Incentivizing the Green Build Up

Solar Panels on House

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There are many good reasons to build green, but for homeowners and small businesses, the high upfront costs can be prohibitive.

The key to advancing renewable energy use nationwide may be government involvement.

Federal, state and local incentives can help offset the big capital outlay that solar, wind and other renewable energy technologies require. Tax credit and rebates already go a long away. Now, innovative local funding programs are taking these projects even farther, making renewable energy installations as affordable as the monthly electric bill.

Adding Up the Incentives

Homeowners and small businesses in every state can start with the federal tax credit for energy efficient home improvements. The credit just increased from 10 percent to 30 percent under the economic stimulus package.

In many states, they can also add state incentives, and often local incentives as well. Put together, these incentives can make a significant dent in the cost.

Take California, which offers a Solar Rebate Program. Installing 600 square feet of photovoltaic panels, enough to power a 2,500-square-foot home with air conditioning would normally cost about $90,000. Of this amount, the $66,000 for equipment would qualify for the state rebate and federal tax credit, which also would cover a portion of labor costs. With those incentives, the homeowner saves about 50 percent.

The cost may be reduced even further by rebates and grants offered by local government-operated utilities. For instance, Anaheim, Austin, Los Angeles, San Diego, Palo Alto and Roseville municipal utility districts offer incentives for photovoltaic systems, ranging from $3 to $6 per kilowatt hour, offsetting the cost for a system up to 75 percent. The cost for a system varies by regional sunshine availability and individual electric usage. For a typical residence, the cost of installing a one-kilowatt (1,000 watts) solar photovoltaic system—the smallest considered practical—is between $6,000 and $10,000. To find out how much is needed, based on location and usage, check the Solar Power Calculator.

Cities Go the Extra Mile

The federal tax credit and Environmental Protection Agency Energy Star programs have been highly successful in encouraging energy-saving home improvements, such as weatherizing, better insulation and purchase of energy-efficient equipment and appliances.

Renewable energy incentives, however, have failed to generate significant participation nationally – even in places with incentives like California.

Annual limits on funding for state energy incentives, along with lack of public awareness about green energy programs, may be partially to blame. But the main problem is the high upfront cost for installation, which is still a lot of money even after rebates and tax credits, points out Dave Alpert, vice president of the San Francisco office of HGA Architects and Engineers.

He says his commercial clients usually aren’t interested in solar because payback takes longer than five years. He points out that the majority of participation in California’s Solar Rebate Program involves new construction, where installation costs can be rolled into 20- or 30-year mortgages. Alpert suggests that green energy incentives would get more traction among existing homeowners if coupled with a financing mechanism similar to Berkeley, Calif.’s FIRST (Financing Initiative for Renewables and Solar Technology) program.

Launched last year, FIRST uses bond financing to provide 20-year loans at 3.75 percent on up to $37,500 for renewable energy installations. Similar to loans for other public utility upgrades, the property is encumbered so the debt can be transferred to new owners if it changes hands.

The program is a win-win. It allows homeowners to repay the loan as part of their property tax, and in the meantime enjoy lower electric bills, while helping the city meet requirements of the California Global Warming Solutions Act of 2006. Better known as SB32, the new law requires a 20 percent reduction in greenhouse gas emissions by 2020. The biggest problem with the FIRST program is there’s currently only funding available for 40 loans annually.

Similar programs are beginning to emerge nationwide, with San Francisco and several cities in Massachusetts and Ohio planning on using bond money to offer residents upfront financing for solar installations. Several states, cities and public utilities already offer loans at various levels for solar and other renewable energy technologies, including public utilities in Sacramento, Calif., and Clallum County, Wash.; the states of Oregon, New York, Pennsylvania and Vermont; and cities of Santa Monica, Calif., Aspen, Colo., and Orlando, Fla.

The cost for renewable energy technologies will come down as demand increases. New building-integrated photovoltaics products that integrate solar with roof tiles, skylights and facades are already helping to offset costs by reducing the amount spent on building materials and labor normally used in construction.

Local governments also offer incentives, including reduced fees or fee waivers and fast-tracking of plan checks and permits, for attaining a certain level of sustainable building criteria.

The criteria may involve conserving energy and water, reducing carbon emissions, recycling construction waste, or using renewable or recycle materials and products. Most of these green elements simply involve good design, site selection, and selection of green building materials and products. For a state-by-state list of green building and energy financing programs, visit the Database of State Incentives for Renewables & Efficiency.

When Push Comes to Shove

Green building incentives are helpful, but alone they are unlikely to generate the level of participation needed in time to save the planet. Many industry experts agree that to shift to a sustainable build paradigm quickly, incentives must be linked to policy mandates.

California’s SB375 is serving as the national test case for this concept, linking land use to SB32’s greenhouse gas reduction targets, notes Barry Rosengrant CEO and inventor of E-Space Systems, a moderate price sustainable building system.

Signed into law by Gov. Arnold Schwarzenegger last year, SB375 offers a road map for attaining SB32 greenhouse gas goals by halting urban sprawl. The law encourages cities to adopt a general plan with a Sustainable Communities Strategy (SCS) that requires new development to be near transit or clustered with existing development. While cities are not obligated to adopt an SCS, Rosengrant notes that only those that do will be eligible for a share of the state’s $6 billion annual transportation budget.

SB375 also rewards projects that meet SCS criteria, exempting them from requirements of the California Environmental Quality Act, which involves an expensive, time-consuming process that can delay construction. Qualifying projects are mixed use with at least 50% residential, 20 units or more per acre and no more than half a mile from a transit stop.

Obviously, it will take more than one type of solution to meet the American Institute of Architects’ goal of 100 percent carbon neutral design for new buildings and renovations by 2030.

Solutions, however, must involve a financial hook to get buy-in by a majority of Americans, who may have altruistic intentions that are jarred into play by their personal finances. This became crystal clear last year when fuel prices hit $4 per gallon, causing ridership on public transit to soar to record highs and people to trade their gas guzzling automobiles for more fuel-efficient models.

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