Doing the Most With Solar

7 min read

Today’s Regulatory Landscape and Its Impact on Low-Income Housing 

Today’s solar power systems are cheaper to build and more efficient than ever. According to The National Renewable Energy Laboratory, between 2010 and 2020, the cost to build new solar projects declined by 64, 69 and 82 percent in residential, commercial-rooftop and utility-scale settings, respectively; numbers that have continued to decline in the years since. This decrease comes opposite traditional residential electricity spending, which in 2022 experienced the largest increase in annual costs since at least 1984, according to the U.S. Energy Information Administration.

Beyond these cost decreases, solar energy can bring unmatched energy resiliency to a property. For example, according to Todd Griggs—vice president of commercial finance at Sunnova and a recent speaker at National Housing & Rehabilitation Association’s Summer Institute—98 percent of the firm’s 40,000 customers in Puerto Rico retained power in the aftermath of Hurricane Fiona, a storm that knocked out power from the traditional grid for the entire rest of the island.

Thus, for many multifamily developers, implementing solar across a portfolio can seem like a more attractive option with each passing quarter. However, a shifting regulatory landscape rushing ahead to catch up to solar technology’s rapid ascent has many owners struggling to complete what should be home-run projects. “It’s become what we call ‘a solar coaster’ because the industry is constantly changing when it comes to policies, regulations and utility strategies,” states Darien Crimmin, vice president of energy and sustainability at WinnDevelopment.

Whether because of new federal tax credits or state-level policy changes, Crimmin says, “The reason why everyone’s talking about solar right now is because of political changes.”

Community Solar
From that policy and practice perspective, Crimmin identifies community solar as one of the most exciting possibilities for rapid expansion among lower-income communities. In general, a community solar project takes a remote solar installation that sends its power production to the utility grid, and then the value of that production is transferred to a group of customers, called subscribers, who then receive a per-kilowatt-hour credit that reduces their electric bill. In this way, many households who otherwise are unable to install rooftop solar can take advantage of solar power in their community.

In multifamily buildings, solar will typically serve the building itself, and then send any surplus power out to the grid and ultimately to subscribers via the local utility. These systems utilize net metering, which allows traditional utility customers to sell their excess electricity back to the utility. Net metering rules currently exist in 38 states, plus Washington, DC and Puerto Rico.

These approaches are crucial tools, says Crimmin, “to figure out how to share the benefits of solar with more and more people, especially renters.” Fortunately, Crimmin says that since 2015, a wave of interested parties, such as states, utilities and even the federal government, have been engaged in making community solar projects as effective and impactful as possible.

Above all, says Crimmin, community solar requires a “well-designed regulatory mechanism to be in place in which the utility pays a fair market price on every kilowatt hour of solar pushed out to the grid. The regulations must also create rules to require the utility to send the excess value to subscribers.” About half of the states in the country have set up some regulatory framework for community solar initiatives, says Crimmin.

However, not all community solar programs are created equal, and Crimmin says that ultimately, the strength of one state’s community solar policy can determine how many low-income renters benefit from clean energy.

Generally, he says, that comes down simply to how the state values solar. “Is the value of that solar adequate? Is it five cents a kilowatt hour, or is it 25 cents a kilowatt hour? Who determines what the value of solar is for the electric grid? Is it the utilities? Is it a public regulatory commission? And most importantly, is there a requirement for low-income households to participate?”

The value of solar—and who determines that value—is the cornerstone of a well-functioning community solar or net-metering program. For example, late last year, California implemented new pricing guidelines that shrunk solar’s value by 75 percent. This change immediately stunted the growth of the state’s fledgling community solar industry and limited its production to about 1/16th of its potential, according to an analysis by Coalition for Community Solar Access, a trade group.

Another element of community solar regulation is how subscribers pay their bills. “Everyone is familiar with paying their monthly electric bill to the local utility,” says Crimmin, “but what if you had to pay two bills: one to the utility and another to a solar provider? It would be much simpler if the utilities were the only bill collector for all customers.” In that scenario, a renter would pay the utility its monthly electric bill, which is lower because of the community solar discount, and then the utility company would reimburse the solar provider on the back end. This type of consolidated billing is exactly what New York State enacted in 2022 to help simplify and expand solar access, with other states considering the same. 

Understanding Limits of Local Regulation and Infrastructure
Even if other pieces fall into place and an owner can implement a robust solar solution in a multifamily apartment community, developers should still be wary of the capacity for interconnection within their local grid. This is another area that Crimmin says is dynamic and requires much of the same creative innovation as community solar, with owners needing to work cooperatively alongside utilities to evaluate the necessary upgrades to the distribution grid.

Indeed, according to the White House, as of late 2022, over 70 percent of the country’s energy lines are over 25 years old. This age, coupled with the rapid expansion of solar as a primary energy source, means that outdated grid infrastructure often may not be able to handle the type of interaction needed for community solar and other novel aspects of solar generation.

The limitations of the existing distribution grid to accept new generations are further complicated as we add significant new electric loads, like Electric Vehicle (EV) charging and beneficial electrification of buildings. In some cases, it may require a near-total overhaul of a local grid to adapt to these changes and unlock the potential of solar power for a community. “It’s not just electrifying the buildings or the cars,” says Crimmin. “We must also understand the broader infrastructure; it’s the wires, the poles, the transformers, the substations. All of that is a massive challenge to solve.”

One technology that can support the electric grid and multifamily properties is battery energy storage systems. Batteries can help balance power at an individual building and at the broader grid scale, absorbing and dispatching power depending on fluctuations in demand. While policies and regulations are rapidly changing, developers are finding opportunities to become front-line changemakers in the long-term effort to make battery storage systems a viable solution for future energy needs.

Most owners assume a battery can replace a gas generator to provide emergency backup power if the grid fails, but “the reality is that the regulations that define emergency generation power are very strict. And the battery technology that exists today does not meet the standards required by the fire code for emergency power.” Nonetheless, battery storage can provide buildings and the grid with other value streams, including demand response and flexible discharge when the building or grid needs more power while recharging when there is a surplus of power.

Despite the challenges, Crimmin says progress towards a cleaner, more resilient and more flexible electric grid is happening. The Inflation Reduction Act provides significant funding, including bonus tax credits, that will specifically benefit affordable multifamily owners and renters looking to adopt solar power. “We have the potential to turn challenges into solutions that strengthen the grid, impact people’s lives and unlock the potential for solar much more than we’ve seen so far. We’re just getting started.”  

Abram Mamet is a freelance writer based in Washington, DC, whose work focuses primarily on the social histories of the community. He currently works as the assistant editor for CapitalBop.