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Solar, the benefits are big but the funding is not

In the green world, the "benefits of solar" is bandied about as dogma. But exactly what kind of benefits are we talking about? Economic? Environmental? Social? All of the above? As part of preparing to moderate the Affordable Housing panel at the recent Solar Power International conference, we tried to answer this question by running a few simple analyses.  If the sun powered every affordable housing development in the country, how many kilowatts of energy could we create, what would that energy be worth, what kind of green economy stimulus would result, and what would this do for climate change? Our calculations show that if all of the 75,000 units of affordable housing built annually were designed to be fully powered by the sun, it would result in a 2 billion dollar annual investment in alternative energy and avoid 66,578 tonnes of carbon emissions each year.  These are big numbers with correspondingly large benefits to the housing developers, regional economies, and the global climate.  So why don't we see solar on every development? In a nutshell, it's because solar is still relatively expensive and it takes a long time for the economic benefits to flow back to the developers - at least if you are paying full price. The recently extended federal business investment tax credit results in about a 30% reduction in cost, but in most places, and for most affordable housing developers, the need to raise the remaining funds is still a major hurdle. Both numeric and anecdotal data shows that in places where incentives like rebates and tax credits exist, developers are well on our way to realizing the potential of solar. In California for example, the strong, long-term incentives have made powering a development's common areas with solar nearly standard practice. Going a step further, some developers are pursuing the aggressive goal of net zero. In other states like Massachusetts, support for solar has come through a one-time catalyst fund distributed to developers willing to pilot solar. Through the affordable housing program of the Massachusetts Technology Collaborative, 8 development partners were awarded 25 million several years ago to bring a solar component to 60 affordable housing projects.  These efforts have been effective in demonstrating to the solar industry that affordable is a viable, and potentially lucrative market. But there are still more hurdles to cross. Two of the biggest are in the decidedly unglamorous terrain of the large government bureaucracy.  First is the utility allowance.  Traditionally housing authorities are responsible for determining what portion of the housing burden is the result of utility expenses.  These "utility allowances" are deducted from the allowable housing burden to determine what owners can charge tenants for rent. So it follows that if utilities are lower due to use of alternate energy sources, the utility allowance should be reduced and the owner would thus be able to increase the rent by a comparable amount. With more revenue the developer could then pay back the loans used to purchase the photovoltaic (or solar thermal) system.  This is a win for everyone: the tenants get more stable energy costs, the developer gets a more stable asset, green jobs are created, and less carbon ends up in the atmosphere.  Until recently this approach was been simple in theory but very difficult to apply in practice. The good news is that the IRS recently expanded the group of organizations that can develop a utility allowance to include the utility companies, thus giving developers options. Setting what may become a national example, the state of California is about to approve a new methodology that includes the ability to account for onsite generation in the utility allowance. It is expected that the state's utility companies will take the lead in preparing, or at least verifying, this type of analysis.  The improved accuracy of this schedule will allow developers with energy strategies to get full credit for their innovative efforts in their pro-forma. The other issue is metering. Due to either state or local regulation, each individual dwelling unit is usually required to have a separate meter and inverter to account for the electricity generated for, and used by, the unit. Doing this adds cost and complexity in design and construction and precludes aggregating energy use and production across multiple dwelling units during operation.  For example if one apartment has a net gain of energy one month it can't be shared with an apartment that has a net loss.  Several years ago, Massachusetts figured out a smart way around this through "neighborhood" or "virtual" net metering.  In this situation all the energy generated is accounted for at a single meter and the credits produced are then spread "virtually" to the individual units on their monthly bills. This approach simplifies the PV system design and dramatically reduces the number of inverters. Just last week the California Public Utilities Commission adopted a similar approach, which greatly increased the odds of there being more net zero affordable housing projects in the near future. By removing these barriers we can expect an accelerated rate of solar adoption in California and other states that put in place similar regulations. However, there still needs to be the base level of support provided by the federal tax credit and state incentives.  Only by combining a progressive regulatory environment with predictable and sufficient rebate programs will solar cease to be a novelty and instead become as conventional as windows, lighting, or appliances.  When this occurs we can talk about the benefits that solar is providing, instead of thinking wistfully about missed opportunities. What do you think? Leave us a comment. ———- Walker Wells, AICP LEED AP, is Director of the Green Urbanism Program at Global Green USA and the editor and co-author of Blueprint for Greening Affordable Housing.