City Strategies

Cities can pursue several different strategies when it comes to jumpstarting solar energy. Here's a few:

Solar On Public Buildings

The best way for cities to support solar is to walk the walk, and put solar on public buildings. There are two basic financing strategies to make a solar purchase cost effective:

Bundle the solar with energy efficiency. Energy efficiency has a much quicker payback. By combining it with solar, it is possible to develop revenue positive projects. See the Moscone Center case study (PDF) for an example.
Instead of buying a solar system, buy solar electricity. Staples (PDF) found the benefits of buying solar by the kWh compelling, and recently signed contracts to buy the output of two 280 kW systems on their distribution center roofs at rates below utility rates. This method also allows municipalities, which don't have tax burdens, to utilize the 30% federal tax credit. The City of San Diego recently signed a 5 MW deal (PDF) below utility rates. We've posted the RFP (PDF) and related documents exhibit A (PDF) and exhibits B-G (PDF).

City Leadership for Solar on Private Buildings

After putting solar on their own buildings and leading by example, Marin County built on that momentum with an innovative program (PDF) for identifying local business owners with solar-friendly roof-space, and educating them about the benefits of solar. And check out this paper on the role the city permitting process can play in removing roadblocks to solar.

A Novel Model for Solar Loans

Berkeley Sustainable Energy Financing Districts

We've posted a suite of resource documents here.

The City of Berkeley is on track to offer low-interest solar loans to city residents. Property owners would be allowed to install solar systems on their buildings and pay for the cost as a 20-year assessment on their property tax bills.

The concept is loosely based on special property tax assessments for “underground utility districts” where a city serves as the financing agent for a neighborhood when they move utility poles and wires underground. For the purpose of solar and energy efficiency improvements, the city has created a “Sustainable Energy Financing District”, in which addition property taxes are assessed to property owners who opt-in.

The Financing District solves many of the financial hurdles facing property owners seeking to go solar. 1)Little or no upfront cost to the property owner. 2)Since the upfront costs are repaid through a voluntary tax on the property, therefore funding approval is not determined directly by property owner's credit or the equity of in the property. 3)The city financing is comparable to a traditional equity line or mortgage refinancing. 4)Perhaps most innovative, the tax assessment is transferable between owners. Therefore, if the property is sold prior to the end of the 20-year repayment period, the next owner takes over the assessment as part of their property tax bill.

The City is in the process of contracting with a local bank for loan funding and ironing out other program details. There are a few hang-ups - primarily whether accepting city financing would negate the federal investment tax credit. With out the ITC, this proposition will not be very attractive to commercial buildings. The Berkeley Renewable Energy Lab put together a comprehensive paper on this topic you can read here (PDF).

Also of note, in California only charter cities are currently allowed to designate property tax assessment districts. To remedy this for non-charter cities, a bill is moving in the State Assembly (AB811 and 1709) to allow all California cities to create renewable energy financing districts. Cities across the nation are closely watching Berkeley to see whether this financing model proves effective and increases solar uptake.

Solar on New Home Developments

Including solar on new home developments makes sense for a lot of reasons. First, installation is cheaper at the time of construction. Secondly, mortgages are the best kind of financing available, and in many instances when the cost of a solar system is wrapped into a 30-year mortgage, the utility bill savings are larger than the incremental increase in mortgage payments — meaning on net, solar houses can be cheaper to live in. Finally, if done on large developments, utilities can account for the difference and potentially make choices in the grid infrastructure that may save all ratepayers money.

Given these benefits, some municipalities have chosen to require solar for certain developments. The city of Roseville, California is one; check back for a case study.

The city of San Diego chose a carrot approach: they've developed an innovative permitting program that uses the evil of bureaucracy for the public good. They incentivize solar through the permitting and inspection process: permit applications for any residential construction projects generating more than 50% of expected load with on-site renewables, or commercial projects generating more than 20%, go to the top of the pile and are processed first. This is a cost-free way to incentivize the inclusion of solar energy solar energy into housing developments. For San Diego, it means more solar energy projects will happen. For developers, it means they can avoid expensive delays on their permitting and inspections.