Can solar for low-income families work in Georgia’s tough market?

Georgia is a tough market for home solar. It’s even tougher if you’re trying to offer home solar to lower-income households at no upfront cost, and with monthly payments that don’t cost more than what their solar power enables them to save on their utility bills.

But Andy Posner, CEO and founder of Capital Good Fund, thinks that Georgia Bright, the pilot program his nonprofit and the cities of Atlanta and Savannah launched in September, may have the formula to make it happen.

The formula starts with a nonprofit that’s experienced in managing and financing energy improvements for lower-income households — something Rhode Island–based Capital Good has been doing for the past 15 years, most recently with its DoubleGreen Solar Loan program in New England.

Then it adds in a provision from the Inflation Reduction Act that allows nonprofits to convert tax credits for solar investments into lower-cost solar leases — a new model for Capital Good, a community-development financial institution that primarily works as a nonprofit lender.

To offer leases that lower-income households can afford, Capital Good and its municipal partners also use utility energy-efficiency rebates, renewable energy credits and low-income and energy tax-credit adders wherever possible.

And to avoid putting the costly burden of going out and finding customers on the shoulders of their solar-installer partners, Georgia Bright is tapping into a network of community organizations willing to promote the program to their neighbors, Posner said. Those organizations can also vouch for the program’s credibility in communities that have been targeted by predatory solar businesses, he noted.

So far, the formula seems to be working, if only at a small scale. Since it launched in September, Georgia Bright has signed contracts to install solar panels on 21 homes, at an average project cost of $25,000, for a typical starting lease payment of $51.85 per month for solar-only systems that will increase by roughly 2.7 percent per year, Posner said. That’s low enough for customers to save about 10 to 15 percent on their utility bills compared to what they were paying before, even with monthly lease payments included, he said.

That’s a good deal for families that lack the cash or credit access to afford systems like these on their own.

Now, to scale from dozens of households to the 8,000 installations it’s targeting over the next five years, Georgia Bright is seeking $250 million from another Inflation Reduction Act program that’s designed to expand solar access for low-income communities across the country.

Eight thousand homes in five years might not sound like a lot. But ​“to put that into context, there are roughly 11,000 rooftop residential installations in all of Georgia today,” Posner said.

Georgia Bright has also launched a program for community centers, nonprofit agencies, houses of worship and other entities that are seeking a cost-effective way to go solar and reduce their bills. 

And Capital Good Fund, which now offers a variety of low-cost loans in other states, is already looking to expand the Georgia Bright model outside of the state, Posner said, pointing to ​“discussions with lenders to enter Pennsylvania in April,” as well as conversations with approximately 10 other states.

Making low-cost rooftop solar work in a tough state

Georgia ranks in the top 10 states in terms of overall solar power growth, but that’s driven by utility-scale investment. Meanwhile, it’s among the worst states for residential solar.

That’s partly due to cheap electricity rates that reduce the value of solar, and partly due to Georgia’s lack of net-metering incentives that would allow utility customers to sell their excess solar power back to the grid.

That makes it a lot harder for a solar program geared at lower-income residents to make financial sense in Georgia compared to the New England states where Capital Good launched a $7 million solar loan program in 2021, which have electricity costs roughly twice as high as Georgia and offer far more valuable net-metering incentives, Posner said.

But when Alicia Brown, interim sustainability director for the city of Savannah, read about Capital Good Fund’s low-income solar loan program in 2022, she emailed the nonprofit with this message: ​“If you want to do some good, come to the Southeast, where there’s very little support.”

Savannah has set a 2035 target for achieving 100 percent renewable energy for its population of nearly 150,000, nearly one-fifth of whom have an income below the federal poverty level, according to the U.S. Census Bureau. Brown’s department works with community groups and utility Georgia Power to help lower-income residents access the utility’s energy-efficiency retrofit rebates.

“We have some parts of Savannah where people are paying 10, 15, even 20 percent of their income in energy,” she said. That’s well above the utility costs that mark a household as facing an ​“energy burden” that can force them to choose between paying for heating and air conditioning and paying for food and medicine.

Rooftop solar can help reduce those energy burdens. But the economics just don’t work for companies like PosiGen that specialize in solar for low-income households, she said. ​“They said, ​‘We can’t do it without net metering.’ I understand that — they’re a for-profit company.”

Nor were many nonprofit solar organizations like Solar United Neighbors actively targeting Georgia and other Southeastern states with no net-metering policies in place, she said.

That makes Georgia Bright a step into the unknown for all the partners involved, Brown said. ​“We’ve built something where the private sector…and most nonprofit institutions weren’t going to go.”

Pulling the plan together

For Georgia Bright, the first step was to tap into a new opportunity for nonprofits unleashed by the Inflation Reduction Act, Posner said. Those are the ​“direct-pay” provisions in the law that allow nontaxable entities such as nonprofits and city governments to collect the value of clean-energy investment tax credits in the form of checks from the federal government.

Many lower-income households don’t pay enough in taxes to recapture the full benefit of traditional rooftop-solar tax credits. ​“Direct-pay transfers the economics to us,” he said. ​“It makes it easier for us to raise the capital and lowers the starting lease price. ” 

Where possible, Georgia Bright is seeking out tax-credit ​“adders” created by the Inflation Reduction Act that allow it to boost the value of those tax credits beyond their starting point of 30 percent of the value of an installation, he noted. One example is the handful of installations completed so far that have been able to secure low-income bonus credits that add another 10 percent discount. Those bonus credits are a limited source of funds that are being sought across the country, so Georgia Bright isn’t relying on them, Posner said — but it’s getting them where it can.

Cutting costs for the solar installers Georgia Bright works with — Be Smart Home Solutions, Sunpath Solar and Better Tomorrow Solar — is another key step, Brown said. Georgia Bright’s network of community groups and volunteers have taken on the responsibility of securing customers willing and able to install solar.

In other words, ​“we guaranteed the deal flow,” she said — a big deal for solar installers for whom the process of finding and signing up customers typically makes up about a fifth of their total costs. The community groups finding customers aren’t doing it for free, she noted: Partner organizations get 3.25 percent of the project cost for every lead they bring in.

All of these factors combine to drive down the cost of projects, as well as the portion of those costs that Capital Good Fund has to borrow money to finance, which helps reduce the interest rates for the loans it takes out, Posner said. As Georgia Bright does more projects, and the households it helps continue to make monthly lease payments, that track record should allow Capital Good Fund to return to lenders and ask for even lower interest rates based on its successful track record, he said. 

At least that’s the hope. 

“Everything we’re doing now is to prove the model to hit the ground running when EPA makes its decision,” he said, referring to funding from the Environmental Protection Agency’s Solar for All program, the Inflation Reduction Act program that Posner hopes will allow it to rapidly expand this model. 

Going big with Solar for All 

Competition is tight for the Solar for All program: The EPA has received applications totaling more than $38 billion so far. Its pool of funds is just $7 billion.

But Georgia Bright is hoping its $250 million grant proposal — or another $250 million proposal submitted by the Georgia Environmental Finance Authority that includes a model that closely matches the Georgia Bright structure — will end up winning a significant chunk of federal money.

If that happens, Georgia Bright is preparing to quickly expand its pipeline from dozens to thousands of projects, Brown said. It’s also structuring its leases to meet the Solar for All program’s guidelines.

For example, Georgia Bright is now helping households save about 10 percent on existing utility bills, while Solar for All requires that programs using its funding achieve at least 20 percent savings on their bills. To make that happen, Capital Good Fund will use Solar for All money as part of its ​“capital stack” to reduce the risk to lenders supplying the nonprofit with loans to buy solar equipment and pay installers, Posner explained — a move that would lower the interest rates for projects.

Take the example of a $150 million pool of solar project funds, of which $60 million comes from Solar for All. ​“Effectively, we’ve got $60 million that’s interest-free” and committed to covering any losses that might arise if customers can’t keep paying their leases, he said. That allows lenders to avoid charging Georgia Bright higher interest rates to cover the potential risk of customer nonpayment, which in turn means ​“we don’t have to charge as much on the leases.”

Georgia Bright is also hoping to tap into other sources of low-cost finance, he noted. The Inflation Reduction Act created a $20 billion Greenhouse Gas Reduction Fund that will be administered by EPA and given out to national and regional entities seeking to use it to lower the cost of clean energy and sustainability investments in lower-income and disadvantaged communities like those Georgia Bright is doing, he noted. 

Posner also hoped to extend more savings to customers who choose to install batteries alongside solar systems. So far, more than half of Georgia Bright’s households have chosen to add batteries, he noted, even though the extra cost of those batteries, which brings the average lease payments to $113 per month — has largely erased the bill savings for those who’ve chosen it. 

Savannah is a coastal city subject to hurricanes and flooding that can knock out power lines, as happened during Hurricane Idalia last summer, and these characteristics make batteries more appealing to residents, Brown said. 

“When you’re income-constrained, losing an entire refrigerator or freezer of groceries can be financially devastating,” she said. Elderly or ill people also need electricity for lifesaving medical equipment or air conditioning during heat waves, she noted. 

That was a big concern for Marc and Margot Thomas, Georgia Bright’s first customers in Savannah. 

“We want to reduce our consumption of carbon-based power as much as possible — that’s a theoretical, moral proposition,” said Marc Thomas, a 77-year-old retired federal government worker. ​“Our selfish reasons are the cost of power and the continuity of power.” 

In the 12 years he and his wife have lived in their Savannah home, they’ve experienced at least four power outages that lasted days, he said. ​“I have very bad sleep apnea, and I use a breathing machine at night,” which needs electricity to work. ​“I’ve got backup batteries for it — but that means I’m always double-checking them to make sure they’re healthy and holding a charge.”

Adding a battery to their solar array has increased the cost of the lease that the Thomases have signed with Georgia Bright, ​“enough so that I don’t expect the savings on my electric bill to fully offset the cost of the lease,” he said. ​“So I’ll be paying a little bit more. But that increment there, I view as being because of my health needs. It’s in the domain of health insurance. It is avoiding a problem and avoiding a different kind of cost.”

Georgia Bright is looking for ways to structure its financing and operate solar-plus-battery systems to ensure that customers can still hit Solar for All’s 20 percent savings target, Brown said. It’s also looking at the potential for customers to sign up for Georgia Power’s time-varying rate program, which offers low electricity rates during most hours with high rates during summer weekday afternoons — times when batteries could store solar power to reduce household energy consumption for extra savings.

At the same time, Thomas is prepared for his electricity bill to keep rising. Over the past two years, ​“I’m using about the same amount as a year ago and the year before — but the cost keeps going up.” Much of that increase is driven by Georgia Power’s successive rate hikes to recover the cost of building its expensive expansion of the Vogtle nuclear power plant.

Posner highlighted those steady price hikes as one factor, among many, that is making solar power more attractive — and pushing communities to find ways to overcome the upfront costs of installing it. 

“A lot of folks are saying, ​‘Huh, I can lock in this lower-cost energy through a solar lease.’” The trick is making it possible for everyone who comes to this conclusion — especially those with lower incomes and higher energy burdens — to act on it.