Fees, Permits Fizzle Solar Celebration

By Published On: July 2, 2009

Like Fourth of July fireworks, California’s solar rooftop program is going great guns, according to a June 30 California Public Utilities Commission report. But hurdles still stand in the way of distributed photovoltaic technology--from high fees and long processing times at city building permit counters to complications that have limited help from a state law that promised to ease financing for solar systems. A June 21 report by Sierra Club’s Angeles Chapter in Los Angeles details some of the complications home owners face when they seek to install rooftop solar panels. The report found that some Southern California cities charge more than $1,500 for required building permits, with La Habra Heights topping the chart at $1,572. Permits can take a while to obtain too. For instance, Sierra Club found that La Mirada charges $1,008 and takes an average of six to eight weeks to issue an installation permit. These fees and permit processing times add expense and complications for home owners already spending anywhere from $15,000 upward on a solar system. A bill easing financing for solar systems has had limited impact. AB 811, enacted last summer, promised to enable cities to make loans that would be paid off by property tax assessments on homes or businesses installing panels. The measure promised to ease financing for an owner who might sell their property before fully recovering the costs of installing a rooftop system since the assessment would carry over to a new owner until the loan was paid in full. “There’s a huge pent-up demand,” said Pat Conlon, energy management office director in the city of Palm Desert where residential electricity bills run as much as $1,000 a month. He credit’s the city’s ability to have financed 208 energy efficiency and solar rooftop installation projects under AB 811 with its long-standing commitment to green programs. Few small cities, he notes, have energy offices and can devote full time staff members to solar loan programs, particularly in these economic times. Indeed, Palm Desert is one of the few California cities that have enacted AB 811 financing programs, according to Annie Carmichael, Vote Solar federal policy director. She cited Berkeley--which actually pioneered the program before AB 811--San Francisco, and the city of Palm Desert. Sonoma County also has rolled out an AB 811 program. Other cities find the program is too complicated to arrange with banks and when all is said and done may not offer significant financial advantages to borrowers compared to conventional home refinancing and home equity loans, according to Scott Son, New Resource Bank senior vice president. Due to a number of factors, AB 811 financing programs must charge borrowers between 7 and 8 percent interest, he explained. These factors, the vice president said, include: -Concern about whether somebody who later buys a property from the original solar installer will prove credit worthy. To address this risk typically requires cities to post loan loss reserves with financial institutions. -Atypical payment schedules for AB 811 loans. Banks are used to getting paid monthly, while county tax assessors collect taxes only every six months. This means banks earn less on cash flow connected to AB 811 loans. -Concerns about recovery in cases of foreclosure due to non-payment of property taxes. Banks typically foreclose after a few months of non-payment. County tax assessors often wait years, a situation which would leave banks waiting for their money. Another major limit on the success of AB 811 so far, though, is that the Internal Revenue Service ruled that bonds that cities float to finance solar loans under the law are taxable--as opposed to tax free--as usually is the case with municipal bonds, said Conlon. That’s because the money ultimately benefits private parties rather than public entities, he explained. As a consequence, he said that Palm Desert resorted to financing its AB 811 program through lease revenue bonds. It provides loans under the program at 7 percent interest. If it could finance the loans with municipal bonds it would charge only 5.5 percent interest, according to Conlon. That would make the AB 811 program more competitive. Hurdles aside, the CPUC observed in its June 30 report to the Legislature on solar that California has over 515 MW of panels installed at 50,000 sites and that even in the midst of the recession strong demand for systems continues. The state’s goal is to install 3,000 MW by 2016.

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