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A Solar Market Niche You May Have Overlooked: Low- and Moderate-Income (LMI)

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There’s a growing trend in the solar market that some solar contractors may have overlooked: moderate- and low-income households as solar customers. As the cost of solar has gone down and financing options have expanded, these communities are becoming a more and more viable niche for the forward-thinking solar contractor.

There have been a number of successful solar policies enacted around the country intended to achieve a more balanced level of solar market participation across incomes. The 2016 Low-Income Solar Policy Guide by nonprofits GRID Alternatives, Vote Solar, and the Center for Social Inclusion, discusses a myriad of federal, state and local level policies and tools aimed at bringing solar to low-income communities. The guide asserts that organizations that enable these communities to participate in solar are making a valuable investment, “whether motivated by… critical justice issues, the climate crisis, or the economic opportunity of a largely untapped solar market sector.”

The idea of an untapped market sector for solar is a very attractive one these days. Market saturation, fierce competition, and recent unfriendly government policies have put pressure on solar contractors to find innovative ways maintain growth and differentiate themselves. Broadening and diversifying the populations your company works with could be a smart move, whether from a marketing, financial, or mission-driven perspective. In a recent interview on our blog, Abby Hopper, President and CEO of SEIA–who has made inclusivity a priority for the organization, emphasized the solar market’s need to diversify its customer base.

While barriers to solar adoption remain for many low- and moderate-income households in America, a recent study has surprising findings about the viability of this sector.

Compelling Data About A Solar Market Niche

The report, Income Trends of Residential PV Adopters, was conducted by Lawrence Berkeley National Lab’s Electricity Markets and Policy Group to paint an accurate portrait of current rooftop solar adopter income levels in America and discuss recent and future developments. In particular, the authors sought to provide comprehensive information about low- and moderate-income (LMI) households.

The study examined data for 781,153 residential PV systems in 13 states, representing 61% of all residential systems in the US. The authors explain that their analysis is unique in part because, contrary to previous studies, they pull income estimates for each available street address, rather than from a more vague source like zip code.

There were a number of unexpected, and highly relevant, findings. Unsurprisingly, the median income of PV adopters was found to be higher than other households. A big reason for this is that that home ownership is the determining factor in a household’s likeliness to go solar and fewer LMI households are homeowners.

However, when comparing just owner-occupied households, that margin of difference was significantly smaller. Plus, the gap in income between low- and high-income PV adpopters was smaller in states with higher incomes overall than in lower income states. Additionally, in those higher income states, a larger fraction of households below the median income were found to afford solar.

The study also found that a sizable portion of solar adopters are moderate-income households. It found that this portion of the population comprises 33-50% of solar adopters in 13 states, and the market share of this group is rising. Additionally, low-income groups (below 200% of the Federal Poverty Level) make up 15% of all PV adopters within the sample.

The authors attribute this to the growth of third-party ownership, more attention from agencies and solar contractors, and a general maturing of the solar market (i.e. consumer awareness). They also highlight the declining solar costs as an important factor, something Hopper points to as well. She states, “in four states, the average income of solar adopters is on parity with average income in the state; it’s right where it should be.”

Also unsurprisingly, the study finds that use of third-party ownership options, like leases and PPAs, are more concentrated among LMI solar adopters. However, the authors points out that this fact in itself is notable, “given the oft-stated concern that lower-income HHs may have more difficulty qualifying for TPO contracts, given a presumption that these HHs have lower credit scores.”

Conclusion? Lower- and moderate-income communities should not be ignored.

Thinking Outside the Box to Tap Potential

What all this amounts to is that LMI households represent an opportunity for forward-thinking solar companies to build business models that take advantage of a previously overlooked niche. And this might mean rethinking the usual way of doing things.

For example, the Yale Center for Business and the Environment released a report in 2017 that examined marketing tactics for LMI customers. In addition to some interesting findings around why and why not LMI families adopt solar, they found that LMI households tended to respond best to information about solar from print articles and community newsletters, town leaders and events rather than online media or a letter identifying their house as well suited for solar.

It could also mean embracing solar offerings previously unexplored by most solar businesses. The Berkeley Lab study points to the advantages of targeting groups like multi-family households and renters who often access the benefits of solar through community solar, a form of solar particularly important to LMI households.

Community solar is a growth market: a joint study by the Smart Electric Power Alliance (SEPA) and the Coalition for Community Solar Access (CCSA) report found that community solar in America grew 112% in 2017, from 387 MW to 734 MW. And Abby Hopper states that, “community solar has really taken off in the past year…it’s very accessible to people; it’s a business model that intuitively makes sense…So I think community solar will continue to grow.” All of this means an opportunity for solar contractors to broaden their customer base and explore less crowded markets.

Riding the Wave of the Future

In light of all the changes the solar industry goes through, thinking outside of the box can be an advantageous strategy for solar contractors looking to grow their business. Understanding that the income profile of PV adopters in rooftop solar is always evolving can help the savvy contractor anticipate and capitalize on market opportunities. Ultimately, embracing making LMI households an integral part of your company’s future plans could mean joining what study author Galen Barbose calls “a new frontier.”