The Berkeley City Council unanimously approved a solar loan program late Tuesday night that will see the city loan homeowners the upfront cost of solar panels and recoup the cost across a 20-year property tax assessment.I think this model makes a lot of sense. While many alternative energy projects have a high enough return on investment to make economic sense, customers aren't willing to do them because they expect a very short payback period. Berkeley's system solves that problem by using a 20 year loan to pay for the solar panels. I am curious what interest rate they will charge, but with California's high electricity prices I bet that the solar panels will save more in electricity costs than the yearly loan payment.
The program solves a number of problems that have been holding residential solar back. First and foremost, it removes the high upfront cost of going solar with a large, lump-sum loan, around $20,000. And it goes even further, by attaching the loan to the property title — which means that if a homeowner moves before paying off the loan, they can easily pass the payments along to the new owner. Residential solar installers, on the other hand, often require customers to pay an extra fee to break their contract should they move.
The next step for the city is to secure a financier to front the money on the loans, and given the state of institutional mortgage houses, that could prove difficult. But city reps are optimistic: “I would argue that this is very, very secure debt,” City Deputy Christin Daniel told the New York Times. The city will initially seek $1.5 million for a pilot program of about 50 homes before scaling up to a program financing hundreds of solar systems.
The Mayor’s Sustainability Advisor Nils Moe says the pilot program should start by the end of October or beginning of November and if things go well the second, much larger phase could start at the new year. While the focus of the pilot program will be on photovoltaics, Moe says the second phase could include solar thermal as well as energy efficiency technologies.
I would also like to better understand the pros and cons of the loan being given by a private solar installers vs. the local government. The ability to attach the loan to the property title seems like a big advantage for local governments. I also wonder what happens if the home goes into foreclosure. I guess even if no one is living in the home that the solar panels could be generating electricity and paying the government back for the loan.
I like this better than San Francisco's plan to offer tax rebates of up to $6,000 for installing a solar system. Instead of the tax payer subsidizing the purchases, the Berkeley plan just solves the financing problem with no additional costs to tax payers.