In a continued trend, solar is feeling the political love, from the feds on down to the municipal level. Interest in municipal tax assessment based finance programs is rapidly spreading. This type of financing removes the biggest barrier to solar – the upfront cost- and could fast become a key pathway to making solar accessible for more Americans.
You may remember when Vote Solar released a report on Berkeley’s pioneering new approach to solar financing, known as the “FIRST model.” The model helps homeowners go solar without breaking the bank. It works like this: the city finances the new solar energy system for the homeowner and wraps the cost into affordable property tax payments spread over 20 years.
The idea gained support immediately with cities like Berkeley, San Francisco and Boulder competing to launch their program first. However, there was real concern that participation in FIRST-styled programs could preclude access to the full solar investment tax credit. Fortunately, with leadership from Speaker Nancy Pelosi and support from SEIA and Vote Solar, the feds recently clarified that businesses and individuals who participate in these municipal programs also qualify for the full amount of the solar tax credit.
Next step is to pass enabling state legislation to authorize municipalities to offer FIRST-styled tax-assessment based finance options. Vote Solar is already working with local advocates and interested policy makers in eight states and counting (AZ, CA, MD, MI, NM, NV, TX, WI) to advance such legislation. If your state isn’t on the list, maybe we should talk. Email me at firstname.lastname@example.org if you want to clear the way for FIRST-styled programs in your state.
Last November my hometown,Berkeley, announced they would loan homeowners the money for a rooftop solar system with no down payment in return for paying it off through property taxes. There goes my radical little city with another innovative solution.
I was so excited about this development and what it means for residential solar systems that I started researching the topic. Just this week, my colleague Annie Carmichael and I published a paper on the Municipal Property Tax Financing.
For solar nerds, it’s no secret that residential solar installations have lagged far behind commercial installations in the last several years. Residential solar installations have had to make due with a $2000 cap on the federal tax credit and without the creative solar financing arrangement know as a “power purchase agreement.” What that added up to was the need for some serious capital outlays for a homeowner to go solar.
Municipal property tax financing removes the upfront costs of going solar. This city financing scheme has several other sweet benefits. First, the loan payments are fixed for 20 years at reasonable interest rates. Second, the loans are neither dependant nor do they impact homeowner credit. Third, the loan is a tax assessment tied to the property, not the property owner, so if the current owner sells the remainder of the payments go to the next owner who also reaps the solar benefits.
I believe this innovative financing policy has the potential to greatly increase the amount of residential solar rooftops installations. Several cities- Palm Desert, Boulder- already have plans underway to offer this type of solar financing to their residents. And we have heard from many more city officials who are keenly interested.
California cities have the state go-ahead to implement a municipal property tax financing program. Cities in other states will need to amend state code to allow authority. The paper provides a how-to for other states.
If I had had to buy my 2004 Prius without easy access to financing, I wouldn’t have one. Now with the Berkeley solar financing, called BerkeleyFIRST (financing initiative for renewable and solar technology) I am calling my Berkeley landlords to get them interested in this win-win solar opportunity. That and waiting to own my own solar-powered house.