Green Energy Market Securitization On-Bill Repayment Program (GEMS) Overview
Administered by the Hawaii Green Infrastructure Authority (HGIA) in partnership with the Hawaii Public Utilities Commission (PUC), the Green Energy Market Securitization On-Bill Repayment Program (GEMS) is an excellent example of how innovation can overcome issues facing low income solar programs. Though not specifically targeted to low income households, GEMS is setup in a fashion meant to overcome various financing issues faced by many low income individuals.
GEMS was originally launched in 2014 with the goal of providing low interest loans for the installation of solar panels and other energy saving technologies by individuals, companies, and organizations that otherwise might not have access to other sources of financing. To secure funds, the PUC agreed to a surcharge on electricity rates in order to create the collateral needed to secure a $150 million bond. This bond was meant to act as start up funds, with the eventual goal of creating a long-term self-sustaining program.
Unfortunately, GEMS proved much less popular than expected. After three years of operation, the HGIA had only managed to loan out $5 million, the PUC began publicly stating that the program was in serious danger, and many pundits began to call for its end. Rather then ending the program, the various groups instead investigated the problem. Eventually issues related to higher interest rates for those with lower credit scores and the long twenty year term of the loans needed to make them financially make sense were identified as the main barriers for program success.
To counter these issues, GEMS was shifted to an on-bill system for loan repayment in April of 2019. Under the new system, eligible groups are given a twenty year fixed rate loan which is repaid in monthly installments as part of the electric bill. Rather than measuring loan eligibility based upon credit scores and income, it is instead congruent upon whether or not utility customers have had a disconnection notice over the past twelve months. Other eligibility requirements are that the installed system must result in an estimated 10% savings in electricity costs, including the added cost of repaying the loan; the system must cost a minimum of $5,000; recipients be customers of the Hawaiian Electric Company, which covers the islands of Hawaii, Maui, Lanai, Molokai, and Oahu; and installation must be done by a list of pre-approved contractors. Since GEMS is a loan, the owner of the solar panels is eligible for all federal and state rebates.
In addition to removing the credit and income barriers, the updated program also removed the loan longevity issue by attaching repayment of the loan to the electric meter rather than to the utility customer. This means that the loan obligation automatically transfers when a property changes residents or is sold. This facet of the program also removes many of the barriers to installing solar panels on rental properties; such as tenants not wishing to make long-term investments on properties they don’t own and landlords lacking the incentive to make such investments.
In the short time since the introduction of the on-bill system, GEMS has experienced a surge in new interest to the degree that the HGIA recently had to announce a moratorium on loans for commercial properties in order to guarantee funds for residential projects.
Despite its limitations, we love Hawaii’s approach to affordable solar
Hawaii’s GEMS program should be viewed as a model for encouraging the wide scale adoption of solar technologies. Though not specifically designed for just low income households, it effectively overcomes many of the challenges and limitations they face via its innovative approach of tying loan obligations to locations rather than to individuals, which also makes it one of the few programs available to renters. The utilization of loans rather than rebates or grants gives GEMS a source of income via interest payments, which in turn increases the likely effectiveness of the program.
A further benefit of GEMS is that it is set up in a way to allow for the utilization of federal and state tax credits. However, this is also an area of weakness given that lower income households often do not fully benefit from these credits, if they benefit at all. As a result, monthly loan payments for low income households can be over twice as high as households that can fully take advantage of the credits. In Hawaii, this issue is offset by the relatively low average household electricity usage and relatively high utility rates, guaranteeing that even low income households receive some benefit from installing solar.
That being said, this limitation would likely cause issues in states with higher usage levels, requiring larger solar systems, and/or lower utility rates. While this does not take away from GEMS being applicable as a model for strategies to increase overall solar utilization, when it comes to programs specifically for low income households, a similar model would likely be better utilized other states in conjunction with grant programs to help lower the overall costs.
Last modified: August 9, 2019