Sunday, March 14, 2010

Incentivizing off-grid solar energy generation

One of the critical components of Government of India's recently announced Jawaharlal Nehru National Solar Power Policy is the promotion of off-grid solar power through the establishment of photovoltaic panels on roof-tops and other vacant locations.

In this context, a widely praised program model, called Property-Assessed Clean Energy (PACE), under implementation in 18 US states, which seeks to encourage homeowners to add solar panels and make their houses more energy efficient, is worthy of emulation. This model overcomes the problem of high up-front costs, which often deters people from making such investments, by allowing homeowners to pay for the panels and renovations gradually, through higher property taxes, which can also be passed on to subsequent owners if the house is sold.

The initial cost is covered by the municipality, generally through a bond issue. The financing is repaid over a set number of years through the "special tax" or "assessment" only on those property owners who voluntarily choose to attach the cost of their energy improvements to their property tax bill. The financing is secured with a lien on the property and in the event of foreclosure, the energy financier is paid before other claims against the property. If the property is sold before the end of the repayment period, the new owner inherits both the remaining repayment obligation and the financed energy improvements. Here is a snapshot of the financing elements.

This site has resources on how to lauch a PACE program in a locality, inlcuding enabling legislations. See this guide to energy efficiency and renewable energy financing districts for local governments.

Update 1 (18/10/2010)

The U.S. government has two programs to help the industry: a cash grant that pays 30 percent of project costs for plants under construction by Dec. 31, and a loan guarantee program that covers as much as 80 percent of project costs.

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