Sunshine is obviously an abundant resource in Los Angeles, but it’s been woefully underutilized. Compared to other major U.S. utilities, the Los Angeles Department of Water and Power (LADWP) ranks last in solar capacity per capita and still gets 45 percent of its energy from coal.

In April, LA City Council approved a measure that paves the way for a 10-megawatt demonstration program—enough to power 10,000 households—that reimburses residents for the solar energy they produce.

The program prioritizes building types with large rooftops such as condominiums, parking structures, and warehouses that yield more solar power for less cost and create another source of revenue, a plus particularly in low-income neighborhoods.

“We have to make sure there’s a good geographic distribution and different types of buildings,” said Mary Leslie of the Los Angeles Business Council (LABC), a leading advocate of the program. “Solar programs have tended to cluster in affluent areas. We want to disabuse that.”

The program also helps LADWP determine an optimal amount that residents will be reimbursed for creating solar energy through a bidding process.

The demo is just the tip of the iceberg. LA rooftops have the potential to generate as much as 5.5 gigawatts of energy, enough to offset the needs of half a million LA households, according to a study by the Luskin Center for Innovation at UCLA. LADWP plans to add 65 megawatts to the program later this year. An additional 75 megawatts is expected by 2016, for a total of 150 megawatts, enough to power 34,000 homes.

Still, environmental economist J.R. DeShazo, who heads the Luskin Center, said LADWP has to take bigger steps. Commissioned by the LABC, the center designed a program that would, in the long run, produce solar energy as cost effectively as gas, and found that the sweet spot is a 600-megawatt program, which prioritizes large rooftops, phased in over ten years. The larger program would power 136,000 homes.

Not that this initial step isn’t good news. The LABC has forecast that the 150-megawatt program has the potential to create 4,500 jobs, generate $500 million in economic activity, and offset 2.25 million tons of carbon dioxide emissions by 2016.