For retiree Lisa Ray Clarkson, Norfolk offered the ability to own a house that wasn’t available in her prior life in New York.
Putting solar on that house — both for environmental reasons and to reduce her electric bills — was a bit trickier.
“When I purchased my home, I was looking for a company, and every time I would call one, they would tell me that my income wasn’t high enough to have the solar paneling installed,” she said.
This year, Clarkson may finally get her panels as a new frontier for solar installations opens in Virginia, one that could see the placement of more panels in low-income neighborhoods.
Rooftop solar, while capable of significantly reducing electricity bills over time, has long come with steep upfront costs. And in Virginia, where electricity markets are regulated by the state, alternative ways of financing solar have in many cases been blocked by laws intended to protect the utilities’ customer bases.
In 2020, however, the landmark Virginia Clean Economy Act ushered in a change to those financing options. Among a host of sweeping measures designed to transition the state’s electric grid to 100 percent renewables by 2050, the law also allowed the use of a financing tool known as the power purchase agreement to install solar or wind power for low-income residential customers.
“One of the central goals of the Clean Economy Act was to deliver clean energy to all Virginians and help low- and moderate-income consumers access that as well,” said Harry Godfrey, executive director of Virginia Advanced Energy Economy and one of the key architects of the bill.
For Ruth McElroy Amundsen, a NASA engineer and solar investor who over the past five years has become one of Hampton Roads’ primary evangelists for rooftop solar, the new availability of PPAs for low-income projects like Clarkson’s is a game-changer.
“It is a great way to leverage some of the private wealth in our state and use it to install solar and lower utility bills for residents of marginalized and low-wealth communities,” she wrote in an email. “I don’t think most people realize this financing method exists.”
Restrictions on residences
Power purchase agreements have been allowed in much of Virginia since 2013, when the General Assembly passed a law creating a pilot program in Dominion Energy and Appalachian Power Company territory.
Under a PPA, a developer installs solar panels on a customer’s property and then sells the energy back to the customer, usually at a lower price than that offered by the utility.
The tool has been particularly popular among schools, which due to their tax-exempt status cannot take advantage of federal solar tax credits and see PPAs as a way to decrease energy costs without major upfront costs. According to records maintained by the State Corporation Commission, more than two dozen school systems around the state have struck PPAs with non-utility companies to install solar to date.
Until 2020, however, statutory restrictions effectively edged out the use of PPAs to put solar on residential homes. No solar installation of less than 50 kilowatts was eligible for a PPA, the law said. According to a recent report from the Lawrence Berkeley National Laboratory, the median size of a residential rooftop system in 2020 was 6.5 kilowatts — meaning that most homeowners couldn’t use the financing tool. (An exception did allow tax-exempt institutions to take advantage of smaller PPAs.)
A push for panels in Norfolk
Amundsen, who first began working with PPAs as part of a successful effort to get solar for the private Norfolk Academy, had been eyeing residential solar for some time.
In 2019, she founded the Norfolk Solar Qualified Opportunity Fund, which used PPAs to install solar on businesses and nonprofits in qualified opportunity zones, a federal designation for economically distressed communities that allows certain new investments to get tax breaks. The company has since installed more than $1 million worth of solar panels in the region, but Amundsen said she has always wanted to do residential projects.
Commercial installations are important, she said, but “it’s not having as direct an impact on the energy burden of the marginalized communities.”
After the Virginia Clean Economy Act went into effect July 1, 2020, Amundsen jumped at the chance. So new was the idea that when she first contacted the SCC in January 2021 about low-income residents participating in the PPA pilot, she was initially told the program “does not contain any specific provisions for low-income customers.”
Eventually commission staff came back to her to say that “this is totally unprecedented, but this totally works,” she said.
How it works in practice is that the fund (or a second company created by Amundsen called SunSpots, LLC that handles projects in areas outside opportunity zones) signs a PPA with the homeowner and then installs the panels on the house. The resident pays the fund for the electricity the panels generate while paying the power company the reduced bill. Meanwhile, the fund takes advantage of federal tax credits and depreciation to recoup roughly 60 percent of its initial investment. After about seven or eight years, said Amundsen, the homeowner will have paid off the remaining cost of the panels and will own the array.
There are, of course, risks to both parties: an unscrupulous company could offer homeowners contracts with unfavorable terms or install panels incorrectly. On the other side, a homeowner’s death prior to the panels being paid off could leave the company in the lurch, or a house sale could offer complications.
Amundsen said that for herself, “I’m really only trying to make my money back. I’m not trying for large profits. I’m just trying to get my money back in seven years.”
Slow buy-in but big hopes
Amundsen aims to install solar on five to 10 low-income homes per year using PPAs, but so far buy-in has been slow.
One installation, the first use of a PPA for rooftop solar on a low-income household, began generating power in May. Clarkson’s project is still working through the approval process.
Still, she said, “I felt there was more opportunity than anything else” in the PPA arrangement. Solar, she added, is “for our future and for the betterment of our future.”
Amundsen said she’s hopeful other investors will see potential in developing residential solar for low-income communities.
“I’d love to see any low-income house with a roof that was even in the slightest way suitable for solar with solar” installed, she said. “I know so many people who want to do good with their money. This is something that’s really concrete, and it’s not a donation. It’s something you can do with your wealth without giving it away.”
This story originally appeared in the Virginia Mercury. It is reprinted here under a Creative Commons BY-NC-ND license.
Sarah is the Virginia Mercury's environment and energy reporter, covering everything from utility regulation to sea level rise.