In this issue
		Energy Services Bulletin home page
		Utilities offer loans to promote residential solar
		Utility contracts fund Ellsworth AFB's award-winning energy program
		Tri-State, Columbus create irrigation and motor workshop for growers
		Topics from the Power Line: Drip irrigation may provide energy, water savings
		Energy shorts
		Calendar of events

Utilities offer loans to promote residential solar

The Community Office for Resource Efficiency gave Snowmass Village, Colo., a $40k grant to install a solar water heating system on the town's recreation center. The city of Aspen's Renewable Energy Mitigation Program funds CORE programs. (Photo by Community Office of Resource Efficiency)

While the cost of renewable energy systems and energy-efficient technology is slowly coming down, most homeowners still need loans to make major home energy improvements—loans that financial institutions are often reluctant to make. To remove one of the main barriers between residential customers and greater energy efficiency, some utilities are setting up their own loan programs.

"The reason is that most banks are driven by the numbers," explained Howard Mallory, a banker with Community Bank of Colorado in Aspen. "The residential market hasn't shown a bias yet for solar-efficient homes over traditional housing. There is no certainty that the system will add value to the collateral. The bank has to know that the system will continue to function after the present owner is gone." 

"For commercial buildings, a solar upgrade is different—like replacing an old coal-fired furnace with a natural-gas unit," Mallory continued.  "It's a newer technology that will reduce the owner's operating costs, so it has a demonstrable value."

Colorado program offers choice

Community Bank and the Community Office for Resource Efficiency in Colorado's Roaring Fork Valley have teamed up to provide zero-percent financing on loans for residential photovoltaic or solar hot water systems. The loans are available to any full-time valley resident served by Holy Cross Energy, City of Aspen Electric System, City of Glenwood Springs Electric System or Xcel Energy. The typical loan term is five years, with amounts varying by system size. Participants are responsible for the principal payments, and CORE covers the interest with money from its Renewable Energy Mitigation Program.  
 
Homeowners actually have a choice between the loan and a direct cash rebate. "When we started the program five years ago, we wanted to offer options, and we didn't know which one people would prefer," said CORE Associate Director Gary Goodson.

The rebate has been more popular because it helps cover the up-front cost of installation, said CORE Executive Director Randy Udall. "Between CORE's $1,000 rebate and the $2,000 Federal rebate, the cost of the system is cut in half," he said.

Community concern for environment

Even with the incentives, solar water heaters are considerably more expensive than conventional units. However, long-term benefits overcome simple economics, which is why utilities are getting involved. "Gas-fired water heaters waste half the energy they consume, and there are 60 million gas-fired units in the country," Udall pointed out. "The potential savings in energy and emissions is enormous."

While CORE's programs have helped to make the Roaring Fork Valley what Udall describes as a hotbed of solar technology, other factors deserve credit, too. Holy Cross offers the best incentives for renewable generation in Colorado and frequently appears on National Renewable Energy Laboratory's annual list of Top 10 green power providers.

Also, many residents—especially in and around Aspen—moved to the area for the natural beauty and are able to invest in protecting it. Their support made REMP possible, and the $7 million the program has generated since 2000 supports CORE's work, said Goodson.

Reviving interest in established program

California's Public Benefits Fund provides a similar pool of funding that Sacramento Municipal Utility District draws on for its Solar Domestic Hot Water Program. "We offer financing for a lot of energy-efficient upgrades for the home, including windows, insulated siding, duct sealing and wall and attic insulation," said SMUD Residential Product Services Specialist Jon Elissalde.

SMUD's loan program for solar water heaters, which began in 1990, provides a $1,500 rebate and a 10-year, 7.5 percent-interest loan to residential customers who replace electric water heaters. Most of the water heaters in SMUD's territory are gas-fired, Elissalde noted, so, "The program peaked at about 3,500 replacements," he said. "For a long time, we were doing only five or six replacements per year. We are starting to see an increase again."

That may be helped along by the Federal tax credit of 30 percent of the system cost up to $2,000 for qualifying systems placed in service in 2006 and 2007. "We've installed 10 units this year and are on track to reach a goal of 25 installs for 2007," said Elissalde.

All solar water heaters must meet standards set by the Solar Rating and Certification Corporation, be installed by a SMUD-approved solar contractor and pass inspection by SMUD representatives. SMUD currently has a list of five qualified contractors who know the specifications for installing the unit and have the proper licensing and insurance. "There were two contractors who left the program and came back recently," Elissalde commented. "We hope that's a sign that consumer interest is picking up again."

The Sun Cache, a new type of solar water heater, could contribute to that revival, Elissalde added. Because the roof-mounted unit combines a poly-urethane tank with the solar collector, there is no need for a pump and maintenance is minimal. "It performs well and is less expensive than other solar water heaters," he said. "Simplifying the technology makes it more attractive to consumers."

More funding options

Ultimately, the key to getting consumers to install solar water heaters and other energy-efficient or energy-self-sufficient technology is long-term savings, said Mallory. "Borrowers will have to see lower energy bills and lower interest rates, and somebody has to be willing to absorb that quarter percentage point," he stated.

Some homeowners may be eligible for Federal programs designed to deliver those savings. Fannie Mae, Freddie Mac, Housing and Urban Development’s Federal Housing Administration and the Veteran’s Administration offer different types of energy-efficient mortgages. "Theoretically, what people save on monthly energy bills can be applied to a larger home loan," explained Mallory. "Unfortunately, these programs are not as well-publicized as they could be."

Udall pointed to a Lakeland, Fla., program as another promising model. "The municipal utility installed solar water heaters on customer homes and charges homeowners for the hot water they use, rather than the equipment," he said. "That's the ideal situation—provided the utility has the money to support it."

Project funding is a challenge for any industry, especially a relatively new one, but utilities, community groups and financial institutions are rising to it. In the days of abundant energy supplies, loan programs like CORE's, SMUD's and others might have seemed risky. Now, in the face of volatile energy prices, environmental concerns and national security issues, utilities are realizing that the potential rewards far outweigh the risk.