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The future of roofs in California is at turning point. Right now, the state is considering changing how households with solar panel systems sell power back to the grid when they have more than they need. But the December proposal was so controversial, the public utility regulator delayed a vote, arguably to consider the deluge of public comment.
It's a very specific fight with implications about how the state gets to a zero-carbon emissions grid, and it's divided groups that are usually in agreement on all things renewables. But it's not the only policy that aims to make it more financially attractive for homeowners to install their own solar.
A soon-to-be published study out of the Lawrence Berkeley National Laboratory considers upfront incentives to install solar panel systems specifically for low-to-moderate income (LMI) households.
Who puts solar on their homes is still fairly unequal: just over 20% of households with solar systems in 2019 were in this "LMI" category.
Eric O'Shaughnessy's analysis of two state incentive programs — one in California, one in Connecticut — suggests 80% of solar installations on LMI households were "additional" — meaning they wouldn't have happened without incentives.
It's not surprising that lowering the cost drives more people to adopt it, but O'Shaughnessy suggests that instead of tying incentives to the cost of the system itself, policy makers might limit extra funding to lower and lower income thresholds over time.
The implications of broadening who puts solar panels on their homes are not small: nearly half of viable space for rooftop solar across the country are on buildings in this category. It also holds potential to lower the burden of energy on these households, at least if the benefits of installing these systems outweighs the costs.
I asked O'Shaughnessy a few questions about home solar panel installations, affordability and why people choose to put panels on their roof, regardless of income.
One of the first things that struck me in your study is the idea that subsidies are phasing out just at the point rooftop systems become financially possible for LMI households. Is that because the price is coming down or some other factor?
Most emerging technologies tend to be expensive early on, then prices decline as the industry innovates and finds ways to cut costs. Solar is a great example of this. Solar prices started really high but have declined significantly over the past few decades (if you want to get into the weeds check out the annual Tracking the Sun report).
Many subsidy programs were designed based on the correct assumption that prices would decline. Phase-out design makes sense because it provides subsidies when prices are initially high then lets the market take over once prices come down. But one key point I’m trying to make is that the phase-out design overlooks another consequence of declining prices: the fact that emerging technologies tend to expand to LMI households as prices decline. So that yields the insight you refer to, that subsidies will tend to phase out just as prices decline to a point where LMI households begin adopting solar.
You mentioned that LMI households and richer households have similar motivations for adopting solar systems. What are the biggest motivations for everyone? How do we know?
This claim is based on research by Dr. Kim Wolske at the University of Chicago. Dr. Wolske found that both high- and low-income solar adopters are roughly equally motivated to adopt solar by desires to buy “novel” and environmentally-friendly goods. As costs decline, survey research led by the National Renewable Energy Lab shows that desire to save money on electricity bills is becoming an increasingly important factor driving adoption.
What are the major differences in how California and Connecticut's programs work?
The California program is based on an up-front subsidy offsetting the installation cost of systems installed on eligible households.
The Connecticut program is more complex. In the CT program, the state’s Green Bank is facilitating financing for systems installed on eligible households. The Green Bank subsidizes the system installations so that the customers pay a lower lease rate. The CT program is interesting because it leverages a financing model with ongoing payments but zero up-front costs. Previous work done by our group shows that this type of financing (even if not subsidized) can help support the LMI market.
The study mentions the impact of the marketing patterns of large scale installers, especially in California. So installers go to places where incentives are, or do installers try to create new markets and then make the case there should be incentives for equity reasons? What are some patterns you’ve seen about where and to whom large-scale installers market their services?
Research on this question suggests that installers follow the incentives, though installers and the solar industry more broadly have become more active in their efforts to influence solar policy.
For the second part of your question, as a general rule installers are looking for big roofs on homes that use lots of electricity.
But even when controlling for those factors, our research suggests that installers tend to market their services to relatively affluent households, which feeds into the broader issue of adoption inequity. It is worth emphasizing that this is not some unique feature of the rooftop solar industry, marketing in many industries is targeted at relatively affluent customers.
What does the data about solar installations in the state tell us about who is benefiting from net metering?
While the data are clear that solar adopters tend to earn more than non-adopters, solar adopters are increasingly diverse along all demographic dimensions. So the answer to questions like “who benefits from net metering” or other incentives is never as simple as some like to suggest. Yes it is true there is an inequitable skew in benefits toward high-income households, but lots of folks from a variety of backgrounds benefit from these programs, and with each passing year the benefits are more equitably distributed as the rooftop solar adopter base diversifies.
Have you considered installing solar panels on your house? What was the make or break decision to go ahead with it or not? Reply to this email with your answers.
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