From my perch in
the Berkeley Hills I look down on a sea of roofs stretching toward San
Francisco Bay. A glint here and there in the California sunshine
telegraphs that someone has installed a solar array. But even in this
most ecologically self-conscious of cities, homeowners face a familiar
conundrum: cutting the utility cord and your homes greenhouse gas
emissions means coughing up some serious cash. A residential rooftop
solar system can cost anywhere between $15,000 and $30,000, and it can
be up to a decade before the array pays for itself in electricity
savings. Rebates through the $3.3 billion California Solar Initiative
help and the program has been a great success so far, but its goal of a million solar roofs by 2017 will cover just a fraction of the states households.
Now the city of Berkeley has devised an innovative plan that could
dramatically increase that number and turn the nascent solar industry
into a mass market if replicated. Under a solar initiative to be
considered by the city council on Tuesday, Nov. 6, Berkeley would
finance the installation of solar arrays and solar hot water systems
(more on that later) for any homeowner or commercial building owner.
You choose an installer from a city-approved list and retain ownership
of the solar system, paying back the cost over 20 years through an
assessment on your annual property tax bill. Over next decade we could
have solar on 25 percent of the buildings in Berkeley, Cisco DeVries,
chief of staff for Berkeley Mayor Tom Bates, told Green Wombat. The
federal government is supporting the Berkeley initiative the first of
its kind and Californias largest utility, PG&E, backs the plan.
Heres the game-changing aspect of Berkeleys proposed Sustainable
Energy Financing District: When you sell your home the solar array and
the tax surcharge stays with the property, passing on to the new owner.
In other words, theres little risk that youll lose money by going
solar. And given that a solar array generally boosts your property
value in California, at least youll likely to come out ahead.
(When Green Wombats Fortune magazine colleague, Michael Copeland,
installed solar on his new Berkeley home, the appraised value
immediately jumped nearly $13,000.) Whats more, as a property tax the
solar assessment is a deductible on your federal income tax return.
Banks now offer solar home equity loans that similarly allow property
owners to install an array with no upfront costs. But the catch is that
when you sell your home, you pay back the loan from the proceeds. With
the city financing your solar array, youre just on the hook for the
annual property tax surcharge for the time you own your home.
Given that the city will likely put up a bond to borrow millions of
dollars, DeVries expects to obtain a lower interest rate than what
would available through a solar home equity loan. Because this is an
assessment on your property bill, effectively a lien, its a very
secure position for financing, he says. In event of foreclosure, its
paid before the mortgage.
The program also will finance the installation of solar hot water
systems, which for Berkeley and other temperate zone cities could be a
real environmental and economic boon. Solar thermal systems that tap
the suns rays to heat water are widely used in countries like China
but have not caught on in the United States. But they make perfect
sense for cities such as Berkeley, where moderate weather means that
much of residents utility bills is not for electricity used to power
energy-sucking air conditioners but for natural gas that heats water
for bathing, cooking and running dishwashers. You would be able to
displace natural gas and get a much more direct environmental benefit,
says David Rubin, PG&Es (PCG) director of service analysis, who
helps run the utilitys solar rebate program. Solar hot water also will
help Berkeley meet a voter-approved mandate to fight global warming by
reducing the citys greenhouse gas emissions 80 percent by 2050.
Just how much extra homeowners will pay on their property tax bill
depends on the size of the solar array they install and the terms of
the financing the city is able to arrange. But DeVries says some
preliminary calculations show that a $15,000 solar array might add
$1,300 to a homeowners annual tax bill. (It should be noted that
Berkeley residents are accustomed to such surcharges. Green Wombat just
got his 2007-2008 property tax bill and counts 18 local surcharges,
ranging from fees for mosquito control to school classroom-size
reduction.) While it will hit them in the pocketbook at tax time,
Berkeley homeowners, if they install the appropriate size solar array,
can count on free electricity year-round. California is a so-called
net-metering state, which means that electricity produced from a
residential solar panels is fed into the power grid; in return
homeowners receive a credit that can zero out the cost of the energy
they consume.
No surprise that the solar industry is enthusiastic about the
Berkeleys initiative, which has the potential to provide a big boost
to their business if other cities copy the program. Among those that
stand to benefit are installers and solar cell makers like SunPower
(SPWR) and Sharp. It just seems like its a great model for other
cities to look at and hopefully to emulate because it really advances
homeowners access to solar, says Ron Kenedi, vice president of Sharp
Solar, one of the worlds biggest solar panel makers. Sharp supplies
arrays to many of the installers Berkeley is likely to include in its
program. We found that solar powered homes are easier to sell and move
faster on the market. And they gain value over time.
Says Barry Cinnamon, CEO of solar installer Akeena Solar: Its
going to raise awareness of solar. I think there will be a big
spill-over effect, especially if starts to work. If they can aggregate
the financing, it definitely helps lower the cost of solar.
DeVries has been meeting with solar installers and already has had
discussions with PG&E about what support the utility can provide to
the program. For PG&E, a big spike in residential and commercial
solar could potentially ease the cost and environmental impact of peak
power demand. Having the city finance solar through a property tax
assessment is a good idea, says Rubin. Additional amounts of solar do
help reduce demand.
Lest you think this is just another wacky notion from Berkeleys
left-winging politicos and social engineers, consider that two Bush
administration agencies have lined up in support of the initiative. The
U.S. Department of Energy has given Berkeley a $200,000 grant that can
be used in part to promote the Sustainable Energy Financing District
while the U.S. Environmental Protection Agency is about to sign off on
another $160,000 to get the program off the ground and create a guide
for other cities.
If approved by the city council next week, DeVries expects to begin
signing up homeowners and business owners by June 2008. I just got an
e-mail from a large-scale commercial property owner interested in the
program, he says.
Green Wombat 
This should open up orders in solar panels.
Dad
It’s too bad that solar panels are out of the question for most in wealthy, PC Berkeley. I guess being green is only stylish when one can use it to come out ahead financially. But, the cars (not mass transit) in Berkeley tell the real deal about how green they are. They talk the talk but they drive the car when they need a quart of milk.
You must live in El Sobrante- jealous Squirted one. Most folks in the berkeley “flats” walk where they can and take the bus where possible. Boy your post is bitter. Come set up a tent in my backyard.
That $1,300 added to annual property tax for a $15,000 solar system is equivalent to paying about $127 a month on a financed 25 year loan at a low, low, low 1% interest!
Since many people here pay $127 mth for electricity now, its a great swap: instead of $120 to PG&E, $120 a month for green energy.
I will lobby my neighbouring city of El Cerrito to adopt this too: we have even more houses just baking in the sun than you.
Basically, it’s a voluntary tax, which is the best kind of tax, if one must have them (and according to Franklin, we must). The downside is more red tape for the government to keep up with and the risk of having to discount your home’s sale price by the price of the extra property tax– but these are minor. And then, as is the case whenever government steps in to skew the market, there is the risk that government incentives will shift capital in the wrong direction. However, I think solar is a good bet, and more importantly, this is a time for a bit of risk-taking. The biggest risk would be not to act at all!
Really it amounts to a loan that you pay off in annual payments of $1300 at 1% interest.
Its brilliant to make it part of the property tax: it means you don’t have the hassle-factor of having to go out looking for your financing, and they can approve everyone with a roof and a mortgage.
Also… since you would pay this solar payment INSTEAD OF paying your electrical bill, its hardly an ADDITIONAL “tax”.
You already PAY for electricity, right. This way you would just pay it once a year.
Excellent discussion.
And, kudos, you seem to be the only one who picked up the tax implications of deductibility of the entire process for the homeowner.
I didn’t pick it up in my write up last weekend … shame on me.
There is a company already trying to market solar to the masses with a similar concept. They intend to put a complete solar system on a clients home. When the system produces electricity, it will lower the bill from the current utility provider. In most cases the savings from the lower bill will more than cover the rent fee that the company intends to charge. The company currently has no product available but intends to deploy in the middle of 2008. They are currently taking reservations and have 24,500 takers so far. I have written several articles on this company in my blog and even have a couple of vidoes that I have recorded at wwwsolarjoules.com. Feel free to take a look. I welcome comments. As any start up business, a chance exists that they may never get off the ground and fulfill any preorders,but if this is the case – the potential client has not lost anything. If you cannot afford the upfront cost of solar today, this may turn out to be a great alternative.
Business opportunity and commercial real estate investment property options include special purpose businesses such as gas stations and motels.Acquiring a business opportunity excludes commercial property investing. Without real estate, the business loan value will be primarily determined by the business instead of real estate.
Reggie, that is CitizenRE, a well known scam. Google them. Please don’t put them on your otherwise good site.
There are plenty of banks currently offering green loans, and plenty of reputable solar companies co-ordinating with them currently.
Since the monthly loan payments amount to a similar dollar amount as the electricity bill it replaces, it is just a waste to get people sitting around waiting for CitizenRe to get off its butt and build a solar company. Those are potential customers who could do it now with a functioning solar company, helping to build the market.
Stephen or Zephyr, how did you get the 1% interest figure? The example given in the blog is a $15,000 solar system for which you pay $1,300 a year for 20 years, and that equals 6% annual interest. This is not taking into account the tax deduction which shifts more of the financial burden to the federal government.
Well known scam? The only information that would point this direction that I have run across is Jeff Wolf and he is hardly neutral. For anyone that can not afford solar (and there are many areas that a purchase is not an economically sound decision), why not get on the waiting list? It costs you nothing – and who knows – maybe they can just pull it off! If they can not, you have lost nothing :)www.solarjoules.com