Berkeley Alternative Solar Financing Pays Out

It's been a little while in the works, but Berkeley (CA)'s innovative solar financing plan is celebrating the completion of its first two residential installations. Many energy efficiency and small scale renewables face the same hurdles: high up front cost, long payback periods, and the chance that the owner might not recoup their investment when they sell their property.

Seeing a possible solution, in October of 2007 Berkley began discussing in place the framework for an alternative financing system. Instead of paying for the installations up front, homeowners repay a long term loans through a 20 year reassessments of their property taxes. The interest rate on the bond-secured loans is low, and when the house is sold the next owner simply takes over the reassessment as part of their property taxes. Its seems so obvious... now that someone else has done it.

Since 2007 a few things have changed. Most notable new tax breaks announced in the Federal stimulus package that complement other subsidies already available from utility companies:
On a typical $22,000 solar system, homeowners would pay about $180 a month on their property taxes. But the amount is reduced when factoring in PG&E rebates, which range from $2,000 to $15,000, plus a federal tax credit that allows homeowners to deduct 30 percent of the cost of the solar system from the overall amount of tax they owe.
The other change is that instead of the municipality holding the bag for the loans, the money comes from bonds sold by a private financing company (something that took a little time to find). The municipality simply acts as a broker. The city expects the rest of the first 40 installations to be complete within a few months. The second round of the program will begin later this year. Berkeley is also considering using a similar arrangement to help homeowners pay for other energy efficiency renovations. In terms of job creation, the San Francisco Chronical reports that local solar contractors are on "hiring binges."

In essence this type of program runs as a form of self-taxation, albeit one that the city makes as painless as possible. It will be interesting to see how Berkley's plan measures up to similar efforts, like those of the Portland Clean Energy Fund, that are instead paid for directly through energy-cost savings. Also, in terms of actual reductions in energy use, I would love to see a good comparison between these two projects. Solar PV is an expensive technology and the components themselves take a lot of energy to manufacture. Efficiency retrofits (the focus of Portland's program) are relatively inexpensive and use materials that contain less vested energy.

At this point, both cities have in effect found creative ways to extend the policy ladder, and they are once again picking the low-hanging fruit. The real test will come in a year or so. By then the initial wave of enthusiastic early adopters will have passed and we will be able to see how ready residents are to get behind these kinds of innitiatives. Still, my sense is that it is these kinds of financial arragments, more than any technological breakthrough, that will lead to the real transformation of how urbanites use and produce energy.

Comments

1 Response to "Berkeley Alternative Solar Financing Pays Out"

Blogger said... 29 January 2017 at 22:15

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This is a blog for news and views on the future of sustainable cites. A major revamp is in the works. Until then I am keeping this version up as an archive of my past writing.

You can expect occasional updates, but not with the same frequency as in the past.

You can also find my writing on urban redesign and sustainability in ReNew Canada, The Mark, Sustainable Cities Canada, WorldChanging, and other more specialized academic publications.

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