America’s Most Important Renewable Energy Incentive Does Not Yet Exist
by Ian Kerr
My Solar Story… and Where Are the Sequels?
I’m a middle-class Arizona homeowner in a middle-class Phoenix-area neighborhood with a wife, twin 6-year-old children, and 28 solar panels on my roof. The 6580-watt-rated system is on course to generate enough electricity to pay for itself in about 7 years and last at least 18 years beyond the payback period.
I’ve taken advantage of Federal, state, and utility incentives in order to buy the photovoltaic (PV) system. All of these incentives are still available to all my neighbors. The benefits of these incentives are smaller now than a year ago… but still robust. Yet, I’m the only one in the neighborhood producing and using my own green energy.
Why am I alone? Well, despite the incentives, buying the system I now own came at an up-front cost of about $16,000… and I was in a position to pay cash. Middle-class families tend not to have that much money in the bank. Theoretically, my neighbors could take home equity loans, but this is Arizona, one of the epicenters of the housing-market collapse. Lots of my neighbors are upside-down in our mortgages (including me). It’s quite the sad coincidence that many places where solar energy would do the most good are also places that almost certainly will take the longest to recover from the bursting of the housing bubble (Arizona, Nevada, California, Florida). Borrowing by other means (construction loans, credit cards) makes no sense because the high interest rates cause the payments to be so high that it would be cheaper to buy the electricity (or the payback wouldn’t occur soon enough to make it worthwhile).
Some companies offer leased PV systems… but you have to have excellent credit to qualify (usually a credit score of at least 700 or 720), and you have to agree to escalating lease payments (about 3.5% per year for the life of the lease… which fiercely blunts the payback and may even exceed the rate of inflation for electricity). Furthermore, you’d have to overcome the uneasy feeling of, in effect, becoming a tenant (of the solar company) in your own house.
Clearly the difference between my PV system being a neighborhood solo act and being a part of a ZIP-code-wide solar symphony is low-cost financing of the up-front installation costs. Since solar panels are warrantied for 20-25 years and likely last much longer, low-cost long term financing would be both prudent and useful.
Clearly, a government program to facilitate some low-interest long-term loans would go a long way toward mass-adoption of green energy, but no one in Washington seems to want to talk about anything but creating jobs or reducing the Federal deficit.
Well, Washington, if that’s what you want… you’ve got it.
Job Creation, Deficit Reduction… And Sustainability
I propose a unified and robust Energy Efficient Mortgage (EEM) program.
It should be adopted by all major Federally-backed mortgage programs (FHA, VA, FmHA, etc.) and the guidelines of the mortgage-buying government-sponsored enterprises or government-owned enterprises (GSEs and GOEs like Fannie Mae, Freddie Mac, Ginnie Mae, etc.) should permit the purchase of such mortgages.
This program should allow Americans to buy a home or refinance an existing home AND borrow sufficient additional funds to install cost-effective energy-saving or renewable-energy-generating improvements to their homes… all within the same first mortgage.
Such loans should be considered “conforming loans” to the federal mortgage programs and the mortgage GSEs/GOEs even if the final loan amounts exceed the appraised values of the homes.
There is a precedent for such a program. It exists today. See Part 2 of this post to contrast the current programs to my proposal.
See Part 3 of this post to see how a sample homeowner might benefit.
See Part 4 of this post to see how this might benefit the economy, the taxpayers, and the environment… perhaps hundreds of thousands of jobs, billions of dollars, and a sustainable future.
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