LOS ANGELES (Reuters) - Solar power companies have an image problem - and they are beginning to do something about it.

Solar technicians install solar panels on the roof of a house in Mission Viejo, California October 25, 2013. REUTERS/Mario Anzuoni

Despite a sharp drop in the price of solar panels and innovative financing plans that have brought the technology to many middle income households over the past decade, it is still seen as a luxury only rich, mostly white, consumers can afford.

That perception both hampers solar expansion in less affluent communities and drives political opposition to initiatives promoting greater use of solar power as a renewable alternative to gas, oil and coal.

Though it has grown dramatically in recent years, solar power still makes up less than 1 percent of U.S. energy supplies and relies heavily on government incentives to compete with traditional energy sources. Those incentives help companies such as SolarCity, Sunrun RUN.O and others market solar power contracts that offer customers 20 percent savings on their energy bills.

However, the schemes come with certain credit requirements and are ill-suited for apartment dwellers, homes with low monthly bills or low-income households that qualify for reduced power rates.

“No one needs solar on their home if their bill is not more than $150 a month,” said Steven Bradford, a California Democrat who until last year was a state assembly member for an ethnically diverse district in the Los Angeles area and is now running for the state Senate. “Low income folks in a 900 square foot (83.6 square meter) home or apartment are not the perfect candidates for it.”

Data from U.S. online solar marketplace EnergySage showed that just 4 percent of more than 10,000 people actively shopping for solar systems on its site identified themselves as black, with 11 percent split between Hispanic and Asian shoppers. Those who identified themselves as white made up 73 percent of the shoppers and the rest did not declare their race. EnergySage said nearly 80 percent of shoppers reported household incomes of $50,000 or more and nearly a third declared incomes of $125,000 or more.

Since minorities make up a disproportionate number of low-income households, some advocacy groups have opposed certain solar power initiatives arguing that they deepen social and racial inequality.

Solar companies are now trying to tackle both the perceptions and the economics by pushing to diversify their workforce, forging alliances with minority groups, and making solar power more suitable for multi-family housing.

"We have to get the word out that solar is not just a product for the rich," Lyndon Rive, chief executive of top U.S. solar installer SolarCity SCTY.O told Reuters.

The stakes are particularly high in California, by far the top U.S. solar market where solar power is expected to make up more than 10 percent of the state’s power generation in 2015, according to IHS.

Communities with median household incomes below $40,000 account for just 5 percent of installations in the state even though a third of California households fall into that category.

That share has not changed over the past seven years even as solar installations in communities in the $55,000-$70,000 income bracket have risen to more than half of the total market, according to energy data analysis firm Kevala Analytics. (Graphic:reut.rs/1m7vDHh)

Now companies are trying to tap the lower-income segment.

They have gradually lowered the credit score requirement for the financing of solar panels and are rolling out projects that allow solar installations to be shared by groups of households or used in subsidized housing complexes.

NEW MARKET

This year California passed a law, which the solar industry and environmental groups lobbied hard for, that will allow the state to use up to $1 billion of the money from its greenhouse gas emissions trading program to install solar power on affordable housing projects over the next decade.

“That’s a real market,” said Rive, adding that SolarCity could eventually create an investment fund dedicated to affordable housing.

What solar companies are up against is fears that poor Americans are effectively paying for the lucrative incentives for the rich, something that traditional utilities have sought to exploit.

For example, in Florida, several black and Hispanic groups have joined utilities in opposing a proposed ballot initiative that would allow companies to lease solar systems to homeowners. Both the pro-solar ballot initiative and one proposed by its opponents are still gathering signatures.

In Arizona, the solar industry’s growth has slowed since 2013, when regulators approved a fee for solar customers after the state utility argued that lower-income and minority communities were left burdened with grid maintenance costs.

Solar power advocates say its share is too small to have any impact on costs faced by conventional energy consumers, but the setback made them work harder to win over minority communities.

Chet McGensy, an attorney who leads SolarCity’s efforts to engage with minority communities, said California solar supporters held rallies this fall, for example, with black political advocacy group the Hip Hop Caucus.

“It’s bringing in a different demographic,” McGensy said.

The rallies were part of the industry’s defense of “net metering” that allows solar panel owners to sell their excess power back to the utility. Some utilities and minority groups criticize it as a further transfer of costs from solar customers to poorer households.

SolarCity met advocacy groups such as Hispanics in Energy and the NAACP this fall, but have yet to fully dispel their concerns about solar energy’ pro-wealthy bias.

“They are now trying to clean up a mess that has been made because they haven’t built those relationships,” Jacqui Patterson, director of environment and climate justice for the NAACP, said. “But it’s changing and that is definitely hopeful.”

Patterson said she sought commitments on minority hiring and entrepreneurship as one way of ensuring that they can benefit from solar sector’s growth.

In 2012, The Solar Foundation, which tracks jobs in the industry, found that 54 percent of positions were filled by word of mouth or referral.

“That means we’re hiring our friends, and we’re not allowing it to be a competitive, more broadly accessible process,” Andrea Luecke, the group’s executive director, said in an interview.

That is changing, the industry says. The percentage of blacks and Latinos in the solar workforce increased between 2013 and 2014, according to The Solar Foundation, even though blacks remain underrepresented compared with the overall workforce.

SolarCity and others are frequenting minority-focused job fairs, recruiting more military veterans and engaging in job training in minority communities.

Ian Fernando, a talent programs manager at Sunrun, one of the biggest rooftop solar companies, spends much of his time speaking to minority-focused workforce training programs.

“The approach we take is really grassroots,” he said.