Category: Community Solar
Community shared solar (CSS) promises to expand access to 80% of Americans currently locked out of the solar market due to rooftop restrictions. However, high customer credit thresholds imposed by traditional financing inhibit widespread adoption of CSS. More than 280 million Americans have no credit history, and of those that do, only 56.8% meet the minimum FICO score requirements of 680-700. The problem is particularly severe among low- to moderate-income (LMI) populations, as 45 million Americans in low-income neighborhoods are credit-invisible. Given that the NRDC finds low-income households spend on average 7.2% of their income on utility costs per year, these barriers to entry represent a grave environmental injustice and market failure.
Additionally, FICO is an imperfect proxy for qualifying customers. Studies show that inclusion of bill payment data in qualifying scores would improve predictions and safely expand credit to consumers whose risk is currently overestimated. A recent analysis found that if payment history determined access to credit, these products could be extended to an additional 20% of households in the lowest income group.
In 2017, Solstice was awarded a Department of Energy grant to devise new ways to qualify underserved customers for community solar. A regression analysis of credit, demographic, and utility payment data validated the hypothesis that FICO is an inadequate indicator of utility payment history and should not be the sole qualifier for participation in community solar. Through a subsequent machine learning analysis, Solstice created an alternative metric to FICO called the EnergyScore. The EnergyScore has proven both more inclusive of LMI households and more accurate in predicting future energy bill payment behavior compared to FICO. These findings have far-reaching implications for community groups that have long advocated for more inclusive policies and products in the community solar marketplace. In presenting this research, Solstice hopes to put these data-backed findings in the hands of industry partners - including solar developers and financiers - who may use it to further their own community solar projects, achieve greater scale; and transform perceptions of risk across the CSS market.
Additionally, Solstice is partnering with solar developers and financiers to validate the EnergyScore through a variety of real-world pilot projects, proving that CSS can and should include LMI customers without additional financial risk to project owners. By doing so, Solstice will usher in an improved product that radically democratizes the community solar market for millions of new, and historically marginalized, households.
Sandhya Murali– Co-Founder and COO, Solstice Initiative, Inc.