This is the third and final installment of an article series exploring the opportunities and pitfalls of the current guidance on the IRA’s Low-Income Communities Bonus Credit Program for community solar. In part one, we looked at the ways that the guidance inadvertently lets down low-income households by mandating unnecessarily strict methods for the delivery of benefits. In part two, I proposed that Treasury allow financial benefits to be distributed through prepaid cards so households can benefit directly and immediately from the program.

This third article will address concerns that often arise during discussions of direct benefit payments: auditability and potential impacts on low-income assistance program eligibility.

Auditability

Treasury’s rules dictate that benefits must be run through a utility to be effectively managed, regulated and audited. However, this position is based on a flawed assumption, namely that utilities will timely and accurately apply community solar bill credits to subscribers’ bills. While this is a reasonable assumption, anyone who administers community solar will know that even in the most mature community solar markets, like New York, utilities fail to consistently apply bill credits as expected. Community solar providers are constantly correcting utility errors and handling subscriber concerns. Utilities, by their own admission, are complex behemoths with multiple departments that struggle to communicate with each other, all while using outdated technology.

The point here is that utilities are not infallible in applying bill credits to utility bills, and therefore using these bill credits as the only means of benefits distribution is unnecessarily restrictive. Community solar administrators have been distributing the financial benefits of community solar directly to subscribers for years and are more than capable of maintaining adequate records to ensure benefit funds do actually end up in the hands of low-income subscribers. In fact, our roles in the community solar industry depend upon it. The risk of losing bonus ITC is too significant for a provider to not act in absolute compliance with such rules.

Concerns around taxable income

Another key concern with the direct pay model is the potential for these benefit payments to inadvertently end up as additional taxable income that could disqualify recipients from services like SNAP or affordable housing programs. While this is a valid concern, our internal research found that it is extremely unlikely that these direct payments would move an individual to a higher income category that would disqualify them from other assistance program benefits.

For example, the most common threshold to qualify as low-income in affordable housing programs is 50-80% of the area median income (AMI). In the Boston area, this cutoff was $118,450 for a four-person household in 2023. ​​Based on PowerMarket data, the average community solar allotment for a family in this range is conservatively 6 kW, with an average credit amount of $160 per month. Annually, this family would realize net savings of $384 ($160 x 12 months x 20% savings), representing 0.32% of their annual income. This sum would make a meaningful difference in household budgeting but should not tip them over the threshold to access assistance programs and benefits.

Community solar beneficiaries — a new frontier

Under the traditional model for community solar, low-income households would have to be enrolled in the community solar project, get the full value of the credit applied to their utility bill and then pay 80% of that value to a project owner to see 20% savings. Why not flip this? I propose a different way of implementing community solar that eliminates the risks to low-income households and only delivers the benefits.

• Low-income households don’t enroll directly in the community solar project; instead, these qualified households (as defined by Treasury) are redefined as community solar beneficiaries (CSB) and are listed on a shadow allocation schedule.
• Non-low-income households are enrolled as community solar subscribers at a zero (0%) discount rate.
• 100% of community solar credit value is collected from subscribers.
• The 20% savings equivalent is distributed directly to CSBs via prepaid cards.

By not having low-income households enrolled in the actual community solar project, we avoid the risks and challenges described in part one of this series. However, we can create a shadow allocation schedule that lists all verified qualified households with their address, verification method and allocation of benefits that we can share with Treasury to represent the eligible low-income participants. No need for these households to provide payment details, get off balanced billing or change anything.

We would then acquire creditworthy subscribers who will pay for the full value of credits each month. I believe folks would sign up for non-discounted service because the value proposition is still compelling. By marketing these community solar projects as “low-income benefit” projects, non-low-income households would be eager to participate knowing that their subscription would be directly benefiting these underserved families in their own community. And administratively, since these enrolled households would have bank accounts and credit cards on file, we would simply bill them 100% of the value of the credits, something community solar administrators have done for nearly a decade.

Last, but certainly not least, we would distribute the nominal dollar equivalent of the 20% savings to our CSBs via direct monthly payments by prepaid cards or some other approved method. Our CSBs won’t have to wait around for savings to kick in or navigate multiple unfamiliar billing processes to receive their benefit. Win-win-win all around.

Conclusion

While I believe my proposed solution addresses the fundamental risks I described in part one, while building on the ideas we discussed in part two and delivering on the promise of Section 48, it may not ultimately be the best solution. There needs to be flexibility in the rules to allow for creative solutions to deliver financial benefits to low-income households. Restricting the means of delivering benefits fundamentally limits the potential for successful outcomes.

It is my greatest hope to see the development of a community solar program that is accessible and beneficial to all Americans, regardless of economic class, location or historical access. With the right Treasury guidance and some creative problem-solving, that reality could be within our reach.

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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.