Promoting municipal financing for solar power investments

By Progressive States Network


As concerns about reliance on foreign energy resources increase andwe try to combat climate change by reducing our emissions and expandingrenewable energy use, there has been an increase in talk about publicfinancing of clean energy improvements. A number of states, such as Colorado, already enable public financing for clean energy, including installation of solar power, and even more states, like ArizonaTexasVirginia, and Washington have introduced similar legislation.

Oneof the greatest obstacles for property owners in installing solar poweris the large up-front investment. For an average sized home the cost of installing a solar power system is about $48,000,but the price tag can be much higher for larger homes. Although overthe long term property owners may recoup the installation cost throughreduced utility bills, the up-front cost is still daunting, especiallyfor those with not a lot of discretionary income. While individuals could explore private financing opportunities for such projects  propertyowners often choose to forgo such assistance, because if they move,they will still be responsible for financing the solar power systemalthough not reaping any of the benefits.  

In an attempt tomitigate the up-front financial barriers and lessen the long-termpersonal financial burden  associated with making clean energyimprovements, some states are passing or changing laws to ensuremunicipalities can create municipal financing programs for cleanenergy. Under municipal financing, municipalities loan property ownersmoney to help with the initial cost of the improvements.  The benefits of municipal financing compared to private financing are two-fold. First, any property owner, regardless of their credit level, is able toreceive a loan, and second the loan repayment is tied to the property,not the individual. This means that if a property owner invests in asolar power system and then moves they will not have to cover the costof the upgrade despite no longer receiving the the financial benefitsderived from the associated energy savings. Further, municipalfinancing programs can potentially, especially if they include cleanenergy projects and energy-efficiency retrofits, facilitate jobcreation.  

While there are are critics whobelieve that municipal financing programs promote energy generationthat the market might otherwise not support, states and localities haveconsiderations beyond money, such as helping ensure our nation takesthe necessary steps to combat climate change.