California city provides financing for homeowners to encourage more energy-efficient homes

A story in Environment magazine details a financing program being offered in Berkley, Calif., that helps homeowners pay for improvements that increase energy efficiency:

Many barriers exist to reducing energy consumption and increasing the use of renewable energy. One is high first cost (“up-front cost”), which is both a psychological and financial barrier for many people. Our research group from the University of California, Berkeley, has worked with a number of cities, initially Berkeley to address this barrier by making financing for solar power installations and energy-efficiency retrofits more appealing and accessible to property owners. Urgency around the need to cut emissions has inspired cities to apply old tools, such as municipal financing, to the new problem of reducing the amount of carbon in the energy supply.

Here is the gist of it: the city issues special purpose bonds to create a finance pool for energy efficiency retrofits. When a homeowners’ application is approved, the work is done. The city issues a check to pay for it and puts a lien on the home. A special tax is then added to repay the city with interest over a 20-year period, and these payments are tax-deductible, similar to a home equity loan. The program is self-supporting, so there is no exposure for the city in terms of expenditures from the general fund, and only homeowners that are approved by the program are subjected to the special tax.

To say that there has been a great deal of interest in the Berkley program would be a massive understatement. The vote to authorize the program passed with 81 percent of the vote, and enough applications for the entire initial program allotment of $1.5 million were submitted within the first ten minutes. As of summer 2008, the city had recieved over 1,300 inquiries from around the world about the program.

The authors are concerned about not just reducing energy usage, but especially in the need to retrofit existing housing stock in order to meet the state’s ambitious greenhouse gas emission reduction targets – hence the mention of solar installations. However, as they themselves point out, retrofitting solar photovoltaic (PV) or solar thermal heating upgrades only makes financial sense in areas that have moderate-to-high energy costs and where rebates or subsidies are available to homeowners, and only if compared with future energy costs that include an as-yet-unimplemented carbon tax. On the other hand, increasing the energy efficiency of homes pays of in all cases. One advantage of subsidizing such “efficiency-only” efforts would be the increased number of homeowners that could participate in such programs, since the average cost of upgrading to highly efficient furnaces, sealing against air infiltration/loss, and adding ductwork etc. to improve efficiency are much less expensive than a solar PV retrofit. These measures also have the benefit of making the houses more comfortable to live in.

Saving money and having a more comfortable home? As I sit here feeling the cold air drafting through my own 30-year-old house, I can’t help thinking that if such a program were available that I would sign up in a heartbeat.

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2 comments so far

  1. Enroncamn on

    Solid web site I will definitely come back soon.

    • markkeating on

      Thanks for reading, and for commenting!

      I haven’t seen anything more about the program since I wrote this post. If anyone out there in blogistan has more info, I’d love to hear it.


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