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

TitleProperty Tax Assessments as a Finance Vehicle for Residential PV Installations: Opportunities and Potential Limitations
Publication TypeCase Study
Year of Publication2008
AuthorsBolinger, Mark
Secondary TitleCase Studies of State Support for Renewable Energy
PublisherLBNL
Place PublishedBerkeley
Pagination10
Date Published02/2008
Abstract

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.

Keywordselectricity markets and policy group, energy analysis and environmental impacts department
AttachmentSize
PDF110.84 KB