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New York state directs more capital to solar power for low-income communities

The Empire State is revamping a grant model for clean energy funding, which has the potential for creative financing in underserved communities.

An inflatable lifesaver in New York City, New York.

An inflatable lifesaver in New York City, New York.

In May, George Floyd’s last words, "I can’t breathe," became a rallying cry in the nationwide protests against police brutality that followed his death. For environmental justice advocates, these words held an additional meaning. Communities of color are generally subject to disproportionate levels of air pollution, facing more harm from pollution than they benefit from the consumption of polluting goods, according to a study published in the authoritative Proceedings of the National Academy of Sciences (PNAS) last year.

This "pollution inequity" has an echo in the clean energy economy, where solar inequity runs rampant. As the total installed cost of residential solar has dropped over 50 percent during the last decade, rooftop photovoltaic systems have become a viable investment for many homeowners, reducing both energy bills and greenhouse gas emissions. But lower-income people rarely can access these benefits, and recent evidence suggests that this imbalance is present along racial lines as well.

The New York State Energy Research and Development Authority (NYSERDA) is trying to facilitate the adoption of solar among low- to moderate-income (LMI) people in New York through the relaunch of a fund called Affordable Solar and Storage Predevelopment and Technical Assistance. (The program is more commonly known by its solicitation code, PON 3414.) 

Through PON 3414, up to $10.65 million will go to providers of affordable housing and community organizations who propose projects that bring solar and/or storage to LMI households. The program builds upon a first version, which was opened in 2016 and issued roughly 20 grants throughout a two-year solicitation period.

LMI customers face numerous barriers in accessing solar

From a financial standpoint, obtaining solar is prohibitively challenging for low-income customers. Installing rooftop solar requires a significant upfront investment of more capital than most low-income people have on hand. An alternative is third-party financing through a lease or a power purchase agreement (PPA), but minimum credit score requirements prevent some customers from participating in these arrangements.

Furthermore, according to Robert Klee, a lecturer at the Yale School of the Environment and former Commissioner of Connecticut’s Department of Energy and Environmental Protection (DEEP), "you need a tax burden to take advantage of the tax code benefits." People with limited taxable incomes don’t benefit from tax savings, although they do see a drain on cash. 

People with limited taxable incomes don’t benefit from tax savings, although they do see a drain on cash.

Financing becomes trickier given the comparatively low rates of homeownership for low-income families and families of color. Renters have minimal ability to influence how their rooftops are used. When seeking savings, landlords prefer predictable solutions, leading them most often to fossil fuels.

Getting to this vista takes effort and builds expertise.
Getting to this vista takes effort and builds expertise.

A knowledge gap also prevents adoption of solar in low-income communities, where residents have been less exposed to solar. Klee explains that this is partly due to incentives that target customers in more lucrative locations. "They make more money more easily in white, wealthy suburbs," he says. And even when low-income people are approached, they often have been subject to exaggerated sales pitches, according to a 2018 Vote Solar report. As a result, many are distrustful of nebulous plans that promise energy bill reductions.

PON 3414 will fund predevelopment activities in LMI-focused solar projects

NYSERDA’s initiative aims to empower organizations to eliminate the logjams faced by LMI customers in accessing solar. According to Max Joel, a program manager at NYSERDA, "the impetus for originally launching PON 3414… was a recognition that LMI households face barriers to benefiting from solar above and beyond other households and businesses."

Each individual PON 3414 grant will provide a maximum of $200,000 to projects that will lead to solar installations on affordable housing buildings or community solar projects with significant LMI customer bases. The agency will evaluate proposals by looking at criteria such as the project’s scope, expected benefits to LMI customers, economics and team.

Importantly, the funds are intended for predevelopment, meaning only early-stage project activities are eligible. Processes such as securing financing, developing the project model, conducting feasibility studies and assessing sites can all be funded, although construction-based activities such as engineering and installation cannot.

The grants’ rules and structure can help strengthen communities and build more affordable solar capacity

In addition to encouraging projects that will allow LMI customers to reap the benefits of solar, PON 3414 is fortifying the affordable solar space in two other implicit ways. 

First, the initiative channels money into local communities. Eligible applicants include affordable housing owners and providers, community organizations and local governments. Daphany Rose Sanchez — a New York native and founder of energy equity consulting firm KC3 — emphasizes the importance of funding community organizations, specifically community development financial institutions (CDFIs) and community development corporations (CDCs). "They’ve already developed a relationship with the community, and they understand how to underwrite within these communities," she says. Funding them is an avenue to elevating the wealth within a local economy.

Second, the grant application encourages collaboration between the energy efficiency and affordable housing sectors. Sanchez explains that these two realms historically have been mostly discrete. Traditionally, she says, "incorporating solar or solar thermal is not a proactive thought process for affordable housing providers."

The grant application encourages collaboration between the energy efficiency and affordable housing sectors.

But in the case of PON 3414, "the funding opportunity was written and designed to encourage [applicants] to come in with technical service providers and consultants… and most of them did," according to Joel. The eligible applicants are affordable housing providers and community organizations, many of which have minimal experience in working on energy efficiency. Working with solar experts can help them ensure solar's benefits flow to LMI customers. 

The RiseBoro Solar Ownership Project, a former PON 3414 grantee, exemplifies the value of both funding local organizations and promoting cross-sector collaboration. Now over 40 years old, RiseBoro is a community non-profit that provides social services to four boroughs. Affordable housing has long been one of its focuses, but the organization more recently delved into sustainability. RiseBoro obtained the NYSERDA grant to study the feasibility of bringing solar into its portfolio of around 150 buildings. Ryan Cassidy, one of the project’s leaders, describes the process: "In the beginning, there were 150 buildings. We did a general feasibility study and found that only 120 of those were feasible, then got down to around 70 buildings."

Working with solar experts can help them ensure solar's benefits flow to LMI customers.

On its own, RiseBoro would have trouble owning solar installations. The out-of-pocket cost is significant for a cash-conscious nonprofit, the affordable housing space is rife with regulations and the organization has little experience with solar. The alternative, third-party financing, would provide only the buildings with a fringe benefit, and tenants’ energy bill savings would be a mere couple of cents per kilowatt.

RiseBoro’s co-developer, the National Housing Trust, devised a model that would make sure that tenants are solar installations' main beneficiaries. In this scenario, RiseBoro actually would act as the owner, working alongside an investor to receive eligibility for the solar tax credit and lessen the project's financial burden.

Once all savings are accruing to RiseBoro, the organization can reinvest in buildings and support tenants. Cassidy offers several possible uses of the savings, such as upgrading building facilities and equipment or holding campaigns to incentivize lower electricity usage among tenants. RiseBoro's commitment to funneling money back into the community unlocks another dimension of value to LMI customers beyond the direct energy bill impact.

RiseBoro’s project also illustrates how affordable housing organizations and solar experts can work together to build a project that brings maximum benefits to customers. Both RiseBoro and the National Housing Trust possessed a strong real estate background, but they also brought on Crauderueff & Associates, a solar developer, to do feasibility work. Cassidy explains, "We’re really good at building affordable housing, but we are not experts at solar. Crauderueff brought expertise on the solar component."

The second iteration of PON 3414 improves upon the original solicitation

The new version of PON 3414 maintains earlier strengths. It will continue to direct funding into local communities and foster cooperation between affordable housing and solar experts. But it also contains a number of key modifications, many of which draw on the experiences and feedback of prior applicants. For example, the grants still will use milestone financing — whereby money is doled out in increments according to predetermined milestones in the project timeline — but now allow for a $5,000 upfront payment.

The Clean Energy Group, a Vermont-based nonprofit, is well-versed in offering upfront payments for solar financing. The organization runs a Technical Assistance Fund, providing $5,000-$15,000 grants to clean energy projects that support LMI communities. Half of the grant money is offered upfront to the recipient. "The 50 percent aims to recognize that work goes into these projects even if they don’t get finished," explains Seth Mullendore, a vice president and project director at the Clean Energy Group. "Almost all the projects have gone to completion, but ones that fall out should be compensated for their time."

The $5,000 upfront offered by PON 3414 is a significantly smaller fraction of the total than offered by the Clean Energy Group’s Technical Assistance Fund. For Sanchez, however, "it shows that NYSERDA is moving in the right direction."

Feedback drove other improvements to the program, too. According to Joel, "[NYSERDA] made it explicit in the revision that work more on the planning level — partnership development, identification, determination of community needs — these would all be supported." Both the emphasis on planning-level changes and upfront funding are intended to help smaller organizations build the capacity to eventually complete a solar project.

The first version of PON 3414 also revealed the need for flexibility in projects’ development timelines. The expected timeframe for each project was 12 months, but nearly all grantees’ projects extended beyond this completion goal. In the current version of PON 3414, NYSERDA changed the target timeframe to 18 months and made clearer that the deadlines and milestones were adjustable if needed.

Anika Wistar-Jones is familiar with changing milestones as projects evolve. Wistar-Jones is the affordable solar program manager at Solar One, an environmental education nonprofit, and part of a team working with the Joint Ownership Entity of New York City (JOE NYC) on a former PON 3414-granted project. JOE controls hundreds of buildings across the city, aggregating smaller portfolios of individual affordable housing providers to achieve economies of scale.

Hoping to incorporate solar into JOE’s affordable housing portfolio, the team used the NYSERDA funding to do a feasibility analysis, searching for the 20 most viable buildings for solar installations. However, says Wistar-Jones, "Through our analysis… we found that almost all of the buildings were viable in some way. Instead of 20 buildings, we’re doing somewhere between 80 and 100."

The expanded scope of the project required more time and money. Although NYSERDA was unable to increase the grant amount, regulators approved ad hoc changes to the schedule and scope. Wistar-Jones notes, "We’ve had a number of extensions and amendments to make it fit the current project."

Another welcome change to PON 3414 was described by Joel in a June webinar. Joel explains, "A grant application no longer needs to conclude with the construction of a solar or storage project… If you had a grant application that was entirely focused on site identification or outreach to LMI households, that would be an acceptable application."

Sanchez views this change positively. "Whether solar will work depends on shading and the age and size of the roof," she says, "even though the assumption is that you can just put solar anywhere. But when we get into the nuances, that’s not the case."

Adam Flint worked on a project that initially received a grant through PON 3414, but the discovery that the project was not feasible prevented the team from receiving the funds. The director of clean energy programs at non-profit Binghamton Regional Sustainability Coalition, Flint assisted with predevelopment work on the Bainbridge Guilford Solar Access Project. This project began when the mayor of Bainbridge, a small village in southeastern New York, approached the non-profit with an idea for a community solar project in which low-income customers could participate. The physical aspects of the proposed site were promising, but further assessment after receiving the grant revealed poor project economics. "The circuit could only bear 350 kW, or maybe 370 kW," says Flint, "and when we ran the numbers with our partners at the time, they didn’t add up."

The schedule of payments decided upon by NYSERDA and the applicants specified that the first 25 percent of the grant amount would be given out upon the establishment of an interconnection agreement. Since the project proved unworkable, there was no interconnection agreement and thus no disbursement of PON 3414 funding to the team. The Bainbridge project demonstrates how the improvements in the current version of the grant — specifically, the available $5,000 upfront and willingness to fund activities without an eventual construction requirement — can compensate teams just beginning to determine if solar is feasible in their communities.

Other changes to PON 3414 include small language refinements and expansions of definitions to make the grant a more inclusive process. For example, in addition to solar projects, solar-plus-storage and storage-only projects are eligible. This, says Joel, is a reflection of the improving economics of storage in New York.

But when it comes to storage, Joel advised applicants during the webinar to take note of the made careful note of the difficult permitting environment for storage projects in New York. According to Seth Mullendore, the stringent regulations stem from the New York City Fire Department’s wariness of lithium-ion batteries, which must be installed outdoors and follow strict guidelines. Storage also presents other challenges, according to Mullendore. He explains, "There aren’t clear-cut revenue streams like with solar… Across the board, there’s a knowledge barrier."

Cash-strapped LMI communities can benefit from solar-plus-storage through lower electric bills and resiliency of buildings in the face of power outages.

Nonetheless, the addition of storage projects represents an important step for resilience and versatility, as a 2017 Clean Energy Group report touches upon the very low penetration rate of combined solar and storage projects in low-income areas. Cash-strapped LMI communities can benefit from solar-plus-storage through lower electric bills and resiliency of buildings in the face of power outages, such as when Hurricane Sandy whirled into New York in 2012.

The new changes to the predevelopment fund also include a wider definition of affordable housing and a more expansive category of project benefit recipients — applicants can submit proposals that benefit not only LMI customers but also environmental justice communities.

These upgrades make the current version of PON 3414 likely to be even more effective than its earlier counterpart, and the more-than-doubled pool of funds emphasizes the confidence NYSERDA has built when it comes to disbursing the grants.

Four years since its first solicitation period opened, PON 3414 has come a long way, although some applicants note aspects of the program that could use further refining. For example, the 18-month timeframe is still daunting. And while some applicants, such as Anika Wistar-Jones, appreciate the milestones for providing concrete deadlines, others, such as Daphany Rose Sanchez, see it as burdensome on non-profits, especially compared to the alternative of time and materials financing.

The ineligibility of engineering and construction activities proved frustrating to Adam Flint, and the maximum grant size of $200,000 also pales in comparison to total project costs that end up in the multimillions.

Solar is viable in New York, and storage is increasingly so. But market barriers continue to prevent LMI customers from accessing the benefits that wealthier counterparts can enjoy. Facilitating this access means that customers, communities, and the climate at large can all prosper on more even terms.

This story first appeared on:

Clean Energy Finance Forum

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