Low-income communities will soon get $7 billion for local solar

One of the Inflation Reduction Act’s most potentially transformative programs is close to being finalized — and now we have a window into how it could take shape.

States are vying for a share of a historic $7 billion in federal funding to help low-income families access clean solar power. This program, Solar for All, is poised to benefit more than 700,000 low-income households across the nation, according to a new analysis from the nonprofit Clean Energy States Alliance, shared exclusively with Canary Media.

Solar for All is a competitive grant program created under the IRA’s $27 billion Greenhouse Gas Reduction Fund. Administered by the U.S. Environmental Protection Agency, Solar for All aims to deliver the savings, resiliency and health benefits of small-scale solar and solar-plus-storage systems to low-income households and households in disadvantaged communities.

“This is the biggest low- and moderate-income solar investment in U.S. history,” Vero Bourg-Meyer, CESA senior project director, said. ​“It has the potential to be truly transformational.”

Inequity has been a long-standing issue when it comes to residential solar adoption. In 2022, the median income for a solar household was about $117,000 per year — or 70 percent higher than the U.S. median household income of $69,000, according to research from Lawrence Berkeley National Laboratory. Low-income households also spend a greater proportion of their income on energy bills: on average, 8.6 percent, or nearly three times higher than other households. That’s a burden rooftop solar or community solar could help alleviate.

To help close the solar-equity gap, the EPA plans to announce up to 60 awards next month to support Solar for All programs across the U.S. that would help participants save 20 percent or more on energy bills. States, territories, tribal governments, municipalities and eligible nonprofits submitted their applications last October. (EPA has not disclosed the total number of applications received, according to CESA.)

CESA’s new report, which analyzes Solar for All applications from 33 states, Washington, D.C. and Puerto Rico, is the first to show how applicants plan to use the funds to advance energy equity. CESA focused only on state- and territory-wide programs, which it says will be able to leverage resources, experience and existing programs that make them likely recipients.

There’s no guarantee that every application CESA analyzed will be funded, but if they were, here’s what it would look like: The $6 billion in statewide programs would unleash 2,917 megawatts of new solar-generation capacity, serve 711,068 low-income and disadvantaged households, and save them $2 billion over the next five years.

Most applicants plan to create low-income solar programs — or expand existing ones — that encompass single-family, multifamily and community solar, the latter of which lets customers reap solar savings by subscribing to offsite arrays.

The state Solar for All programs would give community solar, in particular, a massive push. Just 20 of the 33 applicants that outlined community-solar initiatives included estimates of how much solar their programs would install, but those projects alone would boost the 6.2 gigawatts of U.S. community solar currently installed by more than 25 percent. And that’s solar ​“just for low-income and disadvantaged communities,” Bourg-Meyer said. ​“That’s huge.”

The single-family initiatives, for their part, would add 575 megawatts of new solar. That’s a bump of 8 percent over today’s installed capacity for low-income households, according to CESA. Multifamily initiatives would build 479 megawatts of new solar.

Solar for All applicants have different ideas for how they’d deploy any funding they win. They generally plan to use a mix of financial tools, but grants are the most popular option among the applicants CESA analyzed. In some cases, states would fully subsidize solar for low-income households in single-family units, especially those that have already received aid from federal programs such as the Weatherization Assistance Program or the Low Income Home Energy Assistance Program. In other proposals, states would spread the dollars by partially rather than fully covering the costs to install or lease a solar array.

Many of the states would also offer loans to qualified building owners, consumers and developers to install low-income solar. Attractive financing would come in many forms, including zero-percent-interest loans, interest-rate buydowns (which initially lower the loan’s interest rate), and longer loan terms (20 to 25 years) to reduce monthly payments.

What’s more, many states are eager to set up revolving loan funds, which issue new loans to new projects as the initial amounts are repaid. That’s a way to keep the money flowing far beyond the Solar for All program’s five-year timeframe, Bourg-Meyer told Canary Media.

Notably, most states are asking for funds to help cover essential — and often costly — upgrades that enable solar but traditionally haven’t been funded: roof repairs; mold and asbestos abatement; and electrical-panel upgrades. ​“That’s going to make a huge difference in how successful those programs actually are,” Bourg-Meyer said.

Though CESA’s report focuses on statewide applications, that’s only part of the Solar for All story. Programs led by tribal governments, cities and even local nonprofits are also eligible, and EPA aims to distribute the funds widely; it will make up to 60 total awards, but of those, up to five will serve specifically tribal communities, and up to 10 will be for far-reaching multistate initiatives.

Bourg-Meyer anticipates that the programs will have lasting market effects. They’ll show communities the advantages of solar, invest directly in local workforce development, and demonstrate to developers that the low-income solar market is a profitable and safe investment. ​“These are good customers,” she added.

Solar for All ​“is not just an infusion of cash,” Bourg-Meyer noted. It primes the private sector to realize a growing market opportunity for residential solar — all while creating a more equitable and just energy transition.