This article is part of the Future Agenda, a series from Future Tense in which experts suggest specific, forward-looking actions the new Biden administration should implement. On Wednesday, Feb. 3, at noon Eastern, Future Tense will host an online event to discuss what science, technology, health, and energy priorities the Biden administration should pursue. For more information and to RSVP, visit the New America website.
Communities of color, indigenous communities, rural and urban low-income communities, and people with disabilities all suffer from a range of energy-related challenges that perpetuate and exacerbate poverty and inequality: burdensome energy costs, outdated electrical equipment and systems, racial and environmental injustice in energy resource extraction and the location of energy facilities, threats to jobs from energy transitions, and more.
In the lowest income brackets, total energy costs—including electricity, gas, and gasoline—can eat up to 50 percent of monthly household income, forcing people to make impossible choices between having their power cut off and falling short on food, housing, transportation, education, and other essential expenditures. Low-income households often struggle to purchase higher-cost energy-efficient appliances or upgrades that could save them significant money in the long run. They literally burn cash: buying carbon and setting it on fire. By contrast, wealthy households typically pay more like 5 percent of their monthly income on energy.
The Biden administration could help end these injustices by reforming how the nation supports clean energy innovation. Today, U.S. policies help accelerate the adoption of new energy technologies by subsidizing the wealthy, exacerbating inequalities. With a simple change, the federal government could instead leverage its investments in solar and wind to advance economic security and energy justice for disadvantaged communities.
The 2021 omnibus spending bill that Congress passed in December extended tax credits that support investments in wind and solar energy. In 2020, through those same tax credits, the federal government invested roughly $5 billion in solar energy, buying something like 4-5 Gigawatts of solar energy. It will likely spend more in 2021. While not direct congressional appropriations, tax credits are functionally the same as federal spending. Individuals and companies that purchase solar systems receive credits on their taxes, getting a portion of the money they spent on solar back and reducing federal revenues. In effect, the government buys a portion of the solar panels installed and gives them away to the system owner.
This is a time-honored practice in innovation policy. It leverages federal spending 2-to-1 (or more) by encouraging others to buy new technologies. For technologies that are early in their adoption cycle and relatively expensive, the benefits of this kind of policy can be huge.
Unfortunately, however, this approach to innovation policy is highly inequitable. Investors in solar rooftop systems must own their home, have enough money to pay for the cost of the solar system (or to qualify for a bank loan), and pay enough in federal taxes for the credit to be worthwhile. That leaves out those who rent, those with low credit scores or savings, and the 44 percent of Americans (as of 2018) who paid no federal income tax. And the numbers show it. In Phoenix, Arizona, where we live, people in ZIP codes with higher average incomes install more solar systems, install higher-output systems, and generate significantly greater monthly energy savings from those investments—all while receiving federal help to pay for systems that they then own and will benefit from for decades.
It’s time to end this injustice. Solar energy is now the cheapest source of electricity on the planet and the most heavily invested in. The world is adding more solar energy generation per year than any other technology, and so is the U.S. We no longer need to incentivize the wealthy to buy solar. Even without these credits, solar energy will continue to get cheaper and to accelerate in adoption.
Instead, the Biden administration should simply spend $5 billion or more to buy solar panels and grant them to disadvantaged households and communities, where they can help create the foundations of economic security, equality, and environmental justice. The administration has already signaled that ensuring a just energy transition is one of its key goals. This is one way to meet this commitment.
Money for solar panels can be found throughout the federal budget. The U.S. Department of Energy’s Weatherization Assistance Program could purchase and install solar systems on low-income rooftops, helping cut the energy bills of those who already own their own homes. The Department of Housing and Urban Development could allocate funds for solar projects through its community development block grants to low-income communities and communities recovering from disasters, or community solar could be integrated into the design and construction of new federal low-income housing. The U.S. Economic Development Administration could do the same. And FEMA could allow reconstruction funds to be used to build back solar in low-income areas after disasters.
Federal investments in community solar projects would be even cheaper, per Watt, than rooftop systems, which means the same funds would finance an even larger economic boost. And, if designed well to integrate into neighborhood landscapes and community planning, community solar can foster a range of ancillary benefits like enhancing resilience to climate change, supporting local economic development, providing funds to support community initiatives, improving local food systems and security, beautifying urban landscapes, and more. Money used to build community solar projects would also benefit renters and those living in low-income housing, helping to reduce their energy bills, while creating new revenue streams that communities could use for other purposes. And, if Congress wanted to help, it could end solar tax credits after 2021 and instead appropriate that money, too, to help disadvantaged communities grow economic security through energy security.
This is the approach the community water aqueduct in Corcovada, Puerto Rico, has taken. The community invested in solar energy for its water pump, and from the saving on energy costs, it’s now built a new community center and shared internet facilities. It’s also the approach that the Canadian government has taken with its First Nations communities, buying community-scale renewable energy systems and granting ownership of those assets to the community.
The Biden administration needs to take a different approach to stimulating energy innovation. Admittedly, making this change would require bucking the accepted ways of supporting new technologies and those who support them. Opposition would likely come most from those who believe that we need to continue to subsidize solar energy in the current way to drive rapid adoption to solve climate change, and those, such as solar installers, who have benefited directly from the current policy. However, federal spending will still be buying and installing solar panels—the benefits will just go to people who need it more. Explicit rules could also require the program to purchase solar panels from U.S. solar manufacturers. This, combined with expanding the solar franchise by expanding the diversity of solar ownership, would help to cultivate the kind of widespread public support necessary to accelerate climate solutions.
The world spent $500 billion on clean energy in 2020. Investors benefited enormously from the boom. Going forward, the Biden administration needs to make its clean energy investments into an instrument of social and racial justice.