Finance Roll

It seems that no one in the Berkeley City administration recognizes the massive failings inherent in the Berkeley FIRST solar plan. However well intentioned the plan was to begin with, the solar industry has been changing too rapidly for anyone to have seen the present coming, and B FIRST arrived DOA.

Clearly, for the past years, solar did not pencil out for any user with a bill under $45 dollars a month. Even when switching to Time of Use billing, the federal tax credit of $2,000 on residential systems kept solar out of reach for conservative power users. But almost to the day that Berkeley rolled out the program, the fed signed the new tax credit, and lifted the residential cap. As of January 1st, residential solar installations will be eligible for a 30% tax credit, a difference of up to $10,000 dollars.

What the B FIRST program officials (and surely anyone who actually takes the bait) don't seem to be aware of, is that the federal government will only allow application of the tax credit to one's actual cost basis in the system. Specifically, to avoid "double dipping," systems purchased with municipal bond funding are ineligible for the tax credit.

So, when purchasing one kilowatt of solar for $10,000 (with $1,900 rebated from PG&E), the B FIRST customer will string $8,100 on a 20 loan, at higher than market rates, with no prepayment option, which hits their tax bill every six months. Anyone else will purchase the same $10,000 worth for $8,100, then receive 30% of that ($2,430) in tax credits. If they're smart, they'll pay down their loan to $5,670. On a 4 kW system, that's $32,300 vs. $22,680.

With the loan fixed on their property tax bill, B FIRST customers will NEVER be able to sell their homes, as any intelligent buyer will run the numbers and see that they'll be buried in taxes. Those wishing to simply get the free ride from the city will pay 50% more for it. That is, if they can get it.

The primary problem with the B FIRST program is that the bond finance doesn't get processed until after PG&E has signed off on the system, and can't be assigned to the contractor. This means that the monies don't come through for at least a month after the project is completed, and the client will have to be trusted to fork them over. The solar installer, who typically contracts for 70% of the project costs up front just to pay for the panels, will need to hold the bag on 20-40-60 thousand dollars for two months after the contract signing.

Ain't gonna happen babe.

Either the installer pool for Berkeley will be limited to megacorporatesolar.com, who can afford to wait two months for their dough, or B FIRST clients will need to finance the system themselves, then pay that finance off with the more expensive B FIRST program. I think the intellectual curve of Berkeley citizenry will preclude that.

The great benefit of the B FIRST program is that it kept everyone in Berkeley waiting all year, so that they can now take advantage of the increased federal tax credit. Outside of that, it's Wake up and smell the Peets, Berkeley!