SAN DIEGO GOES FOR THE BERKELEY PLAN

When NewEnergyNews recently asked executives of the 2 most accessible market-oriented financing programs for rooftop solar systems (MMA Renewables’ power purchase agreement and SolarCity’s group purchase plan) what they thought about the Berkeley plan, they simply didn’t have any way to say anything substantive against it.

NewEnergyNews posed the question to the executives during a press conference at Solar Power International 2008 in San Diego this past September. Maybe somebody with ties to the San Diego Mayor’s office was listening. In any case, the Mayor is now pushing for his city to be the biggest in the country to take on the Berkeley plan and make residential and small business rooftop solar systems affordable in a big way.

Mayor Jerry Sanders:“San Diego is a perfect site for this. We have the sun. We also have a community that is very attuned to green issues…”

The Berkeley plan (see BREAKTHROUGH BERKELEY SOLAR FINANCE PLAN APPROVED) is the simplest way for property owners to get past the single biggest obstacle to a system purchase, the big upfront costs that don’t pay back for 5-to-10 years.

With the Berkeley FIRST solar financing plan, the city obtains the loan and covers the upfront and system costs. The residence or business owner repays the city through additions to the property tax assessment.

Because the payment program works through the city’s property tax system, it solves the other obstacle for potential purchasers, transferability. When the home or building on which the system is installed changes hands, both the offsetting costs and reduced utility rates go with it in a seamless change of names at the city property tax desk.

The 2 competing systems also aim at upfront cost reductions. One is a power purchase agreement in which a company like MMA Renewables obtains an agreement with the owner to buy the power generated at a fixed rate for an extended period (10-to-20 years) and then handles the purchase, installation and maintenance of the system and earns its profits later, based on price advantages it gets on volume purchases and after the system pays itself off.

In the other plan, a company like Solar City pulls together large groups of system purchasers and arranges discounted purchase prices and loan interest rates based on volumes. It also handles purchase, installation and maintenance of the system.

Both concepts are as comprehensive and potentially efficient as the Berkeley plan, but both involve the complication of a business arrangement with a 3rd party and a new payment program while the Berkeley plan offers the simplicity of a pre-existing arrangement with the city and a simple fee addition to the property tax bill that is offset by a reduced utility bill.

The San Diego City Council is expected to approve the plan. As Mayor Sanders has worked it out, it will cost the city nothing. Even the city's administrative expenses will be included in the loan repayment plan.

How it works:

(1) The city obtains low interest loans from financial institutions after competitive bidding. Even in the present credit crunch, the program has bidders for its low-risk program.

(2) The best installation sites are identified and selected from applicants.

(3) Participants agree to be annexed into a special assessment district, the legal mechanism necessary to add the solar-loan repayment fee to the property tax bills.

The 20-year loan is expected to cost $150/month in San Diego.

Default and foreclosures are handled in the standard way. The solar loan is expected to be very low risk.

Rachel Laing, spokeswoman, Mayor Sanders: “There is a low-risk component to this. When you have a tax lien on a property, you get paid before the mortgage. The government always gets its money…”

The process is a template for future programs such as smart grid and energy efficiency systems and water conservation systems.

Monique Hanis, spokeswoman, Solar Energy Industries Association (SEIA): “When homeowners and companies install solar, they are basically paying the upfront cost for 20 to 30 years of energy use. Our home and business finances are really not set up to do that…By offering these financing options, . . . (San Diego) is putting solar power in the same paradigm as your current utility bills, where you are basically paying a little bit each month…This is a great recipe for opening the doors for way more installations.”

The communities of Berkeley and Palm Desert, CA, and Boulder, CO, have approved and will adopt the plan (see Hip towns and a clever measure). Many expect to see it spread nationally. Some wonder why it hasn’t. Complications and burdens of the financial crisis have likely distracted decision makers since the plan's introduction, to great excitement, earlier this year.

Bernadette Del Chiaro, CA nonprofit Environment California: “Having a large city like San Diego unveil something like this could help get the ball rolling…”

Footnote: The MMA Renewables and SolarCity executives agreed on one potential problem with the Berkeley plan. Should the municipalities find themselves cash-strapped, the extra property tax assessments could find their way into the city’s budget and create havoc between system owners and loan institutions. That, however, would require seriously criminal governance and is even more unlikely than the private companies suffering from, oh, say, maybe a financial crisis and credit crunch…

click to enlarge

Solar plan for San Diego; Sanders promotes financing plan
Mike Lee, December 5, 2008 (San Diego Union-Tribune)

WHO
Jerry Sanders, Mayor, San Diego; Monique Hanis, spokeswoman, Solar Energy Industries Association (SEIA); Bernadette Del Chiaro, CA nonprofit Environment California

WHAT
Subsequent to the passage of AB 811 (allowing municipalities to form special “tax districts” comprised of solar system owners), San Diego will join Berkeley and Palm Desert in creating a publicly-sponsored loan program for solar system installations, in which the loans will be repaid via property tax additions.

click to enlarge

WHEN
- AB 811 was authorized by the CA legislature in July.
- Federal investment tax credits for solar installations ratchet up starting January 1, 2009.
- The San Diego proposal will start with a few hundred homeowners in Fall 2009 and subsequently expand to qualifying home and business owners.
- The San Diego City Council must still approve. Mayor Sanders intends to bring it before them by February 2009 and insiders expect it to pass.

WHERE
- The federal investment tax credit and CA state tax benefits for solar will apply to properties enrolled in the San Diego program.
- Berkeley and Palm Desert, CA, and Boulder, CO, have similar programs.
- San Diego will be the largest city to use the Berkeley plan
- Solar advocates hope to see the plan expand nationally.

WHY
- The Berkeley plan is considered the most aggressive yet to create solar system buyers.
- Privately-financed plans may be threatened if the Berkeley plan becomes popular.
- In the Berkeley plan, the low risk loans will be financed by privately-owned institutions at low, fixed interest rates.
- The loans will be transferred when property ownership changes.
- The new federal investment tax credit returns 30% of the full system price.

click to enlarge

QUOTES
- Irene Stillings, executive director, California Center for Sustainable Energy: “I don't see any barriers. It's the perfect solution…What this does is give an immediate positive cash flow to the homeowners because they are going to be able to see these incredibly lower utility bills…”
- Vincent Battaglia, co-owner, solar installer Renova Energy Corp.: “If you guys pull this off, you would have trumped the cities who stand as the most progressive on green issues, like Santa Monica and Davis. That is a very smart move..”