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Jun 11, 2012

PV for All: Low-Income Housing Residents Going Solar


 Posted with permission from the National Renewable Energy Laboratory (NREL). This NREL article/blog is not to be used to promote any commercial product or service or to imply an endorsement regarding the same by NREL or the U.S. Department of Energy.

Until recently, the low-income housing community has been a tough nut for the solar industry to crack.

Low-income housing developments have historically avoided going solar due to the obvious difficulties of incorporating high-cost, discretionary photovoltaic (PV) systems into affordable housing. However, a unique mix of local, utility, and federal support combined with a little financial creativity allowed a community in Colorado to demonstrate the application of PV into a low-income housing program.

Here's how it worked.

Low Income Housing Denver

                           Figure 1. Solar PV and a low-income housing development in Denver, Colorado [1]

It Takes a Village

In northeast Denver, Colorado, a partnership of community stakeholders came together to pilot the first U.S. low-income housing project to take on solar. The partnership itself was a large and diverse collaboration of various interests groups. No less than six organizations were involved in the effort, including:

  • Northeast Denver Housing Center (NDHC)
  • Del Norte Neighborhood Corporation
  • National Renewable Energy Laboratory
  • Bella Energy Groundwork
  • Denver Governor's Energy Office of Colorado.

Collectively, these organizations put the pieces together to develop the Whittier Affordable Housing Project (WAHP). Within WAHP, 30 affordable housing rentals across 12 buildings received residential-scale solar PV systems [1]. Figure 1 shows three of these systems.

One of the key enabling factors of the low-income solar housing is also evident in Figure 1; each of the housing units selected in the program is smaller than the average American home and has undergone recent energy efficiency retrofits (e.g., insulation, lighting, and building envelope improvements). Because of these small and energy efficient housing characteristics, the WAHP program was able to utilize relatively small 1.88-kW systems to offset approximately 85% of the occupant's energy usage. The small size of the individual systems allowed for a greater number of system installations across WAHP [1].

The Financing Puzzle with One Wildcard

Like most renewable energy financing arrangements, the partnership utilized any and all available revenue streams to have the PV system's economics pencil out. First, the project was set up for the first six years as a third-party financing mechanism, where a private tax-paying investor owns the PV system to take advantage of the federal 30% investment tax credit and accelerated depreciation benefits. Second, WAHP received a $2/Watt upfront cash incentive from the local utility Xcel Energy that significantly bought down the cost of the PV systems. Xcel also agreed to purchase the renewable energy certificates (RECs) at a healthy $0.11/kWh for the first 20 years of the project's operation. Additionally, the low-income housing residents paid $0.08/kWh for the energy produced by the PV systems. By comparison, the average electric rate for NDHC residents was $0.095/kWh, thus the PV is projected to save NDHC money over the course of the 20-year contract period.

Even with these large revenue streams, there was one more puzzle piece required to complete the financing [1]. NDHC was successful in applying for a $107,500 grant from the Governor's Energy Office of Colorado to finance the project. The NDHC award was immediately loaned to the investor to provide the final revenue piece to make the project viable. The investor, in turn, repays the loan with interest to NDHC over six years. At year seven of the project, NDHC will buy out the investor using the loan and interest repayments and will own the low-income solar project [1]. Figure 2 illustrates the lifetime cash flows between the investor and NDHC.

Financing Graph

                                Figure 2. Lifetime cashflows of Whittier Affordable Housing Project [1]

Good for the Goose and for the Gander

Although not all tenants in NDHC received PV systems on their rooftops, WAHP program designers also implemented several community-wide programs to broaden the overall appeal. First, a PV installation training and education program was created for low-income residents. From this training program, several community residents were hired by a local PV installer. Second, a neighborhood-wide energy conservation incentive program was established and funded through savings from the PV installation [1]. Lastly, the community was able to showcase its program as a first-of-a-kind in the nation with successful implementation.

Despite WAHP's use of the one-time grant to fully fund the program, it was intended for the model to be a roadmap for other communities to follow. Since the development of WAHP, there have been sizable reductions in both renewable energy subsidies as well as PV system prices. Therefore, other communities will need to customize their program to take advantage of local financial strengths and resources, but WAHP demonstrates the successful application of PV to all income classes.


[1] Dean, J.; Smith-Drier, C.; Mekonnen, G.; Hawthorne, W. "Integrating Photovoltaic Systems into Low-Income Housing Developments: A Case Study on the Creation of a New Residential Financing Model and Low-Income Resident Job Training Program," September 2011. Accessed April 23, 2012.

Paul Schwabe is an Energy Analyst with the National Renewable Energy Laboratory’s project finance team and has significant expertise in wind and geothermal projects. He has over 10 years of experience in the energy industry, including electricity market analysis, natural gas forecasting, and financial modeling. 


Showing 1-5 of 5 comments

June 12, 2012

Last year I showed how this couold work via the LIHEAP programs with states that offers $5 Billion in low income energy support payments to cover the cost of electrical power and gas energy costs to heat and offer electricity to Low income families who can't afford to pay their bills. I showed clearly that they can't get a return on that funding doing the same thing year after year, and the costs of the program rise every year, forcing Congress to raise the give-away of Billions to utility companies that would otherwise take a loss. I told them, that taking just 10% of their funding to pay for Low Income supporting Solar Energy Installations, would reduce both present and future costs to the Federal government and to state goverments that match such costs...I am glad to see Colorado take their approach, but mine is better, because it provides a return on investment, not a give-away!

June 14, 2012

"Additionally, the low-income housing residents paid $0.08/kWh for the energy produced by the PV systems. By comparison, the average electric rate for NDHC residents was $0.95/kWh, thus the PV is projected to save NDHC money over the course of the 20-year contract period."

Wait, NDHC residents are paying nearly $1/kWh?

June 14, 2012

A couple of thoughts about solar PV.

First, I wonder if we would make more friends and influence people if the US Army gave away small solar PV systems, LED lights, and training in Afghanistan. Bring them up to a moderate level of living, not try and bomb them into the stone age, or installing an electrical infrastructure that other's shoot up and destroy.

Second, I'd like the US government (society in general) to auction off contracts for X kilowatt hours of electricity installation each year for the next few years, on the theory that producers would drive down their own install costs faced with a guaranteed contract and competition. The parallel approach in Germany and Spain being the feed-in-tariff.

June 14, 2012

OK, this sounds great. But ya gotta fix that typo: $0.95/kWh (page 4 of the pdf indicates the correct figure: $0.095/kWh).

You had me reading that paragraph four times before I realized that number had to be wrong... I see that figure confounded Ms. O'Brien (below), too.

Nice work, though. I wonder if we could pull this off in Detroit where we get a lot less sun (more wind, maybe).

I'm curious, too, how you located and vetted a "private tax-paying investor." (I see on page 3 of the pdf it was a "Denver-based investment company.")

Thanks for the inspiration. Cheers.

June 19, 2012

Hi all -

Thanks for the great comments. And great catch with the typo! The sentence should read: "the average electric rate for NDHC residents was $0.095/kWh" (not the much more expensive $0.95/kWh).

Jim I can follow up with your investor question shortly.


Paul Schwabe

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