Energy Matters: Financing your Solar Dream

by Dave Beaulieu

When people learn that I work in the solar industry they like to pick my brain about the evolving technology. The conversation always gets around what it costs to go solar. I attribute this curiosity to the widespread media coverage of going “green” and a newfound awareness of the importance of energy independence. With the current focus on sustainability, I find that most people want to take responsibility for their energy use and make steps toward their family’s energy independence. For many, this goal appears out of reach due to the high initial cost of installing photovoltaics (PV). With solar running between $5.00 and $6.00 per watt-installed locally, and the average home requiring about 4,000 watts of power, upfront costs can be daunting. Nevertheless, you can see a substantial savings thanks to utility rebates, state government incentives, federal tax credits and some innovative financing. Those solar dreams can be made real if you do your homework.

Going solar doesn’t have to be a dream; something you’ll do someday. It’s attainable now using some widely available financing tools. Combined with generous tax credits, available utility rebates and incentives from the Colorado Governor’s Energy Office, you can make those solar dreams a reality.

AN ENERGY-PRODUCING APPLIANCE

When you purchase a grid-tie solar system you’re buying an energy-producing appliance that will offset or reduce your electric bill. Every day (sunny or cloudy), this high-tech, low-maintenance device can be saving you money by helping to pay your second highest monthly expense. An energy-consuming dishwasher or computer doesn’t do that for you. And, unlike other home or office improvements such as hardwood floors or a bathroom remodel, solar will eventually pay for itself. With constantly rising energy rates (at least 5%-8% annually) you get a guaranteed rate of return if you can power as much of your lifestyle as possible with solar.

If you’re a cash-strapped homeowner that hates the idea of paying finance charges, you might consider cashing out any investments that aren’t providing a good rate of return in order to pay for going solar. Stocks, bonds, certificates of deposit, 401ks, retirement accounts and savings accounts are uncertain places to keep your money in this unstable financial market. With rates of return at or below two percent on most of these investment vehicles, the five to ten percent that you’ll gain by paying your monthly utility bill with solar sure looks like a better deal to me. There may be penalties associated with withdrawing some of these funds, but if you do the math you may find that this loss is still offset by the energy savings.

Mortgaging a PV system might make sense because rolling an additional small monthly payment into your mortgage helps build equity in the home and pays the electric bill at the same time. In some cases, the added monthly payment may be the same or less than your current electric bill. And, since solar equipment will last for 25 years or more, it’s a sensible choice to pay it off with your mortgage; just as you would for your doors, windows or any other appliances.

GOVERNMENT INCENTIVES

Government has finally recognized that solar is vital to our nation’s energy independence by making it easier for us to realize our solar dreams. The Federal Renewable Energy Tax Credit allows a 30% credit on PV systems placed in service after 2008. Note that this is a true credit and not a deduction, so it whacks a hefty chunk off your federal taxes and can be carried over to subsequent years if necessary. Colorado’s Amendment 37 also regulates net metering so that utilities must allow their residential and commercial customers to sell back any excess power generated by your PV system. This will result in a credit on your electric bill whenever you produce more PV power than you need. If you are building a new “green” home, you ought to go all the way and design active as well as passive solar right into the architectural plans. The Colorado legislature has passed a bill that requires builders to offer “solar ready” as an option on all new construction.

The Salida City Council has approved a temporary measure giving home and business owners a sales tax exemption for solar power components sold within city limits as long as there is a net metering agreement with Xcel. This can save you hundreds of dollars, depending on the size of your system. Colorado’s current government leaders recognize the importance of home and business energy upgrades from the standpoint of job creation and energy efficiency, and offer substantial rebates to residents. The Governor’s Energy Office (GEO) has a handy website that outlines all the state energy efficiency rebates and incentives available at:

www.rechargecolorado.com.

AN ARRAY OF CHOICES

The Federal Housing Authority (FHA) offers energy efficiency mortgages that will cover 100% of solar financing (up to 5% of your home’s value) on new or existing mortgages through Fannie Mae or Freddie Mac. The Department of Veteran Affairs also offers Energy Efficient Mortgages (EEMs) for solar up to $6,000. If you’ve served in the military you may be eligible. The U.S. Department of Agriculture has loans available for rural homes, ranches, farms and businesses to encourage these heavy energy users to conserve. The Fed also backs EEMs for Energy Star rated homes. The U.S. Department of Energy will often finance solar installations on government buildings at very low rates. With our urging, our public servants can be convinced to put solar on public buildings. Obviously, this saves taxpayers a lot of money in the long run.

All government-backed financing requires a low-cost energy audit be performed on the home or office building in order to qualify. The relatively small cost for the audit can be rolled into the loan for increased savings. Some banks, such as High Country Bank, will often front the amount of any rebates due the homeowner, which can be used as a down payment for the system. Solar equipment manufacturers like SunPower Corporation (www.sunpowercorp.com) are now offering solar financing of their own at very competitive rates and can recommend a qualified local installer to make it easier to get started. As icing on the cake, some banks and credit unions now offer green home improvement loans as a first or second mortgage, personal loan, unsecured loan or a secured line of credit; often at an interest rate that’s lower than going rates. You just have to ask.

Lending institutions are eager to loan you this money because, according to a National Renewable Energy Laboratories study (http://www.nrel.gov/learning/pdfs/43844.pdf) a “solar electric system increases your home’s value by $20 for every $1 in annual utility bill savings, which means a system almost pays for itself with the appraisal value increase.” Also, real estate agents tell me that a home or business with PV installed will sell much faster than a comparable home or business in the same neighborhood.

But a solely pragmatic focus on the economics of going green, such as determining return on investment, ensuring a positive cash flow, computing system payback, hedging against fuel cost increases, and how quickly a home will sell with solar truly misses the point of going solar. When talking with people who want PV on their roof, I’ve found that most have a sincere desire to reduce production of harmful greenhouse gases and conserve our land and way of life with a clean, renewable resource that pays for itself.

If you truly want to be energy independent by offsetting your energy consumption, not only is it a wise financial decision, it is now easier than ever to achieve your solar dream.