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 California’s largest utility, PG&E, backs the plan.
Here’s the game-changing aspect of Berkeley’s 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, there’s little risk that you’ll lose money by going
solar. And given that a solar array generally boosts your property
value — in California, at least — you’ll likely to come out ahead.
(When Green Wombat’s Fortune magazine colleague, Michael Copeland,
installed solar on his new Berkeley home, the appraised value
immediately jumped nearly $13,000.) What’s 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, you’re 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, it’s a very
secure position for financing,” he says. “In event of foreclosure, it’s
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 sun’s 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&E’s (PCG) director of service analysis, who
helps run the utility’s solar rebate program. Solar hot water also will
help Berkeley meet a voter-approved mandate to fight global warming by
reducing the city’s 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
Berkeley’s 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 it’s 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 world’s 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: “It’s
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 Berkeley’s
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.
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