Scaling Low-Income Solar with the Inflation Reduction Act

RMI proposes a new financing model where tax-exempt entities (e.g., CDFIs, green banks, and local governments) act as third-party owners of solar assets for low-to-moderate income (LMI) households. By utilizing the Inflation Reduction Act's (IRA) 'direct pay' mechanism and bonus tax adders, these entities can monetize credits that LMI homeowners cannot, reducing energy burdens and increasing solar adoption. The paper details implementation steps, identifies potential owners, discusses challenges such as CDFI certification and domestic content requirements, and highlights early adopters in Georgia, Ohio, Minnesota, Maryland, and New York City.

• Low-income households face three primary barriers to utilizing federal tax incentives: insufficient tax liability to monetize credits, ineligibility for alternative monetization mechanisms like direct pay or transferability, and an inability to access bonus adders available to commercial and tax-exempt entities. RMI analysis indicates that 4 out of 10 US households would receive no benefit from residential solar tax credits due to these challenges.
• The proposed model enables tax-exempt entities—such as CDFIs, nonprofit green banks, electric cooperatives, and local governments—to serve as third-party owners. This allows them to use 'elective pay' (direct pay) to receive cash payments from the US Treasury for Investment Tax Credits (ITC) and Production Tax Credits (PTC), as well as access bonus adders that can increase the ITC value to as much as 70% of eligible project costs.

APA

Blanchard, J., Hochstrasser, F., Liu, Y., Mann, W., Mendell, R., Meyer, A., Nolette, V., Posner, A., Posner, D., Turner, A., & Varadarajan, U. (2024). Scaling Low-Income Solar with the Inflation Reduction Act. RMI. https://rmi.org/resources/scaling-low-income-solar-with-the-inflation-reduction-act/

Chicago

Blanchard, Jillian, Franz Hochstrasser, Yuning Liu, Whitney Mann, Russell Mendell, A.C. Meyer, Vincent Nolette, et al. Scaling Low-Income Solar with the Inflation Reduction Act. RMI, 2024. https://rmi.org/resources/scaling-low-income-solar-with-the-inflation-reduction-act/.

Wikipedia

{{cite report |last1=Blanchard |first1=Jillian |last2=Hochstrasser |first2=Franz |last3=Liu |first3=Yuning |last4=Mann |first4=Whitney |last5=Mendell |first5=Russell |last6=Meyer |first6=A.C. |last7=Nolette |first7=Vincent |last8=Posner |first8=Andy |last9=Posner |first9=David |display-authors=etal |title=Scaling Low-Income Solar with the Inflation Reduction Act |publisher=RMI |date=3 September 2024 |url=https://rmi.org/resources/scaling-low-income-solar-with-the-inflation-reduction-act/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{blanchard2024scaling, author = {Blanchard, Jillian and Hochstrasser, Franz and Liu, Yuning and Mann, Whitney and Mendell, Russell and Meyer, A.C. and Nolette, Vincent and Posner, Andy and Posner, David and Turner, Amy and Varadarajan, Uday}, title = {{Scaling Low-Income Solar with the Inflation Reduction Act}}, institution = {RMI}, year = {2024}, month = sep, url = {https://rmi.org/resources/scaling-low-income-solar-with-the-inflation-reduction-act/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }