Every city should do this.
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| Something New Under the Sun Berkeley's innovative new plan for putting solar power in all of the city's homes and businesses offers a vivid illustration of progressive government in action. Paul Waldman | November 7, 2007 | web only We sometimes think of local governments in strongly progressive communities as ineffective nearly to the point of being comical. While potholes go unfilled, the collection of aging hippies on the town council debates passionately how they're going to respond to the crises in Darfur or Burma, and whether the town should retain a chakra consultant. This is a caricature, sure, but it contains more than a little truth. But the city council of Berkeley, California -- where run-of-the-mill leftists are considered positively conservative -- just did something extraordinary. Under a plan they unanimously approved yesterday, Berkeley will become the first city in the country to pay to install a solar power system for any homeowner or business who wants it. In the process, the city is demonstrating how creative thinking and public-private partnerships can offer benefits to citizens, business, and the environment that the free market simply can't accomplish on its own. Given ever-increasing concern about global warming, and the fact that most of our nation's electricity comes from burning coal, one might have thought that Americans would be installing solar arrays on their houses from coast to coast, particularly in places like Berkeley where environmental consciousness is high. The problem, of course, is the up-front investment. Putting a solar system on your house can cost $20,000 or more, and it will take a decade or two to get your money back with the savings on your electrical bills. Faced with that hurdle, millions upon millions of people who would love to have their homes powered by the sun will never do so. Some states have tried to offer inducements to get homeowners to convert their houses to solar power. According to the Database of State Incentives for Renewables and Efficiency, there are 16 (mostly blue) states that provide rebates for homeowners who install solar systems. For example, California has one of the more generous state rebate programs, giving homeowners $2.50 per watt the system produces or, according to the state, about 30 percent of a typical residential installation. So on a $20,000 system, you'd still have to come up with $14,000 to go solar. Which means that the only way for most people to install a solar system would be to take out a home equity loan. But that means a large debt on top of your mortgage, and if you sell the house, you'll have to pay it all back. These are the problems that the Berkeley program solves, by relieving homeowners and businesses of the risk and financial burden of the up-front cost. Here's the San Francisco Chronicle's description of how the program would work: A property owner would hire a city-approved solar installer, who would determine the best solar system for the property, depending on energy use. Most residential solar panel systems in the city cost from $15,000 to $20,000. The city would pay the contractor for the system and its installation, minus any applicable state and federal rebates, and would add an assessment to the property owner's tax bill to pay for the system. The extra tax would include administrative fees and interest, which would be lower than what the property owner could obtain on his own, because the city would secure low-interest bonds and loans, officials say. The tax would stay with the property even if the owner sold, although the owner would have to leave the solar panels. The property owner would save money on monthly Pacific Gas & Electric bill because electricity generated by the solar panels would partly replace electricity delivered by the utility. After the assessment expired, the solar panels - of a simple technology that requires little or no maintenance - would continue to partly replace PG&E electricity. In two important ways, this is a better deal than paying for a system with a home equity loan. First, as the Chronicle says, the costs to the homeowner on their tax bill will be lower with the city's program than loan payments would. Second, if you have a home equity loan and sell the home, you're still responsible for paying back the loan. With the Berkeley program, the panels stay with the house, as does the tax assessment, and you don't have to pay anything. This solves another disincentive to buying a solar array: if you aren't sure you'll own your current home long enough to recoup the cost via savings on electricity, it doesn't make much sense to make the investment. But with the Berkeley program, the only extra cost a homeowner has incurred is the monthly tax assessment, minus the electrical savings. You could put up a solar array, sell your house a year later, and probably come out ahead on the deal given the increase in the value of a greener house. And how much would the cost be? Todd Woody, an editor at Fortune magazine who maintains the environmental blog Green Wombat, was told by the Berkeley mayor's staff that the tax assessment for a $15,000 solar array would be around $1300 a year, or just over $100 a month. When you consider that as a part of local taxes, the assessment would be deductible from federal income taxes, and that the solar array would significantly reduce homeowners' electricity bills -- in some cases down to near zero -- it will wind up costing each homeowner only a tiny amount. It's a terrific deal all around. Homeowners benefit with increased property values, the solar manufacturing and installation industries benefit with new customers, and the environment benefits with less burning of fossil fuel. |
