Pay-As-You-Go Solar Power

By Erica Gies

Some Americans may view Berkeley, California like that wacky, eccentric cousin at a family reunion: one of us, yes, but best ignored. Yet Berkeley’s enthusiasm for thinking differently can result in bright ideas with broad appeal, such as a new program that allows homeowners to install solar panels with no up-front costs -- a really brilliant idea in tough economic times when credit is tight, and an idea that is getting noticed around the nation.

Solar power offers the advantages of reduced energy costs, national energy security, green jobs, and environmental stewardship. Yet the up-front $20,000 to $60,000 cost per home has been a daunting deterrent to its use. Berkeley FIRST (Financing Initiative for Renewable and Solar Technology) eliminates that hurdle by paying for the systems with municipal bonds backed by Renewable Funding, an Oakland financing company. Homeowners get a check up-front to pay the solar installer of their choice, and then they repay a fixed-interest loan through a 20-year assessment on their property taxes.

Many states have laws that allow cities to issue bonds to pay for beneficial public works projects, such as sewers or roads. Where Berkeley innovated was to allow the financing of energy efficiency and solar projects on private property. Of course, the program is voluntary. Only homeowners who opt for the plan pay additional property taxes, and they only pay for the cost of their own projects. Also, the tax assessment stays with the house, so if the owner moves, the new owner who reaps the benefits of solar power pays for it.

In February 2009, Aaron Mann became the first person to benefit from Berkeley FIRST, installing 32 solar panels on his 2,800-square-foot home. Mann estimates that the new system, which generates 25 to 30 kilowatts on a sunny day, will provide 90 percent of his family’s needs. Functionally the electricity works exactly as it did before. Whether the house runs entirely off solar, pulls power from the local utility at night or on cloudy days, or uses a blend, “I don’t know the difference,” he said.

Best of all, Mann’s new solar system significantly trimmed his annual energy costs. His system was priced at $41,000, but he got a $6,000 rebate from Pacific Gas and Electric (PG&E), his local utility. (Crunching the numbers is a little less rewarding in states that don’t offer such rebates.) That left $35,000 to finance through Berkeley FIRST.

To repay that $35,000 loan, Mann’s property taxes increased $3,300 a year, which sounds like a lot of money until you realize that his annual pre-solar energy bills with PG&E totaled $4,200. So solar nets Mann an energy savings of $900 a year!

And that savings doesn’t even include the 30 percent federal tax credit on solar systems, now available to people who use municipal financing. Also, with conventional energy prices expected to rise over time, Mann’s annual solar savings will increase too.

In coming months, similar solar pay-as-you-go programs will begin in Boulder County and Denver, Colo.; Flagstaff and Tucson, Ariz.; Albuquerque and Las Cruces, N.M.; Austin, Texas; Portland, Ore.; Burlington, Vt.; Belmar, N.J.; and San Diego, Solana Beach, Santa Monica, Sonoma County, and San Francisco, Calif.

To allow other municipalities to follow Berkeley’s lead, some states may need to amend their laws. But the good news is that, in addition to the states just mentioned, Nevada and New York have already done so or are working on it. New Jersey, Michigan, and Washington are interested. Berkeley hopes to expand its program to include insulation, new windows, and other energy-saving projects. More places will likely follow suit.

But government doesn’t offer the only creative solar financing option; corporate innovation is also taking off. Sun Run, a San Francisco company, owns the panels on people’s homes, allowing homeowners to pay less up-front and to buy electricity at a fixed rate. SolarCity, serving eight western cities, has a community program that signs up 30 to 40 homes in a three-mile radius. Working in volume saves 20 to 25 percent, said CEO Lyndon Rive. SolarCity also offers a solar lease-to-purchase alternative.

All of these options are making solar an economically viable choice, even in the short term. People who start now can begin reducing their energy costs within months. I hope to be one of them.

Erica Gies is a freelance reporter published by the International Herald Tribune, Wired News, Grist, E/The Environmental Magazine, and The San Francisco Bay Guardian.

© 2009 Blue Ridge Press