Solarize Now, Pay Later

A new way of paying for solar installations just launched in Berkeley, CA could well spread to the rest of the country before long.  The idea, known in the Californian city as Berkeley FIRST*, sold out its first round of financing within nine minutes in November!

Berkeley FIRST is a financing mechanism that allows participants to install a PV array on their home without having to find the capital for it in advance.  Instead, the city pays for system purchase and installation (some $28,000), and the property owner reimburses the city, typically over a period of twenty years, through extra property tax payments.  And while the total payments will eventually exceed the overall cost of the installation, those payments will be largely offset by savings the owner enjoys in his electricity bills.

Cisco DeVries, chief of staff to Berkeley mayor Tom Bates when the program was conceived, noted that solar installations were not happening fast enough to help the city reach its climate change goals. “We needed to find a way to help people finance solar and energy efficiency programs in a way that eliminated the high upfront cost,” said DeVries.

The Financing Challenge

To make the idea a reality, as much thought had to go into the financing model as into the solar technology.  California state law allows for special tax financing districts to be created, in order to fund projects designed to enhance the public good and general welfare of the community;  one such ‘Special Improvement District’ has existed in Berkeley since 1982.  To make the FIRST program possible, the city created an expanded version of the special district, the ‘Sustainable Energy Financing District’;  this allowed it to put bond financing in place.  The program that was finally approved in September 2008 allowed for a $1.5-million, 40-home pilot project.  And such was the enthusiasm from Berkeley residents for the project that it was completely subscribed within minutes of being made available in November.

The benefits of a FIRST-style program are relatively obvious:  solar installations where owners may not have been able to afford them, no impact on the owners’ creditworthiness, and little or no budget impact for the town or city implementing the program.  Some concerns persist, however: notably, whether the local solar industry would be disrupted if potential customers delayed placing orders because their city was known to be planning such a program.  Also, the IRS has not decided whether  taxpayers participating in a FIRST program would forfeit their eligibility for the federal investment tax credit for solar power.

Spreading the Word

Despite these uncertainties, the Berkeley program has attracted interest from city governments across the country.  And in Boulder, Colorado, a similar ‘municipal tax assessment financing’ scheme is in place.  But in most states much work needs to be done, and many questions answered, before the legal and administrative framework under which cities can launch such a program can be established:

1. Do my state laws allow for the establishment of special tax financing districts?  And can they be broadened to encompass sustainable energy financing?
2. Is the mechanism under which a city creates a special district simple to implement?
3. Is solar power defined as a benefit, qualifying it for financing in a special improvement district?
4. Do the rules establishing a special district allow for participating citizens to opt in to the solar power scheme, as opposed to a blanket taxation across the district?
5. Does my city have the authority to issue bonds to raise the capital needed for such a scheme?

There are two ways in which we can promote these programs in states that aren’t already on board with them.  One is to press for changes in the federal tax code that will make Berkeley FIRST-type schemes more attractive to potential buyers, the other is to press state governors to aggressively pursue development of these schemes within their states.

Federal Action

Our friends at Vote Solar have identified two specific items in the federal tax code that could be appropriately modified:

1. Allow taxpayers who participate in a ‘municipal tax assessment financing’ scheme with the aim of installing solar power to also enjoy the 30% federal investment tax credit for solar.
2. Allow municipalities to use federal tax-exempt bonds to finance renewable energy projects.

Can you add your voice to those who are pressing Congress to help communities around the country to  institute these schemes?  If Congress hears from Solar Citizens in every state, the federal government could help accelerate the build-out of solar everywhere.  Follow this link and send a message to your Congresspersons right now!

State Action

State governors need to know how much interest their citizens have in installing solar power this way.  Follow this link and you can send a message to your Governor, urging the creation of  Sustainable Energy Financing Districts in your state.

*Financing Initiative for Renewable and Solar Technology
(details available at http://www.ci.berkeley.ca.us/ContentDisplay.aspx?id=22196)