6
Solar incentive opens energy window
Workers install solar panels on a house
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Bob Moon: Even before the new administration's economic stimulus plan is finalized, some environmental advocates are complaining it doesn't go far enough to create a "green energy economy." It could be argued the costs are simply too high. But cities and states across the country are dreaming up creative ways of financing green projects without exhausting their supply of spending green. From the Marketplace Sustainability Desk, Sam Eaton reports.
Sam Eaton: Berkeley professor Dan Kammen likes to open his energy policy lectures with this question.
Dan Kammen: How many of you in the audience have cell phones? And of course all the hands go up. And then the next question is how many of you would have a cell phone if you had to buy 20 years of minutes up front? And no hands go up.
Kammen says the reason cell phone technology took off so fast was because consumers didn't have to pay for everything up front.
Kammen: Energy is the classic case of something where we don't do that.
Take residential solar panels. The technology eventually pays for itself but that doesn't make the initial costs any more palatable. Even with the best incentive programs it can still set back homeowners nearly $20,000. And that's why cities like Berkeley, Calif., are rethinking the economic model for renewable energy.
Solar Contractor: I'll just tell you I was just up in the attic and everything looks great so we're all good to go there.
Retired widow Jeanne Pimentel is meeting with a solar contractor.
Solar Contractor: The actual installation's only going to take a couple of days.
Jeanne Pimentel: That's amazing!
Next week the company will begin installing 11 panels on her Berkeley home -- enough to reduce her energy bill 85 percent.
Pimentel: I was always interested in solar power and I actually got a quote about a year ago just to see if it would be practical but when I heard the price I said no way. I just couldn't afford it at that time.
The only reason Pimentel can now is because she's not paying for it. The city of Berkeley is. She's part of pilot project that uses city bonds to cover the up-front costs of residential solar. Pimentel pays the city back, with interest, over 20 years through a surcharge on her property taxes. The added surcharge is roughly equal to the savings on her energy bill and it stays with the house even if it's sold.
Kammen: This really opens up a whole new window.
Again, Dan Kammen:
Kammen: This is just about the most fundamental change I've seen in how we think about clean energy because every project that has an up-front cost can essentially be amortized away in this process.
Making solar panels much more like cell phones, a technology that's suddenly affordable to the masses. Kammen says several states, including Colorado and New York, are considering similar models. Portland, Ore. is using a clean energy investment fund to weatherize entire neighborhoods, and eventually the entire city.
Kammen says the bigger these programs get, the easier it is to raise capital through bond sales and private investors. And even the federal government. He says by channeling some of the economic stimulus funds into these programs, Congress and the Obama administration could spawn a wave of clean energy spending that would last for decades.
Kammen: Everyone's biggest investment is in their home. And if you can leverage that investment to get you to a clean energy home, that suddenly takes the federal money that might be on the scale of millions or perhaps billions and suddenly opens up a door to trillions.
All by unlocking the power of the consumer. Jeanne Pimentel being a prime example.
Pimentel: I think people want this kind of thing. They want to be part of the bigger picture and the greater good.
As a rule Pimentel lives simply, buying only what she needs and walking and biking most places even at 74. But she admits she'll feel a thrill when she flips the switch, knowing the electricity she does use now comes from the sun.
In Berkeley, I'm Sam Eaton for Marketplace.
People are now looking for ways to make their dollar count and what a better way to do this than greening our homes. Having a program that would financially help the normal homeowner participate in greening their homes, whether it be solar panals or weather stripping; create jobs, increases home values as well as saves the home owner in energy costs over the long run, putting more money in their own pockets. Rather than give the homeowners loans (we are in debt to our eyeballs) provide government subsidized, GOOD HEALTHY rebates. Encourage competitive bids from reputable, licenses and stable, contractors who will do the work. Eventually as the technology becomes more affortable and available, the rebates could go away all together?
Why does the conversation always have to start with increasing government revenues? If more jobs are created from this technology then more people will be able to buy homes (which are now affordable, check out the low interest rates). New homeowners coming into the market (and there are many!!!) will help to put more revenue into our economy and government budgets.
Does the government already have a rebate program? Are they any good? Do people find the valuable? If there are rebates out there maybe they should start advertising them big time!
Esther Marcelino Lee, REALTOR #01065351
Sam: Here is an even better solution - Green Municipal Bonds. http://inspiredeconomist.com/2009/02/07/green-municipal-bonds-economic-c... Green Municipal Bonds, unlike traditional municipal bonds, or Berkeley's plan, cost the taxpayer nothing. The savings from installing Green solutions are split between the homeowner, investor, and municipality. The homeowner receives lower utility bills, the investor receives safe tax free high rates of return, and the municipality creates Green Jobs. It is a Main Street Stimulus, that saves the economy, and the environment. Report it!
I think a lot of us are placing strong hopes that the Obama administrative will intelligently manage green fund/grants/initiatives and somehow magically avoid the big guys who have pushed their way first into line (utility companies, large contractors, etc) around the DC beltway for funding.
The initiative of getting renewable energy implemented in America has got to have at least two goals: 1) Create significant amount of jobs in an industry that will last 2) Not provide incentives that only upper middle and upper class folks can take advantage of.
Currently, many state run solar/wind energy system rebate programs for homeowners require that professional installers install a system. In general this is a good thing - systems that can almost assuredly be installed safely and successfully. The problem is that the mere costs of the installation can increase the system cost by anywhere from 30-300%.
So, who does this leave out? This leaves out Do-It-Yourselfers who may be really energized to do something green but may not have a spare $10k-$30k to pay a professional installer but do have the $5k-$10k to purchase the materials and do 90% of the install themselves (license electrician wrap up final hookup in PV systems or licensed plumber do same for solar hot water systems).
If we are really concerned about global warming, if we are really concerned about getting as many people as possible on renewable energy then we have to make policies which benefit a majority of the population and not just the few that have extraordinary financial means. America is full of people with can-do and I can do-it-myself attitudes - we need to support them as well and ensure that renewable energy rebates and incentives are not just for professionally installed systems.
We have got to shift the focus from heavy rebates on solar panel (electric) systems which have the longest financial return on investment to solar heating technologies (solar water heating and solar air heating> for homes) which will have bigger impact for our tax dollar in reducing carbon emissions and lowering our monthly utility expenses.
A solar air heating system that can offset a homeowner 30% of their heating costs can cost as little as $1700 and be installed in a weekend by a group of handy friends. Solar air heating systems are like the electric motor and batteries in a hybrid car - the use of them reduces the petroleum consumption, making the overall system much more efficient in effect. They will pay for themselves in 4-7 years.
Solar water heating systems are for the more advanced DIY'er but can offset from 50-70% of the energy needed to heat that home. Without a rebate program and installed by the DIY'er they will pay for themselves in 4-6 years, with installation costs that jumps up to 15-25 years!
Sascha Deri
CEO
AltE
'Making Renewable Do-able'
The Berkley program is innovative, not just because it provides financing for solar power (private loans are available) but because the program creates large, hidden green energy tax cuts that greatly reduce the cost of the financing. Berkley's bonds are triple tax free, vastly reducing lending costs from what a private investor would charge in interest -- almost by half -- if the lender needed to pay taxes. In addition, the property tax increase (representing the homeowner's payments on the Berkley loan) is also tax deductible for the homeowner, further decreasing the financing cost to the homeowner by her combined local, state and federal income tax rate -- which might range anywhere from 11% to 45%, depending on individual circumstances. So effectively, if you add it all up, it is as though the price of solar panels were cut by 40% to 70%, compared to the costs of a taxable loan. That is a pretty huge green tax cut. Interestingly, much of that is a federal and state tax cut, imposed by the local voters of Berkley.
Part of the untold story here is the emergence of green energy tax cuts as a viable strategy for promoting renewable energy. That policy is gaining open supporters in Europe, and is at the heart of Berkley's innovative program, whether or not widely recognized.
Rod Richardson
GreenEnergyTaxCuts.com
Hopefully the states and municipalities will utilize economies of scale, clout, leverage, and assured pool of buyers to ensure that solar manufacturers and contractors are getting fair market value for their products and labor. The problem that government entities often seem to not be able to shake is this really bad habit of paying well above and beyond. If that continues to be the case, opponents of government intervention as such will be handed more fuel. Solar providers need to accept reasonable terms as well. We have priced solar hot water heating systems for our home. After doing our homework and comparison shopping, we have found that contractors seem to be marking up the final cost (parts plus labor plus overhead) further by almost dollar for dollar the amount of the federal tax credit. Yet, the industry can't get traction. No wonder.
