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Jul 14, 2023

Solutions to shortcomings in current multifamily solar models

By SPW | December 12, 2022 By Mel Bergsneider, executive account manager, Allume

By SPW | December 12, 2022

By Mel Bergsneider, executive account manager, Allume Energy

Multifamily solar models are a largely unaddressed market, mainly due to the limited access caused by the dependence on policy that would initiate large change. The dependence on U.S. policy can also restrict geographic access, as we’ve seen in California through the Solar on Multifamily Affordable Housing program only available in investor-owned utility territory, cutting off a population that could benefit from shared solar. Traditionally, solar for multifamily housing communities benefits the common meter, not the tenants, leaving available space for options that benefit both.

"Traditional" solar applications benefit single-occupancy sites like single-family homes, industrial warehouses and commercial assets. Having one owner simplifies return on investment and an estimated 20- to 25-year reduction in utility costs. On the other hand, multifamily solar needs the flexibility of multiple occupancy assets and active tenant churn to adequately meet and satisfy solar needs.

A major issue for multifamily solar adoption is the "split incentive." That is, landlords purchase the solar system, while tenants enjoy the benefits. Typically, asset owners find it difficult to recoup their investments with the current model, especially when each tenant receives their own utility bill. Additionally, consistent tenant churn adds an extra layer of complexity for ensuring financial returns. One major consequence of having the solar industry concentrate on homeowners instead of renters is it creates a gap in low-to-moderate income (LMI) access.

But these missing pieces already have some existing solutions for the industry to take advantage of to move forward. Tax credits and solar mandates create additional opportunities for multifamily developments. The investment tax credit (ITC) is one of the most important policies that supports the growth of solar energy in the U.S., with a 30% tax credit for individuals installing residential clean technologies including solar arrays, energy storage and EV chargers. Solar mandates like California's Title 24 new home solar mandate specifically cover multifamily developments, requiring all newly constructed single-family homes and low-rise (under three stories) multifamily buildings to install solar panels.

Identifying areas for solar introduction can play a large role in expanding access to multifamily solar. Areas with growing renter populations in low-rise multifamily units like in Florida, California and upstate New York are a main target for solar access. The expected growth in the multifamily housing market is due to the U.S. needing 4.3 million new apartment units between now and 2035 in order to mitigate issues related to apartment demand and the shrinking supply of affordably priced housing, according to research commissioned by the National Multifamily Housing Council and National Apartment Association.

Further creation of win-win scenarios with utility operators need necessary improvements to ensure grid reliability, affordability and safety from growing solar generation. Accessibility in the renter market adds another hindrance that needs to be addressed in order to manage solar needs. For example, Allume Energy's behind-the-meter technology for multifamily renters solves the "split incentive" by reducing common area bills and offering solar as a service to tenants. Other examples include increasing local manufacturing and allowing for better supply chain stability. In order to expand accessibility, higher standards for the built ESG goals, mainly for multifamily real estate, need to be discussed. Local rebates and incentives, paired with federal and state mandates, can help alleviate the current restrictive access to multifamily solar.

Current and future policies are another way to help expand the access of solar energy for multifamily use. The federal Justice40 Initiative directs 40% of overall benefits of certain federal investments, including investments in clean energy and energy efficiency, as well as affordable and sustainable housing, toward disadvantaged communities. The investment tax credit allows a 30% incentive for 10 years with additional incentives (10%) for domestic materials.

Some of the biggest players in the industry can help drive expansion. Utility entities like investor-owned utilities, municipal utilities, as well as governing bodies such as public utilities commissions, local municipalities and the Dept. of Energy have the ability to enact change. Solar policy associations like the Solar Energy Industries Association (SEIA) and the California Solar & Storage Association (CALSSA) work toward initiating these conversations around policy change. The National Renewable Energy Laboratory (NREL), U.S. Green Building Council (USGBC) and other nationwide organizations also hold power to help increase access to renewables and solar.

Residents should be encouraged to take advantage of resources where useful when looking for solar-friendly housing options. SEIA and the low-income solar policy guide offer insightful overviews for multifamily solar programs and information for solar and housing advocates.

Mel Bergsneider is an executive account manager for Allume Energy.