Biden Announces Recovery through Retrofit: Solar Financing Solution for Homeowners
We at SolarTown believe that the number one impediment to the adoption of solar energy in the United States today is financing. Even with the generous incentives currently available from the federal government and many states and local utilities, the upfront costs continue to present a high hurdle for those looking to place solar panels on their roofs. The creative financing approach innovated in Berkeley, California has received considerable attention and has been seen as one of the solutions to the financing quandary. The City's website summarizes the program:
Berkeley FIRST is a solar financing program operating in the City of Berkeley. It provides property owners an opportunity to borrow money from the City's Sustainable Energy Financing District to install solar photovoltaic electric systems and allow the cost to be repaid over 20 years through an annual special tax on their property tax bill. The tax will only be paid by Berkeley property owners who voluntarily participate in the Berkeley FIRST program.
The Berkeley solar financing program is only in its pilot phase. The City of Berkeley has committed financing to 40 homeowners, two of whom have dropped out of the program. Earlier this week, Vice President Biden announced a new national program, a part of which is modeled substantially on the Berkeley approach. The San Francisco Chronicle summarized the new program:
Biden's program, known as Recovery Through Retrofit, creates a framework for cities, counties and states to set up tax districts that allow residential and business property owners to install solar panels and make other energy improvements, repaying the investment over a 20-year property tax assessment
Bloomberg discusses how the new initiative would also "provide wider access to reliable information about increasing the energy efficiency, set national standards for training of workers to perform such jobs and create a certification process identifying energy-efficient homes." We are not even talking about installing solar panels, but just retrofitting the country's 130 million homes for energy efficiency would cut greenhouse gas emissions by as much 20 percent, according to Biden. The Bloomberg report suggested that, according to Biden, savings on energy bills would amount to $21 billion annually.
But the financing part of the program is of particular interest to the solar industry, and the Oakland Tribune discusses this part of the program. The new program "is in part a plan to let homeowners dodge hefty financial barriers to retrofits such as installing solar paneling on their roofs, U.S. Department of Energy spokeswoman Jen Stutsman said." The article discusses how the Berkelely financing program works and its advantages:
The Berkeley FIRST program works by allowing property owners to borrow the money to pay for installing solar power from private bonds, paying the money back as an assessment in their annual property taxes over 20 years at a fixed 7.75 percent interest rate, said Billi Romain, sustainability coordinator for Berkeley.
"The advantage over something like an equity line of credit is the loan stays with the property, not the person," Romain said. "So if you buy this and then sell your home five years later, the buyer takes on the loan as well as the benefits of lower utility costs, and ideally it ends up a wash."
The plan that Biden announced "will put out a number of financing mechanisms to make retrofits a reality to more people and more communities across the country," Stutsman said.
Among those mechanisms will be a "home performance label," which Stutsman said is "like a miles-per-gallon rate for the home. It's easy-to-understand information about a home's energy use for potential buyers or homeowners, so they know before they get into a home what it's going to cost in terms of utilities."
The Berkeley program is not a panacea for solar financing. There are still many obstacles and the pilot program in Berkeley is a good start, but not without its own serious challenges. Remember that there are only 38 homeowners who have participated in the program. One of them wrote into the San Francisco Chronicle, arguing that the Berkelely program is "seriously flawed." These are the reasons:
I am one of the 38 participants, and I nearly backed out. The current system is seriously flawed. Banks have not necessarily accepted it, so, if i refinance, or sell, the new bank could require me to pay off Berkeley's tax lien. If I do, the prepayment penalties are horrendous, unlike a conventional loan. I think that many of my fellow participants have overlooked this defect.
We think that once these financing challenges are overcome, that there will be sustainable growth in the residential solar market, and you will start seeing solar panels on roofs not only in California, but throughout the country.