The U.S. residential solar industry’s long-term prospects seem bright. Expectations for lower interest rates and a recovery in demand are supporting forecasts for average annual growth in the residential market of 10% from 2025 to 2029, according to Wood Mackenzie.¹  

At its current pace of expansion, solar photovoltaic (PV) cells could be the biggest source of electrical power on the planet by the mid-2030s.² 

These trends suggest the transition to clean energy will gain momentum. However, it is important to ensure that access to clean energy is not just rapid but also inclusive, especially in disadvantaged communities, which are often disproportionately affected by climate change and have the fewest resources to mitigate those impacts.

This paper explores ownership models of solar PV systems for homeowners in California through the lens of a successful, non-profit model and compares it with market rates projects. We hope consumers, policymakers, community groups, and industry partners benefit from this analysis as they consider ways to provide greater access to renewable energy.

A community-led approach to clean energy
Enter GRID Alternatives (GRID). A leading U.S. non-profit solar installer, Oakland, California-based GRID expands access to solar power through community-focused programs. It provides low-to-no-cost solar energy systems and storage, clean mobility, and job training programs for low-income and racially diverse households.³  

In California, GRID’s largest market, its projects serve counties with some of the lowest per capita income in the state, including 146 projects in the Central Valley region. Seven of the ten counties in California with the lowest per capita income are located in the Central Valley.⁴  

In April 2024, the U.S. Environmental Protection Agency selected GRID to receive two Solar For All grants for around $312 million to support affordable housing residents and communities in thirty priority states, and Tribal Nations in five states.⁵ 

Melissa Fifield, Head of the BMO Climate Institute, sat down with Erica Mackie, Co-Founder and CEO of GRID, to discuss the importance of an inclusive clean energy transition on the Sustainability Leaders podcast.

Additionally, in 2023, BMO donated $3 million in support of GRID’s low-to-no-cost solar energy systems and storage, clean mobility, and job training programs for underserved and unserved families throughout California, Colorado, and Native communities in the western U.S. Given the philanthropic partnership, GRID and the BMO Climate Institute worked together to review and analyze GRID’s model to better understand the benefits that participating homeowners receive through GRID’s programs in California.

Solar PV ownership models
Through their programs, GRID currently supports two types of ownership: direct ownership and third-party ownership (TPO), in which the homeowner has a lease or power purchase agreement for the system. GRID decides the ownership model for each participant based on homeowner characteristics. 

• Direct ownership means that the equipment is owned outright by the homeowner and financed by GRID. In this model, GRID purchases solar equipment and designs, installs, and services the systems for 10 years. GRID primarily utilizes this model on Tribal lands in the U.S.

• Under TPO, the system is owned and maintained by a third-party financier. During the first 10 years of a 25-year power purchase agreement (PPA) or lease, GRID provides all servicing for the system, with support covered under the manufacturer’s warranty as applicable.

TPO is not widely utilized in all states. It leverages federal tax incentives, which are not often available to lower-income households either because their tax liability is below the level of the non-refundable credit amount, or because they may not be able to pay upfront or receive favorable financing for the equipment and installation.

In California, direct ownership comprises around 10% of GRID program participants, who are mainly located on Tribal lands where TPO is not currently feasible. GRID offers TPO systems for the other communities it serves. This article focuses on GRID’s TPO systems, which represent a vast majority of their installations.

Owning vs leasing rooftop solar systems
While GRID’s work brings clean energy access to more racially and economically diverse households, how do the benefits—both financial and non-financial—of owning a solar photovoltaic (PV) system compare with leasing it from a third-party provider? 

This question is not only relevant for homeowners thinking about a shift to solar power but also for policymakers supporting the energy transition and the solar panel manufacturing and energy storage solutions industries. In partnership with GRID, the BMO Climate Institute found that: 

• Direct ownership via market rate projects of rooftop solar PV systems often delivers higher financial savings compared with leasing third-party-owned (TPO) installations.

• Leased systems offer the potential for better economies of scale and the ability for organizations such as GRID to reach more disadvantaged households through its programs.

Financial benefits of TPO and market-rate solar
How do the financial benefits of the TPO model compare with direct ownership? We compared GRID’s installations with market-rate projects in California, where many of GRID’s projects are located. Based on a market project of 7-8kW (which is the average solar PV system size in California), the average cost of a market rate rooftop solar system after considering federal incentives is around $16,930 (table 1). This calculation assumes an average electricity rate of $0.24 per kWh.⁶

Table 1

*After considering federal government incentives

For GRID’s projects, the average installation cost is $19,800 for TPO, although that cost is not borne by the participating homeowner.⁷  The average cost is higher for GRID systems, while the average size for market projects is around 3-4kW larger. For comparison, the cost for market-based projects based on a 4kW system is $12,290, or approximately $4.38 per watt (after the federal tax credit).⁸ 

Our analysis highlights the differences in total cost of ownership and factors consumers and homeowners may consider when evaluating their options for residential solar. Considering GRID’s mission to provide more communities access to renewable energy, TPO systems have narrower financing gaps and ultimately enable GRID’s programs to reach more households. While direct ownership typically provides higher savings for homeowners that purchase at market rate.

TPO systems enable wider access to solar
The average state incentive for installing systems for income-qualified homeowners is $3 per watt, which amounts to around $11,056. The incentive was designed to increase access to solar power for single-family homeowners. However, the average installation cost is around $18,660, obviously more than the incentives. For GRID’s programs, some or all of the cost gap is filled through federal tax incentive-supported TPO partnerships, philanthropy, in-kind equipment donations, corporate sponsorships, and longstanding partnerships with major equipment manufacturers, including Enphase Energy. 
Despite being more costly on an outright basis when compared with directly-owned systems, TPO systems enable GRID to scale their programs and reach more communities and program recipients receive no-to-low-cost solar power for their homes. 

Workforce training advances community impact
A financial comparison of direct ownership and TPO systems alone is not enough to understand the impact of GRID’s programs on the communities it serves. We also should consider the impact of GRID’s workforce development training.

To promote green jobs in disadvantaged communities, GRID administers what it calls an Install Basic Training (IBT) program, which provides classroom instruction, lab activities, and real-world experience with solar installations. For each GRID system installation, there is usually at least one person present who is receiving job training.

GRID’s workforce development program is intentionally designed to be inclusive of populations under-represented in the workforce by including stipends to offset barriers to training and wrap-around services, such as legal support, interview preparation, and resume support. 
Most IBT participants are either unemployed (but seeking work), retired, or not working. After the training, 46% of IBT participants reported being employed. Based on our conservative estimates, more than 2,000 people have joined the solar industry workforce after participating in the IBT program. 

The median salary of solar technicians in California was $72,200 in 2023. Therefore, we estimate GRID’s program has increased incomes in disadvantaged communities by more than $145 million per year. Additionally, earnings in the industry could see upward pressure in the future if renewable energy demand rises. We found that when job training is offered to individuals from low-income communities, the community benefits multiply. 

Community health-related benefits
Greater access to clean energy also has an impact on community health. Healthcare costs attributed to climate change are nearly $820 billion annually in the United States, according to multiple studies.⁹ One way to think about that figure is a "tax" of $2,500 per U.S. resident annually.¹⁰

"Exposure to air pollution causes 7 million deaths worldwide every year and costs an estimated US$5.1 trillion in welfare losses globally. In the 15 countries that emit the most greenhouse gas emissions, the health impacts of air pollution are estimated to cost more than 4 percent of their GDP,” according to a 2019 paper from the United Nations Environment Programme.¹¹  

Installed solar panels have avoided an estimated 1.9 million tons of greenhouse gas emissions over a 25-year period.¹² While it is not possible to quantify the resulting effect on medical bills and lives saved from emissions reduction, we do have some data to help us understand the broader impact. According to the Lawrence Berkeley National Laboratory, wind and solar energy deployments from 2007-2015 have led to cumulative air quality benefits of as much as $112.8 billion (in 2015 dollars), mostly from an estimated 3,000 to 12,700 avoided premature mortalities, and cumulative climate benefits of as much as $106.8 billion.

Research also shows that marginalized and under-resourced communities often face greater risks related to poor air quality exposure, highlighting the need for an inclusive energy transition.¹³ 

Benefits for different communities and consumers
Expanding access to diverse and marginalized communities is necessary to facilitate an inclusive clean energy transition. Although market-rate projects provide higher potential financial savings to individual homeowners, they are not accessible to low-income communities. TPO systems are a more accessible approach and help low-income communities realize the related economic, social, and health benefits of a shift to solar power.

The non-financial benefits of GRID’s programs, such as workforce development and lower emissions, are important to consider for the economic and physical health of our communities. Taking a holistic view ofthe impact of clean energy adoption is important since the installation and cost of solar PV systems can be greater than market rates.

While beyond the scope of this article, future research should explore how community solar projects in California can widen renters’ access to clean and affordable energy. We recognize that renters are an important majority in many communities, including in disadvantaged communities.

Looking ahead
The Inflation Reduction Act (IRA) is currently creating new opportunities for nonprofits and government entities to monetize clean energy credits through cash refunds. Beginning in 2023, at least 30% of the cost of solar projects can be refunded via direct payment to these system owners rather than as a tax credit. With the IRA, the cost of TPO projects could be closer to or even lower than market-rate projects. 

Obtaining this credit would require GRID to bear the capital cost of more direct ownership systems but offset that burden with new incentives. To be clear, considerable gaps in clean energy financing remain. But if the direct cash payments continue, GRID could expand its direct ownership of solar PV projects. We will continue to monitor updates to state and federal incentives and their impact on the energy transition.

Through our partnership with GRID, we were able to analyze the financial impact of different ownership models of household solar in California and additional community, health, and economic benefits of GRID’s model in the communities it serves. We hope this analysis provides insights for consumers, policymakers, community groups, and industry partners as they consider opportunities to expand access to solar in other contexts and communities.

"BMO's partnership with GRID helps to foster a more sustainable future by funding a transition to renewable energy that is inclusive, and aligned with our Purpose, to Boldly Grow the Good in business and life,” said Melissa Fifield, Head, BMO Climate Institute.

1 Gaston, Z. (2024). US Residential Solar Finance Update H1 2024: Executive Summary. In Wood Mackenzie. Retrieved July 9, 2024, from https://www.woodmac.com/market-insights/power-and-renewables/forbes-solar-finance/?utm_campaign=pandr-amer-2024&utm_medium=referral&utm_source=forbes&utm_content=us-res-solar-finance-exec-summary

2 The Economist. (2024, June 20). The exponential growth of solar power will change the world. The Economist. https://www.economist.com/leaders/2024/06/20/the-exponential-growth-of-solar-power-will-change-the-world

3 Program participants are 44% Latino/Hispanic, 14% Black, 7% Native American, 12% Asian, and 19% white.

4 Completed projects up to March 2022.    

5 EPA Awards GRID Alternatives Solar for All Grant. (n.d.). GRID Alternatives. https://gridalternatives.org/learn/press/press-releases/epa-awards-grid-alternatives-solar-all-grant

6 Due to Tribal land ownership structures, the requirements of TPO are often unable to be met.

7 Walker, E. (n.d.). California solar panel installations: 2024 pricing & savings. EnergySage. https://www.energysage.com/local-data/solar/ca/ 

8 The average cost for GRID systems neither includes marketing and educational outreach expenses, nor does it include outlays for job training and workforce development.

9 Walker, E. (n.d.). California solar panel installations: 2024 pricing & savings. EnergySage. https://www.energysage.com/local-data/solar/ca/ 

10 The Natural Resources Defense Council report (2021), Lawrence Berkeley National Laboratory (2021), Akbar et al. (2021), Eckelman et al. 2020, Duncombe (2021).

11 Duncombe, J., & Duncombe, J. (2021, October 5). Health Costs from Climate Soar To $820 Billion. Eos. https://eos.org/articles/health-costs-from-climate-soar-to-820-billion

12 Withana, S., Valverde Pedrique, K., Macey, S., Cakarmis, T., & United Nations Environment Programme. (2019). Reducing pollution and health impacts through fiscal policies – A selection of good practices (J. Kim, Ed.) [Report]. United Nations Environment Programme. https://greenfiscalpolicy.org/wp-content/uploads/2020/08/Good-practices-in-using-fiscal-policies-to-reduce-pollution-and-health-impacts-FINAL-17.7.2020-1.pdf

13 Chen, S., Lu, X., Nielsen, C.P. et al. Deploying solar photovoltaic energy first in carbon-intensive regions brings gigatons more carbon mitigations to 2060. Commun Earth Environ 4, 369 (2023). https://doi.org/10.1038/s43247-023-01006-x

14 EPA report shows disproportionate impacts of climate change on socially vulnerable populations in the United States | US EPA. (2023, August 14). US EPA. https://www.epa.gov/newsreleases/epa-report-shows-disproportionate-impacts-climate-change-socially-vulnerable