Phoenix Business Journal, Patrick O'Grady
National Bank of Arizona, SolarCity and Arizona Public Service Co. are teaming on a $25 million effort to land more solar systems on the city’s residential rooftops, with a backup to potential leases provided by the city of Phoenix.
The plan, to be announced Tuesday, calls for National Bank of Arizona to supply funding for what could be about 1,000 solar systems for Phoenix residents. It’s a move officials say could knock down the high entry cost for distributed solar and provide jobs in the city.“It will be a major program in its scale within the country,” said Phoenix Mayor Phil Gordon.
National Bank of Arizona would own the systems and lease them to what officials said would be homeowners with good credit. SolarCity, the Foster City, Calif.-based solar installer, will handle the work from collecting financing applications to installations.
Phoenix will backup leases with $250,000 from the Industrial Development Authority to cover what industry officials said is a typical 1 percent to 2 percent default.
NBAZ, which has partnered with SolarCity on panels for its own facility in the Biltmore area as well as one of the largest ground mount systems in the state slated to serve residences at Davis-Monthan Air Force Base in Tucson, sees a strong demand for the systems.
“The demand is there. It has been,” said Craig Robb, executive vice president for finance and administration for NBAZ. “The problem has been for some period of time the capital has not.”
The program will earmark about $5 million of the total to help low-income homeowners get solar systems, Robb said.
Lease programs are a relatively new offering for SolarCity, which has relied on a power-purchase agreement with customers in other states. Those programs allow SolarCity to own the systems and then sell power to the homeowner. Arizona’s constitution, however, has classified that arrangement as being regulated by the Arizona Corporation Commission.
The deal with NBAZ will allow the company to take what had been a plan for homeowners requiring $1,000 down to one with no down payment. Leases will run for 15 years, at which time homeowners will be given the opportunity to either upgrade, pay off the remaining balance, or have the system removed.
Lyndon Rive, founder and CEO of SolarCity, said having a local partner with financing will provide a quicker way to get solar on rooftops.
“Very rarely will banks go through the amount of brain damage required to understand all the federal tax laws, the rules and regulations,” he said.
Distributed solar projects on residences have been increasing since a federal tax credit was changed earlier this year. That increased demand still has a tough hurdle because even with the tax credits and utility-supplied incentives it costs homeowners thousands of dollars to put in a solar system.
Gordon said the plan was developed primarily by the private sector. The city’s economic analysts believe it will create about 150 jobs and create about $39 million in economic impact.
“The good news is the market is untapped with people using solar,” he said. “The barrier, we believe, has been the up-front costs and the multiple phases you have to go through to get the rebates.”
The lease plan would allow NBAZ to recoup both the rebates from utilities as well as the federal tax credit as the owner of the system, but those savings would be passed on to the homeowner, Robb said.
APS, which will provide incentives for the solar systems in its territory, sees the measure as a way to help it hit goals required in the state’s renewable energy standards. The utility is required to have 30 percent of its renewable power supplied by distributed systems and half of that from residential units. That has proved difficult with the high cost of entry. This year, APS will shift about $20 million from its residential pool to cover schools for solar because there hasn’t been as much demand as the company has collected funds.
APS expects the plan will result in $10 million to $15 million in rebates to customers in 2010, said Pat Dinkel, general manager for resource acquisition and strategic planning for APS.
“There’s no question this is a significant part of our distributed program next year,” he said.
Rive said SolarCity has installed about 400 systems on Arizona residential rooftops since it entered the market last year, but the company expects withe NBAZ program that it will do the 1,000 systems within 2010. Robb also said the bank believes the interest in solar will deplete the fund within a year.
Although the program could last only through next year, both Rive and Robb said it has the potential to be rolled out to other cities. Currently, only Phoenix residents will be eligible.
For more: www.solarphoenix.org
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