When Berkeley Mayor Tom Bates had solar panels installed on his home three years ago, he was fortunate enough to be able to pay for them, up front, in cash. Most aren’t so well-off. The up-front capital costs of residential solar — around $15,000 to $20,000 — is one of the major barriers to its adoption. But in an effort to close that gap, Bates is spearheading a solar financing plan that will go before the city council today, whereby property owners of Berkeley can pay for solar systems and energy efficiency improvements as a long-term assessment on their property tax bills.
The plan is the first of its kind in the nation, and if all goes well, by next summer the Northern Californian city could start providing funding for the project from a bond or loan fund that it would repay through the assessments on participating property owners’ tax bills over a 20-year period. Bates says that nearby cities like San Jose and San Francisco, as well as others from all over the country have contacted Berkeley to learn more. Bates is also hoping that an EPA grant for roughly $160,000 will help the city cover legal and marketing costs and create a blueprint for other cities to follow.
We sat down with Mayor Bates yesterday. Here’s an edited excerpt:
Q: What is Berkeley’s motivation to do this?
Mayor Bates: We put it before the voters whether or not they wanted the mayor to come up with a plan to reduce greenhouse gas by 80 percent by 2050. We got an overwhelming response; voters said they wanted me to get on with the job. With that process we have been scrutinizing every way we could possibly meet our greenhouse gas goals. And one of the things we ran into was solar, and how we could make that much more efficient and available to people. My chief of staff, Cisco DeVries, was the one who basically came up with the idea to address the main principle problems you have with solar: the up-front costs, and when people do regular conventional lending, they have 10 years with variable rates.
Q: Why is lowering the barrier of up-front fees so important for residential solar?
Bates: Most people are not in the position to pay cash for their systems. As a consequence, they have to borrow it and they usually have to go to a lender and a lot of times the bank gets a line of credit and that is relatively expensive and due in 10 years. The average person who sells their home every five to seven years thinks to themselves that they’ll never reap the benefits. Under our idea, the loan would be recorded against the property and would remain with the property. So sale provisions would not affect the loan.
Q: What are the next steps? What is happening on Tuesday?
Bates: We are just bringing the city council on board with the idea. They will vote on a framework approval. We still have a lot of questions we have to answer. One of the things we’d like people to do when they take advantage of our energy financing is to do a energy retrofit for homes or buildings.
We’d also like to make sure that the contractors that do the work are reliable, and have history that would protect the home owner from shoddy workmanship. We’re looking at maybe pre-qualifying some of the contractors, but we also don’t want to be in the business of making guarantees, so we’re trying to figure that out.
We’re also concerned about trying to go to scale. We know the more homes and buildings where we can do the work at one time, then the borrowing can be lower. We’re making sure we fully understand the tax situation. There are a number of devil in the details that we are flushing out.
Fortunately, it looks like we are going to work something out with the EPA that would actually give us money to be able to make sure all the legal work is done properly. We are hoping to do a sort of blueprint guide for other cities and other jurisdictions. The EPA has told us that they are very interested and we are optimistic. We’re talking about a potential $160,000, which should more than cover what we need to do.
There’s been tremendous interest all over California and all over the U.S. Cisco and I were just up in Seattle at the Mayors conference and we were bombarded. It was like the most interesting thing that people had heard of because it was novel.
Q: Have you been working with the solar industry on this?
Cisco DeVries: We got together a group of local solar and energy efficiency providers in Berkeley and went through this proposal about a month ago. We wanted them to hear this was coming and we recognize that when the program became public there might be people who are ready now to get solar but who would wait until this came out. So we knew that would cause an impact on them, and we wanted to discuss those implications.
Q: Sometime in the middle of next year it will be implemented?
Bates: We hope. We think if we’re able to get this grant, then optimistically, summer of 2008. It’s better to be cautious and do it right than to make a mistake.
DeVries: We’re investing in something that hasn’t been done before. The idea of the solar finance proposal makes a lot of sense. It is not complicated. People intuitively get it. If you own property you see a lot of assessments on there anyway. But if you invent something new, even if its based on something you’ve seen before, there are always things that need to be worked out.