Solar cooperatives are becoming a solution for low-income families who want to access renewable energy

Rooftop photovoltaics has long been the domain of the wealthy. According to a report by the Lawrence Berkeley National Laboratory, photovoltaics supporters are perceived as white and affluent compared to the broader public.

The number of households installing solar power across the country may be much higher, but millions of low-income homeowners don’t have enough capital to cover the upfront costs. Although price varies depending on location, incentives and the type of solar panels, a typical 7-kilowatt rooftop solar system can cost between $17,400 and $24,000.

It can take many years to break even on such a huge investment, but because panels typically last at least two decades and their costs are falling quickly, homeowners can save thousands of dollars on their energy bills – If they can find that starting capital.

For those who can’t, there are several emerging alternatives. The growing solar cooperative movement is helping low-income households access financial benefits while decarbonizing the energy sector.

Solar cooperatives are groups of property owners who band together to build small solar projects for their communities. “It’s like putting panels on your own roof, except you put them somewhere else with a bunch of other people,” says Dan Orzech, CEO of Oregon Clean Power Cooperative Revelator.

Once installed, the electricity generated by the panels is fed into the grid, and utilities pay for that energy through a system called “net metering,” which allows cooperative members to reduce their energy bills. Members of solar cooperatives own the solar panels and therefore can take full advantage of federal and state incentives.

Building a solar cooperative can be a difficult process, often made easier by organizations like Orzech and others, including Co-op Power and the People’s Solar Energy Fund, to name a few.

One of the largest organizers of solar cooperatives is Solar United Neighbors, which since 2007 has helped 8,400 people across the United States install more than 70 megawatts of solar energy.

The nonprofit is seeing growing interest in solar cooperatives as people want to lower their energy bills and are “concerned about the climate and the legacy they will leave to their children and grandchildren,” says communications director Ben Delman.

But it is not everything. “Some people also worry about the micro-effects of climate change, like what happens when a hurricane hits and the power goes out,” he says. “We’re seeing a lot of interest in Florida because you can combine solar power with batteries and keep the lights on in the event of a power outage.”

Different approaches

Organizers of photovoltaic cooperatives follow various models, but usually bring together several dozen families and help them negotiate a contract with photovoltaic installers, who often offer wholesale discounts. They also advise them on federal tax credits as well as solar incentives at the state and county levels, and help them secure loans, grants and other forms of financing from local governments and investors.

They are also trying to ensure that low- and moderate-income families have access to solar energy. To this end, Minnesota’s Cooperative Energy Futures does not require credit checks or income verification, “because this is a barrier that prevents many low-income households from participating,” says Timothy DenHerder-Thomas, the organization’s CEO.

Their approach seems to be working: Between 38% and 50% of the approximately 700 people who subscribe to their solar projects are economically disadvantaged.

“Paying $25 to $30 less on your energy bill each month may not seem like a lot, but it’s money that could be spent on groceries or medicine,” he says. “It helps people who are struggling to make ends meet.”

Benefits also apply to non-members. For example, Cooperative Energy Futures tries to hire minority-owned companies to install solar panels. “There are also contractors and workforce development partners that provide employment for Black and Brown workers,” adds DenHerder-Thomas.

Oregon Clean Power Cooperative takes a different approach, based on community share offerings, which typically allow people who “want their money to do something positive for the community” to invest about $7,000, Orzech says. The organization matches these investments with grants, tax credits and donations to fund local solar plants and cooperatives. Community solar projects are small solar farms owned by a third party and typically offer fewer economic benefits, but are ideal for renters.

The cooperative is currently working on a solar project consisting of a 75 kW photovoltaic system and batteries that will reduce energy costs for low-income groups in the town of Talent, which was partially destroyed by the Almeda forest fire in 2020.

“This will allow them to reduce their electricity bills by 50% to 75%, but it will also have some, although small, positive impact on the entire planet,” says Orzech. “I think it really gives people a new sense of power.”

The organization has also helped churches, libraries, schools and at least one farm finance and develop solar projects. The Oregon Shakespeare Festival Community Solar project was selected as a winner of the Sunny Awards by the U.S. Department of Energy for its efforts to increase access to clean energy among disadvantaged communities.

Ultimately, solar cooperatives could potentially help lower electricity prices for everyone because they are typically located in urban areas and don’t require expensive transmission infrastructure to distribute power, says Crystal Huang, co-founder of Oakland-based People Power Solar Cooperative.

The organization argues that the current system, in which utilities produce energy and distribute it to households hundreds of miles away for a fee, is “inefficient, overpriced and unreliable” and has a huge impact on the environment.

Instead, People Power Solar Cooperative envisions using solar cooperatives to create a non-profit, decentralized energy system.

“Our relationship with energy doesn’t have to be the same as consumers,” Huang says. “We can be part of the cooperatives that own the energy and completely redesign what the energy system looks like.”

Increasing your efforts

Stakeholders say demand for solar cooperatives is growing rapidly, thanks in large part to the Biden administration’s efforts to increase local solar production from 3 gigawatts in 2020 to 20 gigawatts in 2025 and provide clean energy to five million families. This goal is part of the Justice40 initiative, which aims to ensure that disadvantaged communities receive 40% of the overall benefits from climate and clean energy investments.

Rooftop photovoltaics in California
Rooftop photovoltaics in California. Photo: Thomas Hart, (CC BY-NC 2.0)

Additionally, the Inflation Reduction Act passed last year provides local solar projects with a 30% tax credit and additional benefits for projects in low-income communities or on tribal lands.

“The Inflation Mitigation Act is a game changer for solar energy in the United States,” Orzech says. “Previously, we had to find tax equity investors and sign power purchase agreements. The same model that large solar investors used, but scaled down to a community level. It took a lot of work, but these regulations make it easier to take advantage of tax breaks for photovoltaic energy.”

Growing threats

States such as New York, Massachusetts, Minnesota and Illinois are also helping solar cooperatives with net metering laws that pay a fair price for excess energy generated by solar projects and fed back into the grid, stakeholders say.

“You basically get one-for-one credit. The value of one electron is equal to what the media compensates the producers,” says Delman. “But some utilities are essentially monopolies. They don’t like competition from rooftop solar.”

That’s what’s happening in California, where investor-owned utilities recently reduced the price they pay for solar energy fed into the grid by residential solar projects by about 75% and introduced a monthly fee for owners of rooftop solar panels. The reduced rate will only apply to future projects.

The changes effectively limit the incentives that drive solar development and will likely put solar energy out of reach for low-income people in the Golden State, Huang says.

“Utilities are stopping solar, or on-site solar as a whole, because it threatens their very lucrative business model. It threatens their existence,” he says.

California is not alone. Many other states are revising their net metering policies or adding fees and charges that effectively undermine the economic benefits of solar PV to households and, by extension, solar cooperatives.

The Carolinas, Indiana, Michigan, Arizona, Utah and Louisiana have implemented these types of policies, while Arkansas, Idaho, Virginia and Washington state are considering similar measures, says Autumn Proudlove, deputy director of policy and markets at the North Carolina Clean Energy Technology Center.

“I think ultimately residential solar will continue to grow, especially with incentives from the federal government, but state policies reduce the value of what customers receive,” he says. “This makes solar energy less accessible to low-income communities because it is not as valuable in new structures unless you add batteries to your system.”

Fortunately, battery storage costs are also falling, thanks in part to tax breaks from the Inflation Reduction Act, and states like Illinois, New Hampshire and Maryland are offering additional incentives.

As a result, both residents and cooperatives are more willing to install batteries to use all the energy produced by their panels, rather than feeding it into the grid at a reduced price.

“These are my predictions,” says Orzech. “But let’s see what happens.”

This story was originally published by Revelator.