Wednesday, March 25, 2009

The silver bullet for funding

The problem with putting up a windmill, solar panels, or geothermal heating/cooling, etc. for your home is the up-front cost. You need to get some huge loan to pay for it. Sure, the project will eventually pay for itself, but sometimes not for as many as 20 years. (This isn't a huge deal if you keep your home over those 20 years--because the loan payments each month will probably be lower than what you would have been paying in traditional utility bills.)

But let's say you're trying to sell your home after 10 years. You're on the hook for that loan, not the new owner. And it's not like you can really jack up the price of the house to cover it, because people will just decide buy the regular homes down the street for cheaper. Recently the city of Berkeley came up with an alternative: they give you an ultra low interest loan to cover your renewable energy conversion costs, but it's attached to the home, not you. Then whoever owns the house makes monthly loan payments to the city as part of their property tax bill. This way, you can sell your house at a normal price, and the new owner continues to pay off the loan with their property taxes. The benefit for the new owner: the loan will be cheaper than utility costs on a normal home that doesn't have solar panels, or a wind turbine, etc. And once the loan is paid off, their utilities will be free.

Now San Francisco is following this model. Expect other cities to follow. The cities win, too, because they make money on the loans.