The LIFT Solar Everywhere research project is proud to announce the release of a three-part research report: Applying the PAYS® System to On-Site Solar to Expand Access to All.
The study provides detailed analysis of whether, and how, a utility investment program based on the Pay As You Save® (PAYS) system could overcome the upfront cost barrier to on-site solar for low and moderate-income (LMI) customers.
“We explored whether site-specific investment by a utility with on-bill cost recovery could work with solar investments,” says Holmes Hummel, Executive Director of Clean Energy Works, lead author of the new LIFT Solar Everywhere study. “The key question is whether a low-income household could access solar through a PAYS program structure with no upfront payment – and whether the utility could both recover its costs and assure a path to ownership for the customer.”
The three-part study tackles the applicability of PAYS for energy efficiency to on-site solar, the regulatory precedents for PAYS at the state level, and possible financial structures that would enable tax-exempt utilities such as rural cooperatives to adapt PAYS to monetize the federal solar tax credit for their members.
Current energy market and regulatory conditions necessitated the study, which delivers clear, detailed recommendations for utilities and policymakers who want to support low and moderate-income energy consumers. The number one recommendation?
“Reforming the investment tax credit to be a grant or direct payment would enable lower upfront capital requirements for on-site solar” across the board – and it would eliminate much of the financing complexity and expense required to serve low and moderate-income households, or to support community solar systems.
“Systems produce outcomes according to the values on which they’re founded, and the current tax credit incentive structure for solar values reducing taxes for the wealthy,” said Michelle Moore, Groundswell CEO. “Improving tax incentive policies to value our low and moderate-income neighbors would go a long way to eliminating structural barriers to solar access and truly deliver clean, equitable energy futures for all.”
“This study provides far-reaching recommendations for innovative low-income energy services,” said Southface President Andrea Pinabell. “We look forward to the next phase of research and action that will help us achieve a low carbon future.”
1Applying the PAYS® System to On-Site Solar to Expand Access to All: Overview, p. 15 and Part 2: Energy Efficiency Institute, Inc., page 21.
This study uses the foundation of successful tariffed on-bill financial structures — such as PAYS — currently in use by 18 utilities to invest in energy efficiency upgrades for utility customers. Tariffed on-bill investments are not consumer loans and do not depend on a customer’s income or credit score or homeownership status to participate. Designed to include households at any income level, PAYS allows customers to install upgrades right away while the utility recovers its costs for the solar system through a fixed charge on the monthly utility bill that is less than the estimated value of the electricity it generates. The PAYS investment is tied to the meter, not the individual, so if a customer moves, the PAYS tariff automatically applies to the next resident at that location. Once the utility recovers the costs of the improvements, the monthly charge ends, and the customer continues to benefit from the upgrades as well as the path to ownership that PAYS provides.
More study is needed to determine how the financial terms for PAYS could be structured in various regulatory markets and business models for on-site solar. LIFT will continue our research on this new application over the next year, sharing research insights.
The LIFT Project: LIFT’s research includes analysis of solar and community solar financing structures for projects that serve low and moderate-income (LMI) households. LIFT also analyzes customer experience program elements. Final research findings will be delivered through a “LIFT Toolkit” that recommends optimal financing and program design structures for utilities and solar project managers. LIFT research is available at: www.Groundswell.org/LIFTsolar
Acknowledgment: LIFT Solar Everywhere, led by Groundswell, is conducting research that will accelerate low and moderate-income (LMI) solar access for homeowners and renters by identifying optimal finance and customer models for each regulatory and utility service territory type, addressing both residential rooftop and community solar. LIFT includes Groundswell, Elevate Energy, Clean Energy Works, and Southface.
LIFT Solar Everywhere, and the Applying the PAYS® System to On-Site Solar to Expand Access to All report, is supported by the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE) under the Solar Energy Technologies Office Award Number DE-EE0008567.
Disclaimer: This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof.