What Philadelphians Need to Overcome Energy Burden Amid Federal Policy Uncertainty

As utility bills climb, more Philadelphia families are being forced to make impossible choices between keeping the lights on and covering other basic needs. In the short term, many Philadelphians depend on support from programs such as the Low Income Home Energy Assistance Program (LIHEAP). In the long term, economic incentives must encourage renewable investments, namely solar, to reduce grid dependency for residents most burdened by rising energy costs.

Philadelphia’s housing market presents both a challenge and an opportunity for solar adoption, since nearly half of Philadelphians rent their homes. As of 2014, the city’s average renter spends upwards of 42% of their monthly income on rent and utilities, a figure that has grown as energy rates have risen over the last decade. With limitations on property improvements, renters forgo investments that lower energy expenses. These constraints create cycles of “energy burden” where households spend an overwhelming share of income on utilities.

Solar can be a groundbreaking solution for mitigating energy burden, but it comes at an upfront investment cost. Amidst ongoing policy uncertainty and inconsistent federal support for renewables, short-term solutions like upgrading to more efficient appliances may be practical in the interim. Yet as electricity demand outpaces supply and utility rates soar, solar becomes increasingly attractive as the breakeven period for investment falls.

Pennsylvania’s heavy reliance on natural gas further pressures electricity price stability, while a recent pause in LIHEAP funding leaves low-income households facing impossible tradeoffs between heating and other essentials. Local utilities PECO and PGW have stepped in with limited assistance programs to prevent winter shutoffs. Nevertheless, relief programs only provide a temporary fix for the underlying energy inequity crisis.

Well-designed incentives could shift the trajectory. The EPA’s Solar for All program offered hope, allocating $156 million to expand solar access across Pennsylvania as part of a $7 billion national effort. However, the program was recently rescinded under the One Big Beautiful Bill Act (OBBBA), a decision now facing legal backlash. Solar for All would transform energy affordability for 12,500 households across Pennsylvania, offering a lifeline as energy costs reach unprecedented levels.

Solar’s upfront cost barrier was temporarily mitigated when the 2022 Inflation Reduction Act (IRA) renewed the federal solar income tax credit (ITC), offering a 30% tax reduction to offset installation costs. Now, the OBBBA revokes this benefit for systems installed after 2025.

Despite the abrupt ITC phaseout, two residential solar financing options remain through 2027. Similar in concept, leased solar and power purchase agreements (PPAs) present opportunities. With solar leases, homeowners pay a lower fixed monthly rate for system electricity use, whereas PPA customers only pay for energy produced, typically below the utility’s price per kilowatt-hour. Because systems are considered third-party owned under these financing methods, the solar contractor claims the 30% tax credit and both parties benefit when savings are passed to households through lower electric bills.

Consider the potential savings for a typical Philadelphia household. According to solar developer Palmetto Solar, installing a 5.74-kilowatt system for a small home (up to 2,000 square feet) costs approximately $16,644 before incentives. The net cost drops to $11,651 with the ITC, yielding a payback period of approximately 7.5 years. Over a 25-year period, a system of this size could offset nearly all electricity usage and generate savings of more than $50,000, illustrating the power of economic incentives for renewable investments.

In contrast, households that lease systems or enter PPAs avoid upfront costs entirely. The solar contractor retains ownership, claims the 30% ITC, and passes part of those savings to customers through reduced rates. While this model offers less long-term savings than ownership, it expands access for households unable to finance their own installations.

Still, solar remains largely inaccessible, particularly for low-income households facing the steepest energy burdens and non-homeowners with few viable clean energy options. If U.S. incentives resembled trends in Australia, a leader in per-capita solar adoption, barriers for marginalized groups would shrink considerably. Australia’s policies are pushing the expansion of solar access for multifamily buildings, apartment residents, landlords, and renters. Even though landlords seldom install solar, split-incentive agreements allow landlords to recover installation costs through slightly higher rents, while tenants benefit from lower electricity bills and potential net-metering credits. The result is a mutually beneficial pathway to cleaner, more affordable energy.

For homeowners able to bear upfront costs, solar comprises a strategic long-term investment. But for most Philadelphians, especially renters, sustained federal and state incentives are essential in maximizing renewable energy accessibility, reducing energy burden, and supporting Philadelphia’s transition to a more equitable energy system.

Courtney Savage

Undergraduate Seminar Fellow

Courtney Savage is a fourth-year undergraduate at Wharton, studying business analytics and marketing & operations management. Savage is also a 2025 Undergraduate Student Fellow.