Supporting LMI solar: What you need to know

Although there is growing interest in policies and programs to ensure that the benefits of solar power are equitably reaching households of all income levels, lower-income households are still less likely to go solar.

Some of the causes for this are well-documented and unsurprising. Income is unequally distributed among households; low and moderate-income (LMI) households have less cash, are less able to finance installations, are less likely to own their home, and are less aware of the opportunity.

But we at the Lawrence Berkeley National Laboratory (LBNL) looked at a further possibility – that solar marketers are not trying as hard to sell to LMI households. If LMI households were more proactively sought after by marketers, would they have higher awareness and be more likely to go solar, despite the barriers?

To test this theory, we drew data from a "solar quote platform" operated by EnergySage.  EnergySage allows customers to enter basic household data (address, electric bill, details about the property, etc.) into its website to receive and comparison-shop multiple competing offers from its network of prescreened solar installers. 

We checked to see where these quote requests came from based on neighborhood income levels. While EnergySage does not ask customers about their household income, our team estimated income using Census data on neighborhood demographics, which serves as a reasonable proxy for the assumptions that installers may have about household income.

In doing so, we found several things about LMI households:

1. Lower PV adoption rate

First, LMI households are less likely to pursue PV adoption in the first place. Bid requests from Census tracts with income levels below the state median are about 16 percentage points lower than the average on the EnergySage quote platform.

2. Fewer quotes received from installers

Second, installers are less likely to pursue LMI customers. Customers in LMI tracts who submit requests receive around 10 percent fewer quotes, on average than those in non-LMI tracts.

3. Fewer deals closed

Third, LMI customers are less likely to close the deal. Customers in LMI tracts are about 30 percent less likely to close deals than customers in non-LMI tracts when controlling for the number of quotes received. Plus, other research using solar incentive data from California suggests that customers in LMI areas are more likely to cancel a deal after it starts.

Interestingly, there was very little difference in price for the submitted quotes across areas with varying income levels. 

The research identifies a basic "chicken or egg" quandary. LMI customers are less likely to close deals due, in part, to the fact that they receive fewer quotes. But they get fewer quotes because they are perceived as less likely to close the deal.

Indeed, our data analysis suggests that income-targeted marketing explains about one-quarter of the difference in LMI close rates. In other words, LMI households would be more likely to close deals and go solar if they got a similar number of quotes as higher-income households.

Many programs around the country help LMI households go solar. But this research suggests some new approaches could be added. Some ideas include:

1. Using supply-side incentive policies

While much policy has focused on addressing the barriers limiting demand from LMI households and communities, there have been few similar efforts to encourage more supply.

For example, policymakers could offer marketers incentives to give more quotes to LMI customers or train marketers to understand the unique needs of LMI customers and help those customers navigate the solar adoption process.

2. Offering better financing options

Also, LMI customers prefer financing solar installations rather than paying cash, but data shows that installers submit fewer quotes to customers who prefer to finance systems. Programs such as green banks can facilitate and de-risk financing projects for LMI customers, potentially making LMI customers more attractive.

3. Promoting marketing in low-income areas

Lastly, solar marketers tend to site their operations in higher-income areas. Perhaps suppliers could be encouraged to locate and work in LMI communities, just as grocery stores are given incentives to locate in "food deserts," resulting in more sales in LMI communities.

While lower-income households may not become a priority for all installers, they could be a growth opportunity for some installation companies with the right strategies and incentives.

Note: The Berkeley Lab study, Income-targeted marketing as a supply-side barrier to low-income solar adoption, is published in the journal iScience, and is available for free download.