Tucson considers low-income solar program, but looks to start small

Tucson is looking into backstopping loans to low-income residents who want to install solar energy in their homes. A local solar company suggested that the city take steps towards creating a "solar empowerment program" that would by helping residents access small loans needed to install the energy-saving equipment.

The City Council voted unanimously Thursday to direct staff to research the possibility of a program that would lower the risk for banks and credit unions in lending to low-income homeowners who want a solar system. At a study session meeting, Kevin Koch, co-director of Technicians for Sustainability, pitched the idea of setting aside funds to offset possible losses from defaults on small solar loans.

Solar energy for middle-income homes is significantly supported by tax credits, but most low-income homeowners don’t qualify for those credits, Koch said. Instead, they need access to loans for installation, but many don’t have the credit ratings to qualify.

Koch suggested that the city set up a reserve fund to cover any losses. More loans for low-income households seeking solar have become available over the past decade, Koch said, and a reserve program would cost less than providing grants for solar installs.

Technicians for Sustainability awards grants to cover the cost of solar energy for households that fall below the federal threshold for low-income based on area median income, and they offer loans and plans that break monthly payments down to match what residents save with their solar energy system.

A loan loss reserve, however, would allow the company to put money aside without having to spend it unless a bank needs to cover losses from a loan for solar. The city of Tucson could do the same and may have other options including offering to underwrite solar loans, Koch said.

Koch previously pitched a loan loss reserve for solar energy to former Mayor Jonathan Rothschild, which led to a credit union piloting a now-popular loan program. That experience has led some local lenders to consider solar loans less of a high-risk product, Koch said.

A lot of solar loans are predatory, Koch said. Plans offered by door-to-door salesmen often promote monthly repayments that cost less than electric bills, but have terms that are as long as 25 years and interest rates as high as 8 to 9 percent masked as much lower interest rates.

TFS now works with a local credit union to offer $150,000 in loan loss reserves to fund around $300,000 worth of home solar energy systems. TFS got the idea after collaborating with a solar company in Boulder, Col., Koch said, and the idea was effective at boosting the credit-worthiness of low-income households "based on the fact the pool of money we have sitting inside the credit union is available to cover any defaults."

A loan for a residential solar energy system is usually about $10,000, Koch said.

Koch suggested on Thursday that the city consider a similar program, though it would be a small first step, he said. For every $100,000 that the city puts toward the reserve, they could help finance the installation of 15 residential solar energy systems.

“It is a small number, but it’s not an insignificantly small number,” Koch said. “Right now, we’re in a place where the industry and the community has not really figured out how to support lower income solar, at all.”

“Once you start a program, bigger foundations start to get interested in this,” he said. “There are a lot of people nationally who are interested in solving this problem of bringing equity into solar adoption.”

A single program can also “spark programs in other communities,” Koch said, and “gets the attention of foundations that put several million dollars in.”

About 30 percent of the solar energy systems that TFS sets up on homes are paid for through loans, Koch said. That’s a smaller margin than most. For other Tucson solar companies, about 90 percent of the homes they install with solar pay with loans. Some companies only install once a home has taken out a loan for solar energy, Koch said. 

Koch told the City Council that getting solar energy to low-income communities has been one of the tougher parts of making it more widespread in Tucson, saying they’re “one of the stakeholders that’s been more difficult to bring into the adoption of solar.”

An overhead view of Tucson would show that there are solar panels on rooftops all across town, he said, but fewer in areas like the South Side. Equity has been discussed in the solar industry for more than a decade, and there’s a myth that solar energy is meant for higher-income households, Koch said.

“We do systems all over town for all kinds of people,” he said. “I started out when solar was truly not accessible. Nobody even knew if it even worked, the equipment was very limited, and no one knew what you could use to install it.”

“Since then I’ve definitely seen a lot of people who don’t make a lot of money still set aside enough to work on solar,” he said.

The City Council gave staff 120 days or less to look into a loan loss reserve program and come back with a plan for approval.

Mayor Regina Romero, who installed solar panels in her home with the help of TFS and a city and Pima County program, said "Tucson is absolutely excited about the possibility of creating a solar empowerment program, which we see in other cities."

The city is limited, however, in what kind of program they start, she said. The city would have to take steps and make a plan if they wanted to work with TFS, but she said it's good that City Council is discussing policies specifically aimed at equity and climate action.

The mayor said she's been an advocate for an increase in federal funding for community block grants that focus on energy efficiency and conservation as a way of improving climate action at a household level.

The city has already been delivering those kinds of grants, but the mayor said that it would be a good time to at least take a look at a low-income solar program as they begin working on their "Climate Action Plan" to be carbon neutral by 2030. The mayor said that she sees the possible "solar empowerment program" as a "piece of the puzzle" for a successful climate plan.

"I think it would be time and adequate for us as the city to start looking at a solar empowerment program," she said. "It would be in addition to all the work we're doing with (energy efficiency and conservation block grants) and it makes great sense."