City watches Bay Area plan that funds upfront costs

By Tom Beal

ARIZONA DAILY STAR

How the plan would work

Tucson is looking closely at this Berkeley, Calif., plan and considering its adoption here.

An example:

A 3-kilowatt solar photovoltaic system, capable of offsetting much of the electric cost in an average Berkeley home, can be installed for about $25,000.

It would qualify for state and utility subsidies of about 30 percent of the cost.

The remaining $17,500 would be paid with low-interest city bonds and repaid by the owners of the home on their tax bills over 20 years.

The estimated saving on electric bills would be $900 to $1,200 a year and would more than offset the yearly bill, based on an anticipated rise of 4 percent a year in electric rates.

Berkeley hopes to begin installing systems by midyear.

Source: Office of Berkeley Mayor Tom Bates

DID YOU KNOW ...

The sun has always been one of the defining features of Arizona life and one of the reasons for its growth. In 1922, a group of Tucsonans, concerned that Phoenix was growing faster than Tucson, found a way to capitalize on the area's good weather. They formed an organization called the Tucson Sunshine Climate Club to promote our sunny, clear skies throughout the country. Through advertising campaigns and promotions, the group was credited with introducing the rest of the country to the Tucson lifestyle.

— Star archives

Count on Berkeley, Calif., to bring solar power to the people with a plan to make 20-year funding available to folks who want to put solar panels on their roofs and pay for them in their property-tax bills.

The plan, approved by Berkeley's City Council in November, gets around solar's biggest stumbling block, which is not the Bay Area fog, but the high upfront cost of buying and installing photovoltaic systems.

Solar has been a hard sell hereabouts as well, even with sunnier skies, utility subsidies and federal tax credits available, because most Tucsonans can't wrap their minds around paying for technology that won't fully pay for itself through lowered electric bills for up to 20 years.

That's why the city is looking closely at the Berkeley model and considering its adoption here.

The Berkeley plan would allow homeowners to pay the cost of installing photovoltaic panels on their roofs in yearly increments over 20 years — and to pass on that cost to the future owners of the homes along with the benefit of lowered electric bills.

Berkeley residents will recoup the cost of their systems in lowered electric bills within 12 years, estimates Cisco DeVries, chief of staff to Berkeley Mayor Tom Bates — sooner than that, if the cost of electricity rises faster than estimated.

In Tucson, the payback period for an average electric user is probably longer than that, said Katherine Kent, owner of the Solar Store. She estimates it is 15 to 20 years, depending on the size of the home, the system installed and the energy habits of the residents.

That estimate figures in subsidies available through electric rate payers of $2,000 for every thousand watts of generating capacity and $3,000 of federal and state tax credits for installing solar.

Erika Roush, of Technicians for Sustainability, a Tucson firm that specializes in solar systems and rainwater harvesting, said consumers should consider that they are "paying for a good 30 to 40 years of electricity" when they install solar.

The photovoltaic panels, guaranteed for 20 to 25 years, should have a life span longer than that, she said.

Roush said maintenance of a grid-tied system, which doesn't need battery storage, is minimal, though the inverters that change the panel's DC current into AC will probably need replacement at least once.

The economics of solar will sweeten as energy costs rise.

In Berkeley, said DeVries, energy costs have risen an average of 6 percent a year for the past 30 years. The city is using a conservative 4 percent rise in its estimates of payback periods, he said.

Half of Berkeley's electricity, supplied by Pacific Gas and Electric, comes from burning natural gas, DeVries said. The price of that fuel has been rising dramatically. The other half is a mix of nuclear and hydroelectric power.

In Tucson, electric rates have been fairly stagnant when adjusted for inflation for the past 20 years, said Kent.

Tucson Electric Power supplies Tucson's energy mostly by burning coal, currently one of the cheapest methods of power production, at plants here and in Springerville.

Tucson ratepayers should expect rate hikes, TEP spokesman Joe Salkowski said. "It's reasonable to assume, when looking at the cost effectiveness of solar-power systems, that the cost of power from your local utility is going to go up in the future," he said.

DeVries suggested rates may rise dramatically for utilities using coal if the future brings carbon taxes and other costs for mitigation of greenhouse-gas emissions.

The higher the cost of electricity, the better solar looks, DeVries said.

TEP would welcome the program in its area, Salkowski said. "We're certainly looking to get photovoltaic systems on rooftops, and anything that does that is a pretty good idea," he said.

Arizona's utilities have been ordered by the Arizona Corporation Commission to produce 15 percent of their electricity from renewable sources by 2025. The subsidies offered through TEP come from a tariff paid by all electrical users, currently capped at 35 cents per month. That amount would be boosted under proposals presented by TEP to the Corporation Commission.

The subsidies, coupled with a combined state and federal tax credit of $3,000, made solar a financially viable choice at his new house, said Tucson financial planner Chuck Dunn.

Dunn said he initially figured solar would give him a 3.5 percent return on his investment, which meant it would take nearly 30 years to recoup costs.

But that return doubled with enrollment in Tucson Electric Power's SunShare program, which offset about half the costs of his 15,000-watt photovoltaic array, the biggest so far under the residential program.

The tax credits of $1,000 from the state and $2,000 from the federal government and the rising costs of energy will boost the return on his $42,000 investment even more, Dunn said, allowing him to recoup his costs in less than 10 years.

Dunn said the TEP engineers who approved his system estimated the worth of its monthly power production at $250 to $300, and he expects it to supply all or most of his electricity.

"It had to make sense on a financial level and on a societal level," he said. Dunn said there aren't a lot of ways for an individual to "tangibly reduce global warming" but solar is one.

Dunn and his wife have four children, he said, and he wanted to influence them. "My meters tell me how many tons of CO2 I've offset. One of my kids has already written a report on it."

Dunn said the Berkeley model is a great way to bring the program to people who don't have his ability to easily pay for solar energy upfront.

Tucson City Councilman Steve Leal said that aspect of the Berkeley model makes it particularly attractive to him.

We all pay for the energy subsidies, he said. They should be more universally available. "It's not the shareholder paying for it; it's the ratepayer. You've got all these low-income ratepayers subsidizing a life they can't afford themselves," said Leal.

Leal said he has asked the city manager and the city's Office of Conservation and Sustainable Development to investigate the possibility of doing a similar program here.

Councilwoman Nina Trasoff, who has been pushing for Tucson to require builders to ready homes for solar water heaters, said she is intrigued by the Berkeley idea, but that it will require some study to see if it applies here.

"I love the basic concept. I just need to know more here about the legality and reality of it."

Joe Simmons, co-director of the Arizona Research Institute for Solar Energy, said his University of Arizona-based group is already studying the program's importation to Tucson.

DeVries said the concept is basic, and simple, and doesn't in itself solve all of solar's problems. "This isn't magic pixie dust that changes the economics of solar," he said.

It won't make sense for everyone, he said, but it will change "the method of purchase that leads to market failure."

He said Berkeley will require that residents using the program first bring their homes into compliance with the city's energy conservation ordinance. The law requires that any home sold or substantially upgraded improve its energy conservation in 10 specific areas, ranging from wrapping water heaters to placing a layer of insulation in the roof space.

"If you're coming in to get a $30,000 solar system on your roof and you haven't insulated it, you ought to be taken outside and beaten with a stick," he said.