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Monday, Mar 18, 2024
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Loan Program Ties Payments for Energy Systems to Property Taxes

Already top-ranked for solar installations in the state, San Diego is about to get even more solar friendly once the city gets the final approval for a financing scheme that will tie loans to install power-generating systems to the property on which they’re installed through the tax assessor’s bill.

The financing mechanism known as PACE, or the Property Assessed Clean Energy program, is already in place in Berkeley, Boulder County, Colo., and Palm Desert. Here, the plan is waiting for the City Council’s final approval of a revision to the municipal code that declares the entire city a financial investment district, allowing the loans to be implemented.

“One of the obstacles to spending money on these systems is the concern that if the families don’t stay in the house for the full term of the loan, they’ll be stuck with a huge buyout on a system they leave behind,” said city spokeswoman Rachel Laing. “This ties the loan to the property that benefits from the system.”

The North American Development Bank, which offers financing arrangements for projects that promote a clean and healthy environment in the U.S.-Mexico border region, has agreed to fund up to $60 million in PACE loans, with the first round of funding set for $20 million. The bank will then bundle the loans, with an interest rate of about 7 percent, and sell them to investors.

The borrowers make their loan payments twice a year as part of their property taxes.

Popular Program

People thinking about borrowing should take note that the money goes fast. In Boulder, where the first round of funding reached several million dollars, the program was fully subscribed and ran out of money after just one month, according to Seth Masia, deputy editor of Boulder, Colo.-based Solar Today magazine.

The PACE loans are the latest layer of financial incentives. The California Solar Initiative rebates are also currently paying $1.10 per watt of installed systems, which usually start at 1.5 kilowatt for a $1,500 rebate. Tax credits and incentives can also bring costs down.

Since its inception in 2007, the California Solar Initiative has paid nearly $900 million in rebates and incentives on nearly 28,000 installations that are generating about 400 megawatts of electricity, according to the initiative’s October report, which is available on its Web site.

Demand remains unabated, according to the California Public Utilities Commission’s October report, while the cost of the systems, and hence the cost to generate power, is dropping. Meanwhile, utility rates continue to rise and the idea of solar power is becoming not only more attractive but more feasible for businesses and homeowners.

Most people are paying for their systems through either cash purchases or home equity, whether on a line of credit or through refinancing, says Chuck Colgan, spokesman for the California Center for Sustainable Energy.

Extending Access

That means solar power is out of reach for lower income families, according to Samuel Kang, managing attorney of The Greenlining Institute.

“We are optimistic about the PACE programs because they allow a greater diversity of ownership for energy generation,” Kang said. “Right now, power is in the hands of a far less diverse group of people, creating the haves and have-nots of solar energy.”

Another funding mechanism is a kind of lease deal, where a solar installer puts a system on the home or business with the agreement that the customer will pay a fixed rate for power while the installer sells the excess power to the utilities. The installers don’t make much money off excess power at this point, but it allows the customer to lock their electricity rates while using sustainable energy — without paying out more than $10,000 upfront for a solar energy system.

Marty Graham is a freelance writer for the Business Journal.

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