This is the third and final installment of a series of articles examining the opportunities and pitfalls of the current guidelines for the IRA. Bonus credit program for low-income communities for communal solar energy. In part one, we looked at the ways the guidance is unintentionally failing low-income households by imposing unnecessarily strict methods of delivering benefits. In part two, I proposed that the Treasury Department allow financial benefits to be distributed through prepaid cards so that households can benefit directly and immediately from the program.
This third article addresses concerns that often arise during discussions about direct benefits: verifiability and potential impact on the eligibility of low-income assistance programs.
Verifiability
Treasury regulations require that benefits be channeled through a utility to be effectively managed, regulated and monitored. However, this position is based on an incorrect assumption, namely that utilities will timely and accurately offset community solar bills with subscriber bills. While this is a reasonable assumption, anyone who manages community solar will know that even in the most mature community solar markets, such as New York, utilities fail to consistently apply bill credits as expected. Community solar providers continually correct utility errors and address subscriber concerns. Utilities are, by their own admission, complex giants with multiple departments that struggle to communicate with each other while using outdated technology.
The point here is that utilities are not infallible in applying bill credits to utility bills, and therefore using these bill credits as the sole means of benefit distribution is unnecessarily restrictive. Community solar administrators have been distributing the financial benefits of community solar directly to subscribers for years and are more than capable of maintaining adequate records to ensure that benefit funds actually get into the hands of low-income subscribers. In fact, our role in the community solar industry depends on it. The risk of losing bonus ITC is too great for a provider not to act in absolute compliance with such rules.
Concerns about taxable income
Another major concern with the direct pay model is the potential for these benefits to inadvertently flow into supplemental taxable income that could disqualify recipients from services like SNAP or affordable housing programs. While this is a valid concern, our internal research has shown that it is extremely unlikely that these direct payments would move someone into a higher income bracket, making them ineligible for other benefits from the relief program.
For example, the most common threshold for qualifying as low income in affordable housing programs is 50-80% of the area median income (AMI). This border was in the Boston area $118,450 for a household of four in 2023. Based on data from PowerMarket, the average community solar allocation amount for a family in this range is conservatively 6 kW, with an average credit amount of $160 per month. Annually, this family would realize a net savings of $384 ($160 x 12 months x 20% savings), which amounts to 0.32% of their annual income. This amount would make a significant difference in households’ budgeting, but should not put them over the hurdle of accessing assistance programs and benefits.
Community solar beneficiaries – a new frontier
Under the traditional community solar model, low-income households would have to enroll in the community solar project, receive the full value of the credit on their utility bill, and then pay 80% of that value to a project owner to achieve 20 % of that value. % savings. Why don’t you turn this around? I propose a different way to implement community solar that eliminates the risks for low-income households and delivers only the benefits.
- Low-income households do not directly enroll in the community solar project; instead, these qualified households (as defined by the Ministry of Finance) are redefined as community solar energy (CSB) beneficiaries and listed in a shade allocation schedule.
- Non-low-income households are enrolled as community solar subscribers at a zero (0%) discounted rate.
- 100% of the value of the community solar credit is collected from subscribers.
- The savings equivalent of 20% is distributed directly to CSBs via prepaid cards.
By not allowing low-income households to participate in the actual community solar project, we avoid the risks and challenges described in part one of this series. However, we can create a shadow allocation schedule listing all verified qualified households, with their address, verification method, and benefit allocation, which we can share with the Treasury Department to represent eligible low-income participants. These households do not have to provide payment details, cancel the payment or make any changes.
We would then recruit creditworthy subscribers who pay the full value of the credits each month. I think people would sign up for service without a discount because the value proposition is still compelling. By marketing these community solar projects as low-income projects, non-low-income households would be eager to participate, knowing that their subscription would directly benefit these underserved families in their own communities. And administratively, since these enrolled households would have bank accounts and credit cards on file, we would simply charge them 100% of the value of the credits, something community solar managers have been doing for almost a decade.
Last but not least, we would distribute the nominal dollar equivalent of the 20% savings to our CSBs via direct monthly payments with prepaid cards or another approved method. Our CSBs don’t have to wait for savings to kick in or navigate multiple unfamiliar billing processes to receive their benefits. Win-win-win all around.
Conclusion
While I believe my proposed solution addresses the fundamental risks I described in part one, while building on the ideas we discussed in part two and delivering on the promise of Article 48, it may not ultimately be the best solution. There must be flexibility in the rules to allow for creative solutions that deliver financial benefits to low-income households. Limiting the means to generate benefits fundamentally limits the potential for successful outcomes.
My greatest hope is to see the development of a community solar program that is accessible and beneficial to all Americans, regardless of economic class, location, or historical access. With the right guidance from the Ministry of Finance and a creative solution to problems, that reality could be within our reach.
Jason Kaplan is Chief Operating Officer and General Counsel at PowerMarkt, a clean energy solutions provider that provides turnkey acquisition, management, billing and support services to developers, financiers and the established energy sector. In his role, Kaplan is responsible for growing the company’s business, managing its legal affairs, ensuring success for its community solar partners and building the company’s culture. Since joining PowerMarket five years ago, Kaplan has grown the company from a small group of six to a diverse team of 26 people, significantly expanding the company’s reach. Today, PowerMarket supports nearly 300 community solar projects in 11 states, representing 550 MW of capacity and more than 70,000 subscribers.
