In my previous article in this series, we delved into the multitude of ways that the Treasury Dept.’s guidance on the IRA’s Low-Income Communities Bonus Credit Program could potentially fail the very communities we are all aiming to help. By mandating that the benefits of the IRA’s community solar program can only be delivered as utility bill savings, without nationwide net crediting (also known as utility consolidated billing), the IRS created a convoluted system with unintended hurdles and risks for low-income participants.

As a reminder as to the crux of the issue, low-income households that enroll in community solar programs in states without net crediting will receive two bills: one from their community solar provider to pay for the community solar credits applied to their utility account and one from their utility reflecting any remaining usage/bill spend not offset by the community solar credits. While these households are guaranteed savings of at least a 20% discount per the IRA rules, realizing this value doesn’t come simply. For instance, community solar credits applied to a bill in June might not be invoiced until August when the utility actually shares required data with project managers, like PowerMarket. Subscribers, understandably, are confused since they naturally look at their most recent bill to reconcile their payment for credits. This inherent delay is a fundamental reality in community solar that results in avoidable frustration from mass market subscribers. This further escalates stress around a customer’s electric bill and increases the likelihood that a participant will miss a payment and go into default. These concerns are amplified for unbanked or underbanked individuals, who need to use methods of payment other than checks or direct deposit, which can be more burdensome and prone to defaulted payments.

There are solutions, but let’s first look at how states have previously implemented programs to deliver financial benefit to low-income households.

Net crediting

Net crediting is a streamlined method for implementing community solar credits where savings are applied directly to the subscribers’ bill. For example, as in traditional models, a subscriber who receives a $100 community solar credit would have to pay $80 to the project owner to realize the $20 (or 20%) savings on those credits. In net crediting, the $20 would simply be applied to the subscriber’s bill as savings and the $80 is paid by the utility to the project owner. No additional payment from the subscriber is required. No risk of default. Everyone is happy.

This billing method solves almost all of the issues previously discussed. So, that bears the question — why isn’t net crediting Treasury’s silver bullet?

Treasury cannot mandate net crediting

Treasury cannot mandate national net crediting, full stop. Community solar programs are state-enabled — established by state legislatures, regulated by state public service commissions and implemented by local utilities. While the IRS can mandate how federal incentives for community solar programs are applied, net crediting must be established at a state level. New York has implemented it, and Maryland, New Jersey and Illinois are in process to also do so. But there are many states with community solar programs, like Massachusetts, Maine, Colorado, California and New Mexico, that are nowhere near close to adopting the model.

To find a universal solution to help low-income households participate in community solar programs, we need to ask: how can we provide the financial benefits directly to intended participants in states without net crediting?

My proposed solution is incredibly simple: Allow community solar providers to provide financial benefits to low-income subscribers through direct payment methods.

Providing financial benefit through direct payment

While Treasury cannot mandate that states implement net crediting, it can adjust the definition of financial benefit in its guidance to allow community solar providers to directly distribute the financial benefit of solar projects to low-income households.

This type of mechanism already exists in community solar today. Under Massachusetts’ SREC-II program, a predecessor to the SMART program, the utility wires the full value of the community solar credits to the project owner, and then subscribers are sent their savings directly. There are no utility bill credits applied to subscriber bills, just the savings paid directly to them.

While the SREC-II program rules may not be replicable across the country, this example shows that the direct payment of community solar savings to subscribers is not only possible but is happening today. Why not apply similar logic to community solar projects benefiting underserved communities?

Prepaid cards: A successful solution

Treasury has determined that financial benefits are delivered to “qualified households” only through utility bill savings. But prepaid cards are equally sufficiently regulated to ensure compliance under the law.

Last summer, US Bank published an article describing the beneficial role that prepaid cards had in the distribution of CARES Act money during the COVID-19 pandemic. It paints a compelling picture as to why prepaid cards are an ideal solution to deliver financial benefits to low-income communities, appreciating that many households are unbanked and unable to receive wire transfers or ACH payments. Prepaid cards also provide detailed tracking information, making them easy and reliable to audit. Prepaid cards could be an equally acceptable way to deliver community solar benefits.

While prepaid cards could provide direct financial benefit to low-income community solar subscribers, there are some concerns around direct payment, such as the potential impact that such increased income could have on assistance-program eligibility. We’ll detail more on this in the upcoming final column of this three-part series.

A community solar call-to-action

As an industry that actively cares about the well-being of people and the planet, we should not let fear of wasting small amounts of time or money limit access to clean and reliable energy. We call on Treasury and the IRS to alter its guidance in a way that allows flexibility in the distribution of the benefits of community solar to low-income individuals, instead of falling prey to theoretical concerns that place unnecessary limitations on access.

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Jason Kaplan is Chief Operating Officer and General Counsel at PowerMarket, a clean energy solutions provider that delivers turn-key acquisition, management, billing and support services to developers, financiers and the incumbent energy industry. In his role, Kaplan is responsible for growing the company’s business, managing its legal affairs, ensuring success for its community solar partners, and building the company culture. Since joining PowerMarket five years ago, Kaplan has grown the company from a small group of six to a diverse team of 26, and has significantly increased the company’s reach. Today, PowerMarket supports nearly 300 community solar projects across 11 states, representing 550 MW of capacity and more than 70,000 subscribers.