Property Tax Assessments as a Finance Vehicle for Residential PV Installations: Opportunities and Potential Limitations

PDF Version Also Available for Download.

Description

Readily accessible credit has often been cited as a necessary ingredient to open up the market for residential photovoltaic (PV) systems. Though financing does not reduce the high up-front cost of PV, by spreading that cost over some portion of the system's life, financing can certainly make PV systems more affordable. As a result, a number of states have, in the past, set up special residential loan programs targeting the installation of renewable energy systems and/or energy efficiency improvements, and often featuring low interest rates, longer terms, and no-hassle application requirements. Historically, these loan programs have met with mixed success ... continued below

Creation Information

Bolinger, Mark A & Bolinger, Mark February 1, 2008.

Context

This report is part of the collection entitled: Office of Scientific & Technical Information Technical Reports and was provided by UNT Libraries Government Documents Department to Digital Library, a digital repository hosted by the UNT Libraries. More information about this report can be viewed below.

Who

People and organizations associated with either the creation of this report or its content.

Publisher

Provided By

UNT Libraries Government Documents Department

Serving as both a federal and a state depository library, the UNT Libraries Government Documents Department maintains millions of items in a variety of formats. The department is a member of the FDLP Content Partnerships Program and an Affiliated Archive of the National Archives.

Contact Us

What

Descriptive information to help identify this report. Follow the links below to find similar items on the Digital Library.

Description

Readily accessible credit has often been cited as a necessary ingredient to open up the market for residential photovoltaic (PV) systems. Though financing does not reduce the high up-front cost of PV, by spreading that cost over some portion of the system's life, financing can certainly make PV systems more affordable. As a result, a number of states have, in the past, set up special residential loan programs targeting the installation of renewable energy systems and/or energy efficiency improvements, and often featuring low interest rates, longer terms, and no-hassle application requirements. Historically, these loan programs have met with mixed success (particularly for PV), for a variety of reasons, including: (1) historical lack of homeowner interest in PV, (2) lack of program awareness, (3) reduced appeal in a low-interest-rate environment, and (4) a tendency for early PV adopters to be wealthy, and not in need of financing. Although some of these barriers have begun to fade--most notably, homeowner interest in PV has grown in some states, particularly those that offer solar rebates--the passage of the Energy Policy Act of 2005 (EPAct 2005) introduced one additional roadblock to the success of low-interest PV loan programs: a residential solar investment tax credit (ITC), subject to the Federal government's 'anti-double-dipping' rules. Specifically, the residential solar ITC--equal to 30% of the system's tax basis, capped at $2000--will be reduced or offset if the system also benefits from what is known as 'subsidized energy financing', which is likely to include most government-sponsored low-interest loan programs. Within this context, it has been interesting to note the recent flurry of announcements from several U.S cities concerning a new type of PV financing program. Led by the City of Berkeley, California, these cities propose to offer their residents the ability to finance the installation of a PV system using increased property tax assessments, rather than a more-traditional credit vehicle, to recover both system and administrative costs. As discussed in more detail later, this seemingly innovative approach has a number of features that should appeal to PV owners, including: long-term, fixed-cost, attractive financing; loans that are tied to the tax capacity of the property rather than to the owner's credit standing; a repayment obligation that transfers along with the sale of the property; and a potential ability to deduct the repayment obligation from Federal taxable income, as part of the local property tax deduction. For these reasons, Berkeley's program--which was first announced on October 23, 2007--has received considerable nationwide attention in both the trade and general press. Since the announcement, cities from throughout California and the broader U.S. have expressed keen interest in the possibility of replicating this type of program. In California alone, the cities of Santa Cruz, Santa Monica, and Palm Desert are all reportedly considering similar programs, while the city of San Francisco has recently announced its own program, portions of which closely parallel Berkeley's approach. Berkeley's Proposed PV Program In addition, a bill (AB 811) that would authorize all cities (not just 'charter cities' like Berkeley) in California to create this type of program was approved by the California General Assembly on January 29, 2008 and passed on to the State Senate for consideration. That local governments from across California and the broader US are so genuinely excited about the prospect of supporting the installation of residential PV in their communities through this type of program is no doubt an interesting development. Given, however, the potential for such programs to negatively interact with the residential solar ITC, it is important to evaluate the financial attractiveness of this specific type of loan program, particularly in advance of any broader state- or nation-wide 'rollout'. This case study presents such an evaluation. Because Berkeley appears to have the most-well-developed proposal at the moment, this case study begins by describing Berkeley's program, as currently planned, in more detail. It then discusses subsidized energy financing and the potential negative tax implications of this type of program. Next, taking Berkeley's proposed program as a case study, it uses a simple pro forma financial model to first assess the potential financial benefit of the program relative to other commercially available financing options, and then to assess how much of that relative benefit might be eroded by the possible loss of the Federal ITC. Finally, it concludes by discussing potential actions that cities contemplating this sort of program might take to clarify the issues and optimize the value provided to participating residents.

Language

Item Type

Identifier

Unique identifying numbers for this report in the Digital Library or other systems.

  • Report No.: LBNL-457E
  • Grant Number: DE-AC02-05CH11231
  • DOI: 10.2172/934725 | External Link
  • Office of Scientific & Technical Information Report Number: 934725
  • Archival Resource Key: ark:/67531/metadc893514

Collections

This report is part of the following collection of related materials.

Office of Scientific & Technical Information Technical Reports

What responsibilities do I have when using this report?

When

Dates and time periods associated with this report.

Creation Date

  • February 1, 2008

Added to The UNT Digital Library

  • Sept. 27, 2016, 1:39 a.m.

Description Last Updated

  • Jan. 4, 2017, 5:45 p.m.

Usage Statistics

When was this report last used?

Congratulations! It looks like you are the first person to view this item online.

Interact With This Report

Here are some suggestions for what to do next.

Start Reading

PDF Version Also Available for Download.

Citations, Rights, Re-Use

Bolinger, Mark A & Bolinger, Mark. Property Tax Assessments as a Finance Vehicle for Residential PV Installations: Opportunities and Potential Limitations, report, February 1, 2008; Berkeley, California. (digital.library.unt.edu/ark:/67531/metadc893514/: accessed August 18, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.