Property Tax Assessments as a Finance Vehicle for Residential PV Installations: Opportunities and Potential Limitations

Abstract

Berkeley Lab and the Clean Energy States Alliance C ASE S TUDIES OF S TATE S UPPORT FOR R ENEWABLE E NERGY Property Tax Assessments as a Finance Vehicle for Residential PV Installations: Opportunities and Potential Limitations Mark Bolinger, Berkeley Lab CONTENTS Introduction 1 Berkeley’s Proposed PV Program 2 Subsidized Energy Financing? 4 Modeling Analysis......... 5 Discussion and Recommendations ......... 8 Introduction Readily accessible credit has often been cited as a necessary ingredient to open up the market for residential photovoltaic (PV) systems. Though financing does not reduce the high up-front cost of PV, by spreading that cost over some portion of the system’s life, financing can certainly make PV systems more affordable. As a result, a number of states have, in the past, set up special residential loan programs targeting the installation of renewable energy systems and/or energy efficiency improvements, and often featuring low interest rates, longer terms, and no-hassle application requirements. 1 Historically, these loan programs have met with mixed success (particularly for PV), for a variety of reasons, including: (1) historical lack of homeowner interest in PV, (2) lack of program awareness, (3) reduced appeal in a low-interest-rate environment, and (4) a tendency for early PV adopters to be wealthy, and not in need of financing. Although some of these barriers have begun to fade – most notably, homeowner interest in PV has grown in some states, particularly those that offer solar rebates – the passage of the Energy Policy Act of 2005 (EPAct 2005) introduced one additional roadblock to the success of low-interest PV loan programs: a residential solar investment tax credit (ITC), subject to the Federal government’s “anti-double-dipping” rules. Specifically, the residential solar ITC – equal to 30% of the system’s tax basis, capped at $2000 – will be reduced or offset if the system also benefits from what is known as “subsidized energy financing,” which is likely to include most government-sponsored low-interest loan programs. Within this context, it has been interesting to note the recent flurry of announcements from several U.S cities concerning a new type of PV financing program. Led by the City of Berkeley, California, these cities propose to offer their residents the February 2008 Download other clean energy fund case studies from: http://eetd.lbl.gov/ea/EMS/cases/ or www.cleanenergystates.org Early examples of such programs are described in a previous case study in this series, titled “Renewable Energy Loan Programs” and available at: http://eetd.lbl.gov/ea/ems/cases/RE_Loan_P rograms.pdf