Despite massive public support and a bill that is actually structured to save money, Congress is too knock-kneed to fight about energy policy in an election year. That’s sad, but predictable. Most regions and communities have figured out that there’s no point in waiting for the feds to solve our problems—energy independence needs to be tackled locally. But now the Federal Housing Finance Agency has cast a dark cloud over renewable initiatives at state, county and municipal levels.
Solar financing districts—a concept cradled in that crucible of lefty panaceas, Berkeley, Calif.—have spread across the country in the last couple of years as a progressive mechanism for residential and commercial installations. Such districts allow property owners to finance the cost of adding renewable energy through modest increases on property taxes. These local-government-facilitated “loans” allow cash-poor property owners to offset energy costs now, while decreasing carbon emissions and spurring local economic growth in the green jobs sector.
Not allowed, FHFA says. In response to the federal government’s attitude, the state of California on July 28 pulled $30 million in federal stimulus money from solar initiatives. That’s money that would have created 4,400 jobs and nixed 187,000 tons of greenhouse emissions next year, according to The New York Times. Closer to home, the FHFA’s position has thrown a monkey wrench in Santa Fe County’s solar financing district, which was set to launch this summer.
In fairness, the FHFA doesn’t have a theoretical problem with solar financing districts. Rather, it has a problem with the financing mechanism that has enabled the rapid spread of the districts. PACE financing (property-assessed clean energy) is cleverly structured so that the renewable energy debt becomes the priority lien. Translated: In the event of a default, the PACE loan must be repaid before anything else, including any outstanding mortgage balance. That doesn’t sit well with Fannie Mae and Freddie Mac, which is why parent agency FHFA has put the kibosh on PACE financing and, by extension, solar financing districts.
“This is one of those times where a regulatory agency is responding to the nervousness of the market,” Duncan Sill, economic development director for Santa Fe County, says. Sill has taken the lead in structuring the county program that may be jeopardized by the FHFA stance.
Among other issues, Sill is now concerned about the effect on Santa Fe’s burgeoning green jobs sector. As soon as property owners are able to take advantage of the county’s program, several solar installation contractors will have their hands full with new jobs, which should translate to increased hiring. But now the fallout from the federal government action has to be assessed and alternative solutions explored before that activity can take place.
“The delay in the economic activity impairs our intent to stimulate recovery for our local economy,” Sill says. “But we’re moving forward and we’re not being complacent.”
Although the county was on the verge of launching its residential program, Sill says his department is switching gears to fast-track development of the commercial program—for which the lending institutions are different—and will consider a cost-benefit analysis in each individual case.
“The value is there; banks can see it, and responsible commercial property owners are going to be able to move forward in the near future,” he says.
As far as salvaging a program for residential property owners, Sill allows that there are opportunities within every problem.
“We’re looking at several other instruments besides PACE that might be available on the federal level to finance the residential program,” Sill says, including “the potential for utilizing public financing.” Another scenario is potential partnerships with green-minded local investors.
At this point, it’s unclear if this federal involvement in solar financing districts will lead to a uniform methodology that allows plug-and-play expansion of desperately needed incentives for renewable energy. Another possibility is individual states and regions will craft their own end runs around federal meddling.
Lingering apprehension about the housing market is fair enough—SFR recently reported that Santa Fe County has the third-highest foreclosure rate in New Mexico [News, July 28: “Borrowed Time”]. But the federal propensity to shut down progressive initiatives without helping to develop solutions is wearing thin. When a country has begun to assess its early adopters, free thinkers, creative financiers and willing experimenters as too great a risk, what does that suggest about its future capacity for innovation, reinvention and, ultimately, relevance on a fast-moving, oil-soaked planet?
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Santa Fe County is currently conducting an assessment on market demand for commercial solar projects. Anyone with a commercial property that may be suitable for renewable energy improvements should contact Duncan Sill.