Author Archives Laura Arnold

December 3, 2009

New York allows municipal finance programs for solar and efficiency retrofits on private property.

by Annie Carmichael & Shaun Chapman, Vote Solar

Last month, in what New York legislators called an "extraordinary" session, lawmakers voted to authorize municipal finance programs for clean energy improvements on homes and businesses. Called PACE (Property Assessed Clean Energy) financing, these popular municipal programs allow homeowners to go solar and make efficiency improvements without any upfront cost. Just how popular is PACE? There was not one single "no" vote in either house. New York's PACE legislation passed by a resounding 192 – 0.

And New York is not alone. Fifteen other states have passed laws to allow PACE programs. For those keeping track that’s: California, Colorado, Illinois, Louisiana, Maryland, Nevada, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia and Wisconsin. Municipalities in Hawaii and Florida can implement PACE programs without any special enabling legislation at the state level. So why is PACE suddenly the most popular flavor of state renewable energy policy?

PACE programs effectively remove the single greatest barrier to energy efficiency and solar adoption — upfront cost. It works like this: Cities set up special clean energy finance districts capable of issuing low-interest bonds. Participating property owners can then opt-in to use the bond money to pay for renewable energy and energy efficiency improvements. They then pay the loan back through a long-term assessment on their property taxes.

This arrangement spreads the cost of a new solar system out across a 20-year payment plan that is easily transferable (along with those energy saving benefits) to the next owner if the property changes hands — a particular benefit to solar that can have longer payback periods. Best of all, the cost of that assessment is typically less than the electricity bill savings generated by the new solar system, so property owners see savings from day one.

Local governments understand the promise of PACE as well. First, and perhaps most importantly in these volatile economic times, the bond-backed PACE model presents little to no impact on the city’s general fund. Or the state’s for that matter (thus why it’s proven such a popular policy for state legislatures this year).

In short, it’s a fiscally-responsible way for government to support local clean energy job growth, make climate change progress, and help lower energy bills in one fell swoop. Plus it’s based on a known and trusted municipal project finance structure, making PACE programs a relatively palatable new program for cities to implement.

Look at Austin, Texas. Earlier this fall, Austin Energy, which had consistently provided one of the strongest rebates in the nation for customer-owned solar, announced that budget constraints were necessitating changes to the popular program. PACE looked to be offering the forward-thinking municipal utility one very viable alternative option. In October, the Austin City Council unanimously passed a resolution to get the ball rolling on a PACE style program for its residents. The plan, called Project Energize, would serve as an exciting supplement to the rebate program.

The White House also recently announced its support for PACE as a job creation and economic development tool. In addition to developing best practice guidelines and consumer protections, the federal government will allow cities to apply for a portion of $454 Million in Recovery Act funds to help launch a PACE program. With the deadline to apply for those PACE dollars coming up on December 14, New York’s late night legislative decision came through for Empire State municipalities in the nick of time.

Economic crisis is forcing leaders at all levels of government to make difficult decisions between very worthy programs: healthcare, education, public safety and the transition to a new energy economy. We can help them make the right choices, by offering easier ones. Through PACE, cities empower homeowners to invest private dollars in building a local clean energy market. At a time when budgets are constrained even beyond their normal parameters, that is music to all of our ears.

Click here for additional resources including a toolkit for helping your city develop a PACE program.

Annie Carmichael is Federal Policy Director with Vote Solar. Annie spearheads the organization’s federal efforts as well as a number of state initiatives. Shaun Chapman is East Coast Campaigns Director at Vote Solar. Based in New York, Shaun leads the organization’s efforts on the east coast.

Vote Solar is a non-profit grassroots organization working to fight climate change and foster economic opportunity by bringing solar energy into the mainstream. Since 2002 Vote Solar has engaged in state, local and federal advocacy campaigns to remove regulatory barriers and implement the key policies needed to bring solar to scale.

http://www.renewableenergyworld.com/rea/news/article/2009/12/keeping-up-the-pace?cmpid=WNL-Friday-December4-2009

Two Tracks (with & without Federal Tax Credits)
There are two tracks because not every potential generator can fully use the federal tax credits. If the program is to be equitable, that is, if the program is to provide equal opportunity to all Indiana citizens, it must not be limited to only those with substantial federal taxes. Thus, even those who do not have substantial federal tax liability can take advantage of the program by using the tariffs.

While it would be technically more correct to run a full financial model taking into account the discounted effects of the federal subsidies, this was determined to be unnecessary. Instead, the proposed Indiana tariffs derived from Ontario's current rates were simply reduced 30 percent, representing the equivalent benefit of the federal tax credits.

Wind Energy
Wind energy is a special case and was treated separately and in much more detail. There are four classes of wind energy tariffs: two tariff classes for small wind turbines, an offshore class, and a tariff class for onshore, commercial-scale wind turbines.

Small Turbines
Tariffs for small wind turbines are divided by the area swept by the wind turbine's rotor. This measure allows inclusion of both conventional horizontal-axis wind turbines as well as novel vertical-axis wind turbines.

The smallest class is representative of household-size wind turbines. These are currently more expensive and less productive than commercial-scale turbines and, consequently, the tariff needed is much greater. The tariff proposed for household-size wind turbines is comparable to that in several European countries and to that proposed in Great Britain.

The second small turbine class is for wind turbines considered suitable for small businesses. With the federal tax credit, the tariff proposed is similar to that proposed by Indianapolis Power & Light in its filing with the Indiana Utility Regulatory Commission (IURC) for wind turbines less than 100 kW in capacity.

Commercial-Scale Turbines Onshore
The price necessary for profitable operation of commercial-scale wind turbines is highly dependent upon the wind resource and the resulting productivity of the wind turbine. To spread economic opportunity to a greater percentage of Hoosier farmers, rural landowners, and small businesses it is necessary to offer a range of tariffs to reflect the different wind resources available.

When a single wind energy tariff is used for commercial-scale wind turbines, some generators will be overpaid and others underpaid. Both to avoid overpayment at windier sites and to enable profitable wind development at less windy sites it's necessary to calculate a range of tariffs.

There are two techniques currently in use to accomplish this task: the German system, and the French system. Both systems use a trial period of five to ten years. All turbines are paid the same price during the trial period. After the trial period, the tariff payment changes, reflecting the site's productivity. The German system (it is also used in Switzerland) is more unwieldy than the French system and less adaptable to North America.

The French system bases the post-trial tariff on a measure of the wind turbine's productivity.

The proposed Indiana tariffs are similar to those proposed in Ontario by the Ontario Sustainable Energy Association. They have been specifically adapted to the North American wind resource and costs.