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City’s Creative Financing May Help Residents, Businesses Go Solar

By Judith Scherr
Tuesday October 30, 2007

The number of Berkeley homeowners and businesses with rooftop solar collectors could multiply in the next few years, if a complex financing proposal pans out. 

The concept of the city providing funds to loan to property owners was first proposed by Councilmember Dona Spring in 2002 “after rolling blackouts yanked up our energy bills,” Spring told the Daily Planet on Monday. However, city staff did not come up with an effective way to support financing at the time, Spring said. 

There are now about 383 sites in Berkeley with solar panels. The project is expected to add about 125 energy-efficient and/or solar sites with estimated construction costs at $4.4 million. 

On Nov. 6 the City Council will be asked to conceptually approve a Sustainable Energy Financing District put together by Cisco DeVries, chief of staff to Mayor Tom Bates, the city’s energy division and a number of financial consultants. The project would finance solar panels and solar hot water systems for both residential and small commercial properties. 

A finalized plan will be before the council next year. 

“We’re doing what Berkeley should do—innovate,” DeVries told the Planet Monday. 

In a phone interview, City Manager Phil Kamlarz told the Daily Planet the financing would work this way: An assessment district would be formed, comprised of property owners who want to be part of the program. The city would borrow the funds to pay for the program from banks or other sources. 

The interest rate charged to the city would be less than the interest rate at which many property owners would be able to borrow as individuals. 

The financing is intended to cost property owners the amount they would have been paying in higher electric bills—that is, the cost would be equal to their savings by going solar or becoming more energy efficient. The loans would be repaid through property taxes; the city would place liens on the properties in the program; the property owners would pay the cost of their solar system over 20 years, which is about the life of the equipment. If a property were sold, the added assessed property tax would remain with the property until the loan was paid off. 

While she is enthusiastic about the idea, Spring pointed out that the financing would work only if the city could truly borrow the funds at a lesser rate than an individual can. 

DeVries acknowledged the plan isn’t for everyone. “Some property owners, based on their means, can write a check,” DeVries said. Others may be able to obtain more favorable rates than the city can. 

The details of the program are still being hammered out, which likely accounts for some of the differences in the program as described by Kamlarz and by Alice La Pierre, building science specialist, with the city’s energy division. 

One of the questions still to answer is the relationship between the solar contractor and the property owner. 

La Pierre says that under the city financing program, the city would certify contractors with whom the property owners would contract directly. Under this scenario, costs could be regulated by the city.  

But Kamlarz says that if the city were to certify a contractor, Berkeley could be liable if the contractor did not perform as required. He prefers a plan where property owners choose their own contractors, without certification by the city. 

The city plans to fund the work to create the Sustainable Energy Financing District with about $160,000 from an Environmental Protection Agency grant proposal written by the city’s energy division. The grant has not yet been formally approved by the EPA. Details are being worked out between the agency and the city, DeVries said. In addition to the grant funds, some city staff time—city attorney and energy division time—would be devoted to putting together the program. 

Part of the work would include having the city of Berkeley create a booklet explaining to other cities how to go about replicating Berkeley’s model, DeVries said. 

The grant proposal emphasizes the pre-solar phase: Before a contractor could evaluate the size of the solar system that a property requires, energy-saving efficiencies would have to be achieved.  

The grant application says that “[t]he audit will meet and exceed the basic criteria required by the State of California prior to the use of state solar incentives. Unlike the state-required audit, this program will also require work be performed to meet a baseline energy efficiency standard.”  

Under this scenario property owners would be required to meet efficiency standards of homes sold in Berkeley, as prescribed by the Residential Energy Conservation Ordinance (RECO) and the Commercial Energy Conservation Ordinance (CECO).  

“In addition,” says the application, “we plan to require property owners install Energy Star appliances to replace appliances more than 15 years old.”  

DeVries underscores that the details of what would be required may change. 

For some people, such as La Pierre herself, reducing energy use is enough. La Pierre said her household pays an average of $20 per month for home energy costs, and they do not have solar panels. Their attic is insulated; their fireplace has been sealed off to prevent air leaks; they own energy-efficient appliances. LaPierre turns off power strips before leaving for the day.  

La Pierre points out that electricity is regulated by the state, but the price of natural gas is not. Since most people use gas for heating, it is important to thoroughly insulate, including walls and floor, La Pierre said. Double-paned windows also prevent heat from escaping.  

La Pierre cautioned that “not every home is suitable [for solar panels]. Some have too much shading.” And, she added, while tenants have little input into what their landlords do, they can make their apartments more energy efficient. 

The Sustainable Energy Financing District would not include city-owned property, DeVries said. That would require a different funding mechanism since the city does not pay property taxes and could not place a lien on itself.  

According to the grant proposal, the city would put together an advisory committee to guide the work. The committe would include Steve Chu, director of Lawrence Berkeley National Laboratory, Arthur Rosenfeld, member of the California Energy Commission, Daniel Kammen, a climate change policy expert and proponent of nuclear energy and Dian Grueneich, a member of the California Public Utilities Commission.  

The proposal further says that the city would contract with the Berkeley-based nonprofit Build It Green to hold workshops with contractors and solar installers “to develop and market the initiative.” Build It Green would also be asked “to produce a brochure and web page…issue press releases and promote the program.” 

The board members of Build It Green include Judi Ettlinger, director of marketing for Truitt and White, Stephanie Kiser, territory manager for Building Materials Distributor, Inc. and Gary Gerber, president of Sun Light & Power, a solar installation company in Berkeley. Gerber’s praise for the program is quoted by DeVries in an Oct. 23 press statement: “Nearly every day we meet potential customers who think they can’t afford a solar energy system. With Berkeley’s financing plan in place, just about any home or business owner who can afford to pay their utility bill every month should be able to go solar.”