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EAH Housing: Expanding Solar Benefits for Affordable Multifamily Housing

As part of its Sustainability Is Good Business initiative established in 2008, EAH Housing has pledged to provide the following solar installations by 2030:

  • More than double 2008 rooftop solar portfolio from 48 properties to 100 properties.
  • Include solar energy options in 80-90% of all new construction.

California’s  Affordable Housing Solar Program  -  SOMAH

EAH applied to California’s Multifamily Affordable Housing (SOMAH) program in 2019. SOMAH, enacted by California’s AB 693 legislation, provides financial incentives for installing PV on-site energy systems in multifamily affordable housing. A core pillar of the program is ensuring that benefits flow directly to low-income residents: (1) at least 51% of the energy produced must be allocated to residents, and (2) residents must receive 100% of the economic benefit of the credits. The SOMAH program provides fixed, up-front, capacity-based incentives for qualifying solar energy systems, using the Expected Performance Based Buydown (EPBB) methodology originally developed for the California Solar Initiative program. The amount of the incentive from SOMAH depends on the capacity of the installed system, the energy percentage split between tenant and common area serving-load, and other eligible funding resources that the project may leverage, such as the Federal Investment Tax Credit (ITC) and Low-income Housing Tax Credit (LIHTC):

Solar Credits and Utility Allowances in HUD-Assisted Multifamily Housing

A potential barrier to meeting SOMAH’s direct tenant benefits requirement was the utility allowance subsidy structure in HUD-assisted housing. Utility allowances are subsidies against rent payments that HUD provides to residents who pay some or all of their utility bills directly. Since HUD-assisted residents are required to pay 30% of their income for rent and utilities, any reductions in utility costs are normally recouped by HUD in the form of a lower rent subsidy, causing the resident’s rent to go up to reach the 30% threshold. Thus the resident would not benefit from energy savings.

SOMAH proponents successfully petitioned HUD to allow residents to take advantage of the SOMAH credits. HUD determined that the on-bill utility solar credits allocated to residents under the SOMAH program through Virtual Net Metering are an incidental benefit that can accrue directly to the resident, i.e. are not required to be reported as additional annual income. Thus, utility allowances would not be adjusted down in response to the additional solar credits.

Specific language from HUD’s 2019 memorandum explaining this utility allowance exception includes:

“While these credits appear on individual tenants’ utility bills’, [on-bill Virtual Net Energy Metering] VNEM credits do not meet the definition of tenant income as they result from the property owners’ participation in the SOMAH program and have no relationship to tenants’ electricity consumption.”

In 2019, EAH entered into a 20-year Solar Services Agreement with SUNRUN, a national solar installation provider, at no upfront or future cost to the company. SUNRUN operates and maintains the PV systems.

SUNRUN worked with EAH to apply for SOMAH funding. Once an application is approved, SOMAH participants must comply with whole building energy efficiency requirements to ensure maximum benefit from the solar installation.

To ensure that residents receive economic benefits of the solar project, the program requires building owners to sign two legally-binding documents:

  • First, the Affidavit Ensuring 100% Tenant Economic Benefit guarantees that residents’ rent will not increase and that residents themselves will receive direct financial savings from the project.
  • Second, there is an Affidavit Ensuring Tenant Education, which requires property owners to provide residents with SOMAH-approved educational information.

Once the system is in operation, solar credits are included in the residents’ utility bills that lower their energy costs. The allocation of the total solar credit from a property to each resident is based on each unit’s size. Click here to view a document outlining the specific solar credit allocation percentages for each unit and common area of Elena Gardens.

Installation

SUNRUN worked with EAH to conduct the feasibility, design, and permitting for the project.

  • Feasibility Analysis: To determine feasibility and size of the proposed solar system, SUNRUN evaluated the building roof’s age, orientation, shading, and surface area.
  • Design: SUNRUN developed solar system designs for each property. Click here to see a sample design drawn from Elena Gardens. These included sizing of solar arrays, generation power potential, and placement locations of the solar panels.
  • Permitting:  EAH acquired permits from both the utility and housing authority jurisdictions (JHAs) to install the solar systems. Permitting can take between a few weeks to several months to complete.

Elena Gardens is a 168-unit affordable housing community of 2-story garden-style apartments in San Jose, California. EAH had previously installed solar PV for its common areas, whose initial annual production was 141,071 kWh. The electrical utility's existing transformer was insufficient to convert the project’s additional solar generation load. However, California’s Rule 21 requires the utility to upgrade its transformer to accommodate additional solar. The estimated time for PG&E to upsize its transformer was one year. Rather than make the residents wait an extra year, and in order to keep the momentum going, EAH agreed to install the solar panels in two phases, which gave the utility an extra year to construct a higher capacity transformer.

*CARE = California discount on electricity rates for qualified low-income residents.

Savings are based on PG&E published rates for August 2021. The higher kWh rate is the total value of the solar electricity at the published “Average Total Rate”, and the lower kWh rate is the value after applying the 34.95% CARE discount, for which many if not most Elena Gardens residents qualify. Residential unit savings are estimated at $464 per year. The annual value will rise in future years, as electricity prices increase much faster than PV panels degrade (3 to 6% vs. negative 0.5%).    

 

 

EAH uses ENERGY STAR® Portfolio Manager® to store raw aggregate utility consumption data. The company measures Energy Use Intensity of its portfolio to gauge progress in reducing energy consumption for reporting to DOE’s Better Buildings Challenge, to inform internal energy project decisions, and to generate ENERGY STAR scores for LEED and other building performance certifications.

In addition to using Portfolio Manager, the EAH Operations department reviews PG&E solar PV bills and manually tracks system production via Excel.

The solar PV Virtual Net Energy Metering (VNEM) system from the two phases is expected to produce around 380,000 kWh of solar electricity for distribution to the residents at Elena Gardens with an anticipated annualized savings of $464 per household. Assuming the historical average 6% increase in electricity expense, resident savings are estimated to be more than $2.8 million over the 20-year term of the agreement.

EAH plans to build upon what it’s learned from Elena Gardens and expand to 13 other properties that will contribute to more than 1.7 MW of solar generation.