|State loans urged to help residents install solar gear|
Honolulu Star Advertiser - February 19, 2013
The state might help more consumers afford solar panels by tapping into the same bond financing that utilities have used to improve power plants and respond to storm damage.
Under bills moving through the Legislature, the state would issue revenue bonds to raise money for loans that consumers could obtain to install solar water heaters or rooftop photovoltaic systems. Consumers would repay the loans over time from the energy savings on their electrical bills.
The financing is meant to deal with the high upfront expenses of solar, which even with generous state and federal tax incentives can cost consumers thousands of dollars. If the concept works, it could also help Hawaii achieve its goal of realizing 70 percent of its energy needs from renewable sources and conservation by 2030.
Gov. Neil Abercrombie has said a green infrastructure loan program is a legislative priority this year, and the concept has attracted broad support from the Public Utilities Commission, Hawaiian Electric Co. and business, environmental, labor and consumer groups. State House and Senate members are working out the details of the legislation, however, looking for the kind of flaws that undermined similar financing ideas in the past.
Three years ago the state was about to join several states that had adopted bond-financed loan programs for solar that homeowners could repay through their property tax bills. But the legislation failed, and the idea stalled nationally, after the federal government and the mortgage industry complained that the loans for solar would have priority over mortgage liens in the event of a default.
The new financing model that the state is exploring does not involve the same risk, experts say.
Utilities nationally have been using bond financing, known as securitization, since the 1990s to help cover the costs of infrastructure improvements and storm damage. The bonds are secured by charges on utility customers.
Under the legislation being drafted — House Bill 856 and Senate Bill 1087 — the Public Utilities Commission would issue a financing order that would spell out the terms of a green infrastructure loan program, including the lending criteria, the type of equipment that would be financed and conditions for repayment.
The state would issue revenue bonds backed by an existing public benefits fee that consumers pay on their electrical bills. The proceeds from the bond sales would go into a special fund controlled by a new green infrastructure authority that could make loans to consumers interested in solar. Consumers would repay the loans from the energy savings on their electrical bills.
The PUC announced earlier this month that an on-bill financing program is viable for Hawaii.
Cisco DeVries, president of Renewable Funding, an Oakland, Calif., firm that specializes in financing tools for renewable energy, said Hawaii could be the first to use the bond structure to finance a consumer lending program for solar. He likened the concept of combining the two strategies to a peanut butter and jelly sandwich.
"Peanut butter has existed for a long time, and jelly has existed for a long time. And I think what the policymakers are working on in Hawaii is the first peanut butter and jelly sandwich," said DeVries, who is scheduled to discuss the new financing model in Hawaii this week.
Richard Lim, director of the state Department of Business, Economic Development and Tourism, told state senators last week that a green infrastructure loan program would make credit for solar available to low- to moderate-income homeowners, renters, churches and nonprofits.
"This will set the tone not only for Hawaii, but, we believe, the rest of the nation," Lim said.
Cindy McMillan, project manager for strategic initiatives at the Pacific Resource Partnership, the advocacy group for contractors and union carpenters, said the somewhat unusual alliance between construction and environmental groups in favor of the concept shows its importance.
"Investing in green infrastructure projects will dramatically increase our capacity to harness renewable energy, lower the cost of energy for working families, and provide construction jobs for years to come," she said in an email. "It's a good bill, and we are standing together to encourage lawmakers to make it happen."
Legislators have been torn about how to contain a solar tax credit that cost the state an estimated $174 million last year, up from about $35 million in 2010, while not interrupting the growth of a solar industry responsible for 26 percent of construction spending last year.
A bond-financed loan program for solar could help sustain the solar industry while tax incentives are slowly phased out.
"In the long run it's going to be what takes over when the tax credits leave off," said Rep. Chris Lee (D, Kai¬lua-Lani¬kai-Wai¬ma¬nalo), chairman of the House Energy and Environmental Protection Committee.
Sen. Mike Gabbard (D, Kapo¬lei-Maka¬kilo), chairman of the Senate Energy and Environment Committee, called the concept "the missing piece to the puzzle." Hawaii consumers, who pay among the highest prices for electricity in the nation, installed a record amount of solar systems last year, according to Hawaiian Electric Co., yet only a fraction of homeowners and businesses have converted.
"This is just going to open the door to folks to be able to pay for this on your monthly electric bill," Gabbard said.
Senate Minority Leader Sam Slom (R, Diamond Head-Kahala-Hawaii Kai) is one of the few lawmakers who have raised red flags, questioning whether it is the government's role to provide loans for solar.
"The government's record of loan programs is abysmal," he told fellow senators. "And, in fact, this is not a function of government."