households earning less than $60,000 per year and more than 50 percent of all minority households faced energy insecurity in 2015, meaning they’re struggling to pay their bills or sacrificing other household expense in order to pay their electricity bill because they face being shut off.”
To make solar affordable for low-income families in Philadelphia, PEA created a model in which a third entity — a legal liability corporation created by Solarize Philly — buys the solar panels needed for 45 houses and leases them to homeowners for 15 years. The monthly prices are 20 percent lower than what they currently pay for their electric bills.
“Instead of taking out a loan for the $15,000, they’re paying that amount over time — basically buying the power from the solar [panels] instead of buying it from PECO,” said Rigell. “And then, at the end of the 15 years, they’ll be able to own the solar.”
The third party allows PEA to obtain low-interest financing for households that would not be able to get loans individually, using a guarantee fund created with program fees collected in Solarize Philly’s first phase. The loans will be repaid through the monthly payments made by homeowners, or by the fund if homeowners fail to pay on their leases. Having a third party also allows PEA to take advantage of the 30 percent federal tax credit for solar installations applicable until 2019, cutting down the total cost.
Rigell said even PEA was surprised that the pilot worked without relying on a per-project subsidy, adding that the cost of solar has come down enough that it just makes sense economically.
“Initially, we were expecting that we had to use some of the program fees just to buy down the cost of individual projects,” Rigell said. “But when you take into account those [federal] tax benefits, it cancels out. It works in terms of the cash flow: We’re able to have them paying 20 percent less of what they would have been paying on the utility grid for electricity, and then we’re able to recoup that upfront investment.”
The pilot will benefit the first 45 households that meet PEA’s criteria. To qualify, an applicant must own the house, have a roof less than five years old (or one recoated in the last five years), meet PEA’s income guidelines — ranging from $18,090 to $46,600 for a household of one, to $43,170 to $71,900 for a household of five. An applicant must not be on PECO’s Customer Assistance Program, and must have paid PECO bills on time for the last 12 months.
To sign up for the program, residents can fill out a form on Solarize Philly’s website or visit the Energy Coordinating Agency Neighborhood Energy Centers all around the city. PEA will follow up to confirm eligibility and schedule a free solar assessment from any of the three local installers working with the program: Solar States, Solar by Kiss, and Moore Energy.
Matthew Reid, the Energy Coordinating Agency’s director of community programs, said one of the benefits of the solar program is that it is helping low-income families access clean energy — something not available to them before. But at the same time, he said, it’s challenging because the program’s requirements — having a new roof, a good payment history with PECO, and owning a house — exclude those who are more in need.
“It’s not for everyone, and that’s OK,” Reid said, estimating that, being optimistic, the program could benefit 25 percent of ECA’s clients. “But the fact that it is being presented to a community that has been overlooked is helpful and hopeful for many.”
PEA’s Rigell said the eligibility criteria had to be very strict for the pilot to work and show that the 45 households would repay. “We’re working with PECO now on potential solutions for renters and people below 150 percent of the federal poverty level, options like community solar, which is not currently allowed in Pennsylvania but would be a good solution for renters.”
After completing this pilot for 45 households, PEA plans to serve 1,000 by 2026.