RENEWABLE ENERGY:

Calif. initiative lets low-income homes bask in solar power

SAN DIEGO -- Hacienda Townhomes apartment complex sits in a struggling section of this city's downtown, steps from an intersection previously known as "Crack Alley." The building's beige, boxy walls house some of the region's poorest residents.

Locked gates and thick bars separate tenants from a homeless shelter, liquor store and tattoo parlor. But on the rooftop, 96 solar panels glint in the afternoon sun.

Solar power arrived at Hacienda Townhomes this summer, changing this building's reputation and cutting residents' electricity bills. The first of its kind in San Diego County, Hacienda is among dozens of similar projects under way in the Golden State through a program called Multifamily Affordable Solar Housing, or MASH. A slice of the $3.2 billion California Solar Initiative (CSI), MASH plans to spend $108 million by 2016 putting solar panels on low-income homes.

"It's designed to bring the benefits of solar to customers who otherwise wouldn't be able to use it," said Gary Barsley, manager of customer self-generation for utility Southern California Edison Co. "It allows us to have solar available as an option to more of our customers."

MASH could have important political implications, said Paul Bledsoe, strategist at the bipartisan National Commission on Energy Policy. The project could help address a criticism, he said, that renewable energy programs cater largely to the wealthy. For solar power to succeed, he said, it must become mainstream.

"As a matter of government policy, it's critical that working Americans are able to gain access to it," Bledsoe said.

So far that has not been the case. A search of grants given under CSI shows that the highest residential subsidies have gone to San Mateo, Sonoma, Napa and Santa Barbara counties, among the state's most exclusive. That has raised criticisms from watchdog groups. Electricity customers fund CSI subsidies through a surcharge on bills.

"It's 1 million solar homes for millionaires," said Mindy Spatt, spokeswoman at California consumer group the Utility Reform Network, referencing California Gov. Arnold Schwarzenegger's (R) goal of creating 1 million solar homes.

"Even with the subsidies, solar is expensive," Spatt explained. "It's higher-income people who can afford to take advantage."

Providing money to lower-income people for renewable power is not as cost-effective as giving it to wealthier groups, said Dallas Burtraw, senior fellow at Resources for the Future, a nonprofit conducting research on energy and other issues. Upper middle-class people, he said, "are large energy consumers who often consume energy inefficiently." Lower-income people might use older, inefficient refrigerators, Burtraw said, but "they tend not to consume as much as the middle class."

But at Hacienda Townhomes, the solar panels have dramatically changed how residents spend limited money.

Previously when tenant Omega Hatch, 23, paid her full electric bill, "It was cutting it real close," Hatch said. "It would leave me with nothing." Many months she paid only a portion and watched her debt climb.

After the solar arrived, Hatch saw her bill fall to $56 in August from an earlier amount of about $90 per month for the two-bedroom apartment she shares with her husband and son.

"Thank God, because I could use the money elsewhere," Hatch said. "I have a 7-year-old, he's about to go back to school. Any penny helps me get what I need to do for him," including buying shoes and school supplies, she said.

Multiple-subsidy funding

Hacienda Townhomes received the solar panels after managers with San Diego Community Housing Corp., which oversees the apartment complex, decided to pursue MASH.

"It's bringing the resources to the people that need it most," said Randall Simmrin, asset manager with Community Housing.

Of the 11 low-income sites that Community Housing manages, Hacienda houses the lowest-income residents, said Kimberly Paul, the group's vice president of community development. Some Hacienda residents earn less than $27,500 annually for a family of four, or about 30 percent of the area's median income. Rents range from $567 to $991 per month for a two-bedroom apartment, depending on the residents' income.

MASH pays developers to install solar using a formula that looks at power savings from solar versus traditional power generation. Everyday Energy, a private company based in the San Diego suburb of Carlsbad, installed the panels at Hacienda. The Hacienda Townhomes solar project offers a clue to how projects likely are structured.

Everyday Energy received $75,198 from the state and $33,476 in federal money through a 2009 stimulus bill program that provides upfront grants for qualifying renewable projects. Those grants, equal to about one-third of the total cost, are in lieu of tax credits the developments otherwise would have been eligible to receive.

The system's wholesale cost would range between $113,000 and $117,000, Everyday Energy CEO Scott Sarem said. The housing development corporation kicked in $10,000 of the solar project's cost.

Utility San Diego Gas & Electric Co. issues credits on residents' power bills based on how much electricity the system generates. In exchange, San Diego Community Housing Corp. pays Everyday Energy a monthly fee for lease of the solar panels. Sarem would not reveal that amount.

The payment structure was created in part because Community Housing as a nonprofit cannot take advantage of tax incentives. Everyday Energy owns and maintains the solar system.

State and federal money is a major driver of solar development, Sarem said. His company has two more MASH projects near completion, and he is likely to apply for the federal stimulus grant for those as well, he said.

"Right now the various incentives help to make solar more affordable," Sarem said in an e-mail. "With a bad economy and no incentives, solar adoption and deployment would stop."

It is not immediately possible to know how many of the state's solar projects also applied for federal grants because utilities Southern California Edison Co., Pacific Gas & Electric Co., and the Center for Sustainable Energy, a group working for San Diego Gas & Electric, refused to release the names of those who have received the state grants.

MASH mirrors programs in Vermont, New Jersey and Boulder, Colo. Because of California's size, the program could influence other states, said Burtraw with Resources for the Future.

California "often defines the realm of what is possible at the national level," Burtraw said.

Driving down costs

MASH grants are coming in two phases. Phase one allocated grants on a first-come, first-served basis while phase two will feature a competitive process. All of the $75.3 million in phase one of the MASH project has been reserved.

The largest total dollar amounts are slated to flow to Los Angeles, San Francisco and San Diego counties. Los Angeles County has the highest proportion of multitenant, low-income buildings, said Barsley with Southern California Edison.

So far, 24 projects have been built, according to the three utilities involved in the project. The California Public Utilities Commission estimates that 50 affordable housing buildings will have solar energy systems by the end of 2012.

Because the utilities will not release the names of grant recipients, it is impossible to know exactly how ratepayer subsidies have been distributed.

Databases from the Center for Sustainable Energy and Pacific Gas & Electric, however, show that many pending MASH projects are slated to receive grants equal to more than half of each development's cost. Those databases do not name the people receiving the money.

Subsidies are intended to broaden and accelerate the solar market, Barsley said.

"More money comes in," from private investors, Barsley said, and that drives down prices. "Eventually it gets to the point where it doesn't need subsidies," he added.

Government subsidies can bring in private capitol and drive prices down, but to be most effective they need to be accompanied by efforts that help shrink the technology's cost, said Joel Darmstadter, senior fellow at Resources for the Future.

When the MASH program is completed, in Southern California Edison's territory it will add solar that can generate about 10 megawatts of power, Barsley said. That is a fraction of the utilities' peak demand, which has run as high as 25,000 megawatts. But any additional power helps, he said.

"Whether it's 1 megawatt or 10 megawatts, that's 1 megawatt or 10 megawatts less energy that we have to get from other sources," Barsley said. Solar produces in the middle of the day at times of peak demand, he said.

"Peak demand is the most expensive, it's the most difficult to get, and it's the dirtiest," Barsley said, because it often comes from older power plants known as "peakers." Edison has added newer, cleaner peakers in recent years, he said, but those are exceptions.