Solar Power on your home makes financial sense, but it’s expensive.  So how do you stop solar projects from routinely taking a back seat to bathroom remodels?

Smart Financing.

That’s why we’re developing a resource to keep track of all the property tax solar energy financing programs across the country. Piloted in Berkeley last year, cities across the country are kicking off programs to help homeowners finance solar power and energy efficiency improvements with zero money down, by leveraging municipal bonds and property taxes.

It works by adding the cost of the home improvements like solar energy to your property tax bill, amortized over 20 years. The cost of capital is very reasonable, and the “what happens when I sell my home” question is simple and elegantly solved. The solar system goes with your house as does the tax bill. Piece of cake. We want to keep people up to date on what’s going on in their city with these programs.

Creative solar financing options, like solar PPAs, solar leases, smarter home equity products, and property tax municipal bond financing are needed for the tipping point in residential solar energy.

President Obama comprised of our state flags. I thought it was a little funny he’s just so.. Alabama? Well, if he was all Arizona, he’d look like a blueberry and that would just be silly.

As most of you are well aware, the President recently signed a $787 Billion dollar stimulus package. Many people I come across say seemingly the same thing when they learn I sell commercial solar energy systems: “That stimulus was good for you, huh?” All I can really mentally, logically muster is a, “Yeah, sorta”.

In all actuality there was no huge groundbreaking solar energy legislation included in this bill that will translate into an immediate “stimulus”. Most people seem to think solar energy companies would be in line to receive billions of dollars in funds in a similar fashion as Citibank, GM, etc. This was simply not the case, nor will it be the case. However, there was some positive to come from the bill:

First, the 30% federal tax credit for businesses was converted into more of a grant arrangement. This was crucially important because more and more businesses simply do not have the tax liability for the incentives to have much of an effect. Cash is now king, and legislators took note.

I’ve yet to see how this will actually work and I’ve heard rumblings the Fed will actually be cutting checks in the very near term. This is all new, so there’s a lot of new processes to be developed. No word yet on whether this grant money will be considered taxable income or not.

The main concern is, even if the government goes ahead and fronts 30% of the upfront cost, businesses by and large are not prepared to fork over the other 70%. Couple that with our banking system’s inability to lend out any new money for such projects, and you’ve got a somewhat ineffective “stimulus”.

Second, the IRS tax code was clarified to allow homeowners to take both the federal tax credit and participate in municipal financing arrangements for solar power. Now this could potentially be much more of an interesting development.

A few weeks ago I had a substantive phone conversation with Nina Erlich-Williams who represents Renewable Funding LLC. If you’re new to the idea of municipal financing for solar power like I was, (I had to back up the conversation a few times to really wrap my brain around the idea) you’ll want to perk your ears up a bit.

Here’s how it works: First, state legislatures enact a law which enables municipalities in the state to issue a bond for solar energy. Next, municipalities do a study to see how many of their residents would likely participate in the program. Then, municipalities announce to their residents they will cut a check for the total installed amount for a solar energy installation in exchange for a property tax increase which gets paid off annually for 20 years. The interesting thing is, there’s no credit application. The home is collateral and the homeowner is not saddled with the property tax increase if they sell their property before year 20 – the new homeowner is. Finally, the municipality sells the bond obligation to a company such as Renewable Funding to handle all of the transactions and provide administrative oversight.

Programs like these have launched already in the California cities of Berkeley, Palm Desert, San Diego, San Francisco, Santa Monica, Sonoma County and Solana Beach. The Colorado legislature also has made the necessary provision for municipalities in that state to do the same. Legislation to set up the program has been introduced (or is being finalized) in Oregon, Nevada, New Mexico, Arizona, New York, Vermont, and Texas. Other states that have expressed interest include New Jersey, Michigan, and Washington. If Berkeley was any indication for a success of the program, things are looking rosy for this type of funding mechanism. Berkeley’s multi million dollar bond allotment was all spoken for by residents in less than a week nine minutes.

Now, while billions of taxpayer dollars were not spent in this tax code clarification, that was sound legislation which will undoubtably lead to more jobs and solar on roofs. While many clamor for feed-in tariffs like those that were in place in Germany for the past decade, we’ll have to wait and see how this type of funding mechanism compares.

These are not bangzoom provisions for solar, but they are a definite help. I’m expecting bigger things from this administration and am confident in 2012 we’ll have cap and trade programs in place coupled with feed-in tariffs to really get our industry moving. If not, the idea of Obama being comprised of the Alabama state flag might not be too far off the mark.

By Guest Author Sheldon Norberg

Berkeley’s long awaited solar program hit the ground yesterday, with the 40 initial financing spots being lotteried off at 9 AM. From the turnout at their public information meetings, it could be as many as five entries for each spot. However, most folks in Berkeley are sharp enough to take a pass on B FIRST and invest in solar for themselves.  Here’s why.

Originally touted as a low cost financing option (with rumors of 2% fixed loans) B FIRST’s novel approach of placing the financial burden on parcel taxes seemed like a smart move. As well intended as it may be, the B FIRST program took over a year from inception to delivery, and in that time, the interest rate has gone up considerably.

More importantly, with congress finally passing the 30% tax credit extension, the program actually costs more than buying yourself. As we read it, the federal prohibition from receiving tax credits on purchases funded by bond measures means that Berkeley FIRST candidates pay $5,000-15,000 more for their system than they ordinarily would. Put that on a 20-year loan with no pre-payment option, fix it to your property tax bill,  and see who wants to buy your house in a few years.

The additional factor left unconsidered by the city of Berkeley is that the financing doesn’t come through for a month or more  after the job is done. I can’t think of any quality solar installer that’s going to want to loan anyone $20-50,000 for that amount of time, so you may need to get a loan for the job, and then pay it off with the B FIRST loan. Or perhaps not.

You can find out all about solar and your (bay area local) financial breakdown by attending our free online webinars.

Sheldon Norberg
Sun’s Free Solar
www.sunsfreesolar.com
510 496-6008

The Berkeley City Council met yesterday and decided to move forward on the solar power tax-based financing system that we covered two days ago. The details still have to be smoothed out (half a year?) and then anyone can install solar in Berkeley and get them to pay for their photovoltaics, and add the cost to your tax bill over 20 years. That means you don’t need cash on hand to do something that saves you money then and there. Piece of cake. It will be hard for people to ignore the possibilities now.

AWESOME!