Federal Solar Incentives
Until the end of 2019 the Federal Investment Tax Credit (ITC) will remain at the current 30% rate. It will then decrease by 10% per year until 2021, and then remain at 10%. This also applies to commercial solar customers.
If available, a Utility rebate is either paid as an EPBB rebate (Expected Performance Based Buydown) usually for systems under 30kW, or a PBI rebate paid annually over a 5-year period, for systems larger than 30kW.
The Los Angeles County PACE program offers funding for nonresidential solar projects. Under this program property owners can negotiate project-specific financing terms with the investor(s) of their choice, and repay the cost of the upgrade over time through a voluntary contractual assessment on the property tax bill.
Secured financing is a loan in which the borrower pledges some asset as collateral. Typically for a solar installation this collateral is a home or building. The following secured loans are available in the SCRC region:
Home Equity Lines of Credit (HELOCs) and Home Equity Loans (HELs)
HELOCs are forms of revolving credit in which a home serves as collateral. A HEL is a loan that has a fixed rate and term and also uses a home as collateral. The major difference between these two types of financing mechanisms is that HELOCs are similar to a credit card – you can withdraw money as needed and pay back the debt indefinitely – whereas an HEL gives you a one-time lump sum of cash that is paid off over a fixed amount of time. These types of loans are typically available through banks.
FHA 203(k) Rehabilitation Loans
The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), administers various single family mortgage insurance programs. These programs operate through FHA-approved lending institutions which submit applications to have the property appraised and have the buyer’s credit approved. These lenders fund the mortgage loans which the HUD insures, thereby giving a line of credit to the property owner to make property upgrades, such as solar PV installations.
HUD Title 1 PowerSaver Loans (Secured or Unsecured)
The PowerSaver program insures loans to finance small or moderate improvements to a home, such as a solar energy upgrade. The PowerSaver pilot will provide lender insurance for secured and unsecured loans up to $25,000 to single family homeowners specifically targeting residential energy efficiency and renewable energy improvements.
Unsecured financing is a loan that is not backed by any collateral. Credit cards and personal loans are the most common examples of unsecured financing. Unsecured financing products available for energy upgrades include personal loans and contractor-sponsored products. However, unsecured financing does come with drawbacks: a good line of credit is typically required with no collateral and the interest rates tend to be higher than with secured loans. However, with some publicly-supported programs, the jurisdiction will pay the interest rate down to attract borrowers.
Fannie Mae Energy Loan
Fannie Mae offers a direct, non-recourse consumer loan program that will finance up to $20,000 in energy improvements without putting a lien on your home. Energy Loan is a simple interest, fixed rate loan with longer terms available then typical bank financing.
Los Angeles County Energy Loans
As with the secured loan, Matadors Community Credit Union and Los Angeles County are offering low-interest loans for energy upgrades and renewable energy projects.
Clean Energy Upgrade Financing Program – AB-14
ABX1 14 authorizes the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) to administer a Clean Energy Upgrade Financing Program using up to $25 million to finance the installation of distributed generation renewable energy sources, electric vehicle charging infrastructure, or energy or water efficiency improvements on homes or small commercial properties.
Other Financing Mechanisms
LADWP Feed-in Tariff (FIT)
Under a feed-in tariff, eligible renewable electricity generators are paid for the generating renewable electricity and feeding it into the utility grid. This is a distinct program from the solar incentive program. One PV system may not participate in both programs. Excess energy produced by a net-metered PV system cannot be sold to LADWP through the upcoming FIT program.
Community solar is a way for multiple individuals to share in the benefits of a single solar installation by pooling resources to develop a community-scale solar energy project that provides the benefits of solar energy to a group or neighborhood.
Third Party Ownership (Solar Lease)
Solar Leases are similar to Power Purchase Agreements in that a third party pays for and owns the system, but with this financing mechanism a customer pays a fixed monthly fee that is not tied to actual use and is responsible for system performance, operations and maintenance. Solar leases have features such as escalator clauses which make them less than ideal for residential solar financing, and mainly benefit the finance company which owns the system. In the City of Los Angeles leasing agreements must be reviewed and deemed acceptable by the city attorney’s office.
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