Part 1 in a series of articles about affordable solar panels in the USA.
California has long been a pioneer and a leader in solar programs, with the state’s first solar rebates starting way back in 1998, and continuing to this day in various forms. The state’s policies have been instrumental in helping the cost of solar panels drop more than 75% in the years since the first rebates were offered.
These days, homeowners installing solar panels in California enjoy a 7-year payback timeframe, with total average savings measured in the tens of thousands of dollars over the 25-year lifespan of a home solar system. But barriers to installing these systems still exist. Purchasing solar panels with cash or a loan isn’t an option available to everyone, so California has designed two programs to help low-income homeowners go solar, essentially for free.
California’s Single Family Affordable Solar Homes (SASH) and Disadvantaged Communities Single Family Affordable Solar Homes (DAC-SASH) programs are currently (no pun intended) available and helping families go solar. And what qualifies as “low-income” in California might surprise you (80% or below the area median income is still pretty high).
We review these two programs in detail below, with additional comments on their effectiveness and how they might be improved.
SASH Program Overview
Up and running since 2009, California’s Single Family Affordable Solar Homes program (SASH) is the oldest and longest running low income solar power subsidization program in the country. As of the end of 2018, the program has installed over 25,000 kW of solar panels on over 8,200 homes, with an average system size of 3.1 kW. In addition to helping low income homeowners install solar panels, the program also strives to provide education on energy efficiency via referrals to the state’s Energy Savings Assistance (ESA) programs and provide hands on job training for low income individuals looking to get into the solar installation industry.
The SASH program currently provides an up-front rebate of $3 per installed watt for systems up to 5.0 kW. It is funded via a small increase in the distribution charge paid by ratepayers receiving their electricity from California’s three largest investor owned utility companies; Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas and Electric (SDG&E); which are regulated by the California Public Utilities Commission (CPUC). The distribution charge covers expenses related to electricity transmission and delivery, billing, and maintenance. The program is currently authorized to collect up to $162.3 million up to the end of 2021.
In order to qualify for the SASH program, an individual must own and live in their own single family home, receive electricity from one of the three participating power companies (PG&E, SCE, and SDG&E), have a household income 80% or below the Area Median Income, and live in a home defined as affordable housing by the CPUC.
The SASH program is overseen by GRID Alternatives, an Oakland based group which is the largest non-profit in the country working in the area of low income solar installation. GRID acts as both the administrator of the program as well as the sole licensed installer of solar systems on qualified homes. GRID utilizes its own core group of electricians and volunteers from offices across California, as well as various sub-contractors through its Sub-Contractor Partnership Program, which gives it a wider reach across the state. In order to meet the job training component of SASH, each of these sub-contractors must hire at least one eligible job trainee for each SASH project.
According to GRID, SASH funding on average covers 85% of the costs associated with installing solar panels on eligible homes. Funds to cover the remaining gap are most often provided by GRID via grants and corporate and individual donations. GRID also has agreements with many solar manufacturers to receive discounts for equipment.
Originally solar panels installed by the program were owned by the home owner. However, since 2016, approximately 80% of SASH projects have involved third-party ownership (TPO). GRID utilizes a TPO model, partnering with the private solar equity firms Spruce Finance and Sunrun, in order to take advantage of the Federal Investment Tax Credit (ITC) to cover the funding gap not covered by the SASH program. The partnering firms benefit via the tax credit and ownership of the project’s Renewable Portfolio Standard (RPS) credits.
Under the TPO contract, the homeowner and partnering solar equity firm sign a power purchase agreement (PPA) where the firm owns the solar panels which are installed by GRID. This agreement includes a performance guarantee, system monitoring, a 20 year warranty, and additional protections required by the CPUC. Once the system is installed, GRID prepays the PPA, essentially taking over the contract from the partnering firm. GRID then asks the homeowner to make a quarterly financial contribution of up to 50% of the homeowner’s electrical bill savings. However, this contribution is voluntary and the homeowner is under no legal obligation to pay.
DAC-SASH Program Overview
First launched in 2019, the Disadvantaged Communities Single Family Affordable Solar Homes (DAC-SASH) program is a continuation of the SASH program which adds further restrictions to which households qualify in order to ensure that funds go to those most in need. In order to qualify, households must meet the requirements of the California Alternate Rates for Energy (CARE) program, which provides subsidized electrical and natural gas rates for low income households, live in one of the top 25 percent most disadvantaged communities as identified by the CalEnviroScreen, and be a billing customer of PG&E, SCE, or SDG&E. The program is currently authorized to spend $10 million per year through 2030.
Administered by GRID Alternatives, the DAC-SASH program functions essentially the same as the soon to end SASH program. However, instead of being funded directly by rate payers, it is instead funded via utility greenhouse gas allowance revenues, i.e. funds paid by utilities to purchase carbon credits from the state of California. Of the $10 million per budget, 85% is to be spent on incentives, 10% on administration, 4% on marketing and outreach, and 1% on program evaluation.
Do California’s affordable solar programs succeed?
Direct comparison of the SASH strategy to programs in other states is difficult due to no other program having a similar longevity. One of the greatest weaknesses of any low income support program is the availability of funds. However, the state of California has more than shown its willingness to continue such investments over the long term. These two factors have combined to make California the benchmark for such efforts, though this does not necessarily reflect the effectiveness of the SASH programs.
One issue with SASH and DAC-SASH is that a single entity, GRID Alternatives, acts as both administrator and the sole designated installation contractor. While such an arrangement does cut down on bureaucratic issues, it can also create conflicts of interest given that GRID is an international non-profit with goals and interests far beyond the state of California. While this does not necessarily suggest that problems actually exist, such a program structure does create an incentive to take advantage of loopholes that may not necessarily benefit those funding the programs.
An example of such a loophole is the structuring of the incentive payment which remains static over long periods of time. In the first iteration of the program, the incentive was based upon a sliding scale ranging from $4.75 to $7.00 per watt, with an overall program average of $5.74 per watt. While such an incentive may have made sense in 2009, when the first iteration of SASH began, by the time it ended in 2015 the average market price of solar panel installation had dropped well below the incentive level, to an average of $3.69 per watt.
In 2016, this issue was dealt with by lowering the incentive level for SASH to $3.00 per watt. However, since then the average cost of solar installation has dropped to $3.05 per watt. This average price drops even lower to $2.14 per watt when taking advantage of the ITC via a TPO agreement. In addition, the DAC-SASH incentive level has also been set at $3.00 per watt for the next twelve years, a period of time that will likely see further reductions in solar installation costs.
By structuring the SASH and DAC-SASH programs to have a single designated contractor and a static incentive payment over long periods of time, the state of California is likely losing out on the benefits of declining solar installation costs on the open market, benefits that could be utilized in helping a larger number of low income households.
Last modified: July 24, 2019