Published on California Progress Report (http://www.californiaprogressreport.com/site)

PG&E Drops Another $9 Million into Prop 16; Asks for a $4 BILLION Rate Hike Created 05/25/2010 - 12:43pm

By Paul Hogarth

“They just don’t shock me anymore,” said Supervisor Ross Mirkarimi at a rally last night against PG&E. The company has already spent $35 million to pass Proposition 16 which would cement their monopoly, and has dumped another $9.5 million in the past five days. Meanwhile, PG&E (who paid its C.E.O. $9.4 million last year) is requesting the California Public Utilities Commission to grant them a 30% rate hike – which would generate $4 billion in profits.

The CPUC is holding public hearings on the rate hike across the state, with the first one last night in San Francisco. Because Prop 16 requires a two-thirds majority of voters to pass a public alternative to PG&E, consumers will be trapped paying these ever-escalating rate hikes in the future. And with “No on 16” raising less than one-tenth of one percent of PG&E’s money, activists must get creative to push their message.

“What do Meg Whitman and PG&E have in common,” asked John Rizzo, Chair of the Sierra Club’s San Francisco Chapter at the rally. “They’re both spending tens of millions of dollars to buy an election. But the difference? Meg Whitman is using her own money. PG&E is using our money to pass Prop 16.” While PG&E has sent leaflets saying we are “powerless” that elected politicians spend taxpayer money, there is nothing ratepayers can do to stop PG&E from spending its money on Prop 16 – unless the legislature passes SB 1441.

With the Supreme Court’s decision in Citizens United, we can expect even more corporations from freely spending their treasuries to hi-jack our electoral process. PG&E is doing it with Prop 16, but the June ballot also has Proposition 17 – which is funded by Mercury Insurance to maximize its profits. “If Prop 16 passes,” said Mirkarimi, “every state with an initiative process will be vulnerable to this corporate predatory interest.”

Last night’s rally – which included a march from City Hall to the CPUC at 505 Van Ness – was timed for a public hearing at the CPUC to consider PG&E’s request for a rate hike. If the hike gets approved, PG&E customers will see their bills go up 30% – a windfall of $4 billion for the utility company. And if Prop 16 passes, local municipal efforts to give customers a competing alternative would require the daunting task of a two-thirds vote of the electorate. In other words, PG&E could get away with more rate hikes in the future.

Yesterday, Capitol Weekly reported that PG&E put another $9.5 million into the Prop 16 campaign, upping its warchest to $44.2 million – entirely funded by the utility company. TURN, which is leading the campaign against Prop 16, has raised $35,000.

But Mark Toney, Executive Director of TURN, pointed out that PG&E’s “coalition” to pass Prop 16 is starting to fragment. The California Chamber of Commerce may have endorsed “Yes on 16” – but its affiliates in Fresno, Riverside, Stockton, Fremont and other places (sadly, not San Francisco) have dissented. The Republican Party in San Joaquin County actually flipped from “yes” to “no” (despite the State Party taking a “yes” position), and yesterday the Los Angeles County GOP came out against Prop 16. Even the San Diego Taxpayers’ Association has broken from its statewide organization and is “no” on Prop 16. When presented with facts, even conservatives are against it.

But with PG&E throwing so many millions, some opponents have taken a more creative route – using new media tactics to get their message out. Ben Zolno of Sebastopol has run a YouTube campaign that prides on spending only “one-millionth” of what PG&E is spending to pass Prop 16. When news broke that PG&E has dumpted another $9 million, he announced on his blog that he will now spend an extra nine dollars – and asked readers how he should spend that money.

At last night’s protest, activists even tried invoking pop culture in a similar way that Pride at Work pulled off recently. By taking Gloria Gaynor’s “I Will Survive,” they re-wrote the song with these lyrics (complete with back-up dancers and some brass instruments as backup):

First I was afraid, I was petrified When I saw my PG&E bill had gone sky high, I spent so many nights thinking how they did me wrong, Then I grew strong, I learned how to carry on ‘Cause we’ve got a choice, of who we pay I wanna dump PG&E and get clean energy I can change who sends me juice, we can break monopoly 16 takes away my choice, and that really bothers me

So just vote NO ... on Prop 16 Let’s turn it around now, ‘cause PG&E’s just playing mean They’re dropping 35 mill, just to trick me with their lies And all the while, they’re planning a 30% rate hike

Oh no, not I … I will survive I’m fighting these PG&E bills that are burying me alive So vote No on Prop 16, to make our power clean I will survive … I will survive.

Maybe this will be the next YouTube sensation …

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Paul Hogarth has a J.D. from Golden Gate University. He is an attorney licensed to practice law in California, but this piece is not intended as legal advice. He was a summer intern for Equality California in 2005, organized volunteers in 2009 for the “No on 1” campaign in Maine, and has helped live-blog the Prop 8 trial for the Courage Campaign. This article was originally published on Beyond Chron.

2010 Ballot Initiatives 2010 Elections Elections Hogarth, Paul Proposition 16 Privacy Policy

Source URL: http://www.californiaprogressreport.com/site/?q=node/7792

Symbol Keyw ordSubscribe to Money

Find CNNMoney on FacebookFollow CNNMoney on Twitter

Home Business News Markets Personal Finance Retirement Technology Luxury Small Business Fortune Video My Preferences CNN.com

By Steve Hargreaves, Senior w riter June 28, 2010: 4:28 PM ET

Email Print Comment

334 2diggs

Solar power done cheap

LOS ANGELES (CNNMoney.com ) -- In a construction van winding through

Los Angeles' crowded streets one hot spring morning, 25-year old Tim

Morris laid bare his contribution to changing America's dirty, fossil fuel-

based economy.

"I'd like to see America and the world become sustainable," said Morris, a

transplant from Flint, Mich., who's been in L.A. just a little over four months.

"Solar is the biggest difference I can make with what's on the market."

Morris is an installer for California-

based SolarCity, one of a handful of

companies pioneering an all-

inclusive approach to solar, making it

as easy and cheap for the consumer

as possible.

Under the company's model,

customers agree to a monthly lease

and sign the rights to claim subsidies

over to SolarCity.

In return, homeowners get a solar

array installed on their roof,

maintained for the life of the lease.

They're hooked up to the electric

grid, so when they need more power

than the panels provide, there's no

disruption. And SolarCity guarantees

the panels will produce a set amount

of power, which the company says

should offset the electric bill and

more than compensate for the

monthly fee.

"Our goal is to get millions of homes

to go solar, but the biggest barrier is the experience," said Lyndon Rive,

the company's 33-year old CEO with major entrepreneurial connections.

job title or company location

Accounting jobs Engineering jobs Finance jobs

Management jobs Marketing jobs Sales jobs

Hot List

Best Places to earn big bucks

Residents living in Palo Alto, Calif., pull in more than

$150,000 a year. See detailed profiles, job openings

and more for all 25.

More

Building the Ochocinco brand

NFL player Chad Ochocinco turns to Twitter to

amplify his brand and take back control of his image

from mainstream media.

Play

Buy a Corvette, build your engine

GM will let some Corvette buyers hand-assemble

their own engines -- for an extra $6,000.

More

Job Search See 195,217 new jobs added today

Original Shows

Street LifePlayboy's private play Fortune's Andy Serwer talks

about why Playboy founder Hugh Hefner wants to take

the struggling publishing company private.

Play

CNNMoney ReportsBuilding the Ochocinco brand NFL player Chad

Ochocinco turns to Twitter to amplify his brand and take

Right Now

See all jobsjobs by

Intel has best quarter ever

Stocks rally on Alcoa profit, Greek auction

China: The new fast food nation

SolarCity employees putting panels on a roof in Los Angeles.

Andrea Kreuzhage is proud of the wayher panels look atop her Los Angleshome.

7/13/2010 Solar power done cheap - Jun. 28, 2010

money.cnn.com/2010/06/…/index.htm 1/5

The challenge now facing SolarCity, and competitors like Akeena and

Sunpower: Can these residential-mounted solar systems compete with the

massive utility-scale solar arrays being built in the desert or the vast

commercial solar systems being put atop big box stores nationwide? And

can they do it competitively when the generous government subsidies

expire?

The obstacles are no doubt huge, but Rive may just be the man for the job.

He's a serial entrepreneur, having started his own cosmetics business in

South Africa at the age of 17. He sold it five years later, moved to the U.S.,

and along with his brother started a multi-million dollar tech company.

The brothers are now in SolarCity together, along with their more famous

entrepreneur cousin - PayPal co-founder and Tesla Motors CEO Elon

Musk.

Green jobs

SolarCity is the type of company President Obama and other supporters of

the new "green economy" love to highlight.

It's creating good jobs for construction workers hard-hit by the real estate

bust. Solar City pays its installers $15 to $30 and hour, plus full benefits.

It's growing. Last year the company had 300 employees. Now it's up to 560,

and plans to have 800 by the end of 2010. It operates in five states, and is

eyeing expansion plans in at least three others.

In a working class suburb just south of Los Angeles, Wayne Holder is not

the typical person one often conjures up when thinking of solar power.

Holder, 44-years old and an electrical engineer with the Los Angeles

sanitation department, uses a lot of power.

Between him, his wife and their two kids Holder says the washer and dryer

get a constant workout. Plus, the family has a salt water pool the requires

the filter to run nearly non-stop.

The result was an electric bill that reached nearly $600 a month last year,

said Holder.

That's when he decided to call SolarCity. Now, he says he pays about $300

a month to the utility, and another $180 to SolarCity, with no change in

electricity use.

"It was a no-brainier," he said. "and the only thing I have to do is hose off

the panels every once in a while."

Other customers do it more for the environment.

On a hillside overlooking nearly all of Los Angeles, Andrea Kreuzhage

recently put down $1,000 to install a SolarCity system on her roof.

Kreuzhage, a 47-year old documentary film maker, is not a big user of

power. Before her solar system, her monthly electric bill was about $50 a

month. Her lease with SolarCity is $55, although her solar panels now

actually produce more power than she uses. (Local law doesn't yet allow

her to sell that power back to the utility, although people are working to

change that.)

But for her the extra $5 a month is well worth it

O uts ide the U .S. and C anada, c lick here.

Full Name

Address

City

St/Pr Zip/Po

E-mail

Continue P rivacy P olic y

Help DeskHow to save during hard times Even if you don't have

a lot of extra cash, there are still ways to put aside

money and invest.

Play

Markets

Markets Last Change % Change

Dow 10,363.02 146.75 1.44%

Nasdaq 2,242.03 43.67 1.99%

S&P 500 1,095.34 16.59 1.54%

Treasurys 3.11 0.07 2.23%

U.S. Dollar 1.26 0.00 0.00%

Data as of 7:30pm ET

Sponsors

US Indexes Market Movers

Sponsored bysymbol

All CNNMoney.com Original Shows

7/13/2010 Solar power done cheap - Jun. 28, 2010

money.cnn.com/2010/06/…/index.htm 2/5

Share this PrintEmail

besides, "I'd rather pay a green business instead of a huge utility."

The helping hand

If SolarCity's customers and employees seem happy with the arrangement,

they owe one entity a big thanks: the government.

Thanks to a mix of federal, state and local incentives, some 50% of the

costs of solar power are subsidized.

Many of those subsidies are set to expire in eight years. The solar industry

thinks it can compete without them, but it's clear costs will have to come

down.

"It's dependent on a lot of key breakthroughs and variables," said Bill Ong,

a solar power analyst at the investment bank of Merriman Curhan Ford.

"One can debate whether they are on track or not, but progress is being

made."

As for solar power mounted on homes like SolarCity's model, known as

"integrators" Ong said there is room for that type of power and larger

commercial systems.

"It's a big market for multiple players," he said, "and the integrator has this

niche."

But with so many challenges facing solar, and Rive's proven track record

seemingly allowing him to get into any industry, why he'd pick one as risky

as solar? For the potential.

Europe's solar eclipse

China trouncing U.S. in clean energy investing

Getting a green job isn't so easy

First Published: June 28, 2010: 12:12 PM ET

Sections

COMPANIES

World's most profitablecompaniesRussian energy giant

Gazprom tops the list, while

BP and Toyota round out the

top 5. More

Intel has best-ever quarteras PC sales pick upChina: The new fast foodnation

ECONOMY

China: The new fastfood nationThe parent company of KFC

and Pizza Hut reports

explosive growth in China as

consumers there warm to fast

food. More

Pay raises are coming --but they won't be muchFCC indecency rules struckdown

TECHNOLOGY

Intel has best-everquarter as PC salespick upStronger server and PC sales

help lift Intel to 'best quarter

ever,' in second quarter as

demand for tech continues to

rise. More

Windows XP just won't goawayFacebook assets frozen inbizarre New York lawsuit

SMALL BUSINESS

Bernanke: $40B insmall biz loansdisappearsThe Chairman of the Federal

Reserve addresses the small

business credit crunch: More

must be done. More

IRS starts mopping upCongress's tax-reportingmessBP gets stricter with claims

PERSONAL FINANCE

Should you buy energystocks?Billionaire investor T. Boone

Pickens talks about the

impact of the BP spill and the

buying opportunity he sees in

oil shares. More

Bill Nygren votes for theComcast dealDebt collectors get nasty

© 2010 Cable New s Netw ork. A Time Warner Company. All Rights Reserved. Terms under w hich this service is provided to you. Privacy Policy. Advertising Practices.

Home Portfolio Calculators Contact Us Newsletters Podcasts RSS Mobile Widgets Site Map User Preferences Advertise with Us

Magazine Customer Service Download Fortune Lists Reprints Career Opportunities Special Sections Conferences Business Leader Council

7/13/2010 Solar power done cheap - Jun. 28, 2010

money.cnn.com/2010/06/…/index.htm 3/5

I f you need convincing about themarketability of green building,author Jerry Yudelson offers up a

dozen reasons why green is the way togo.

1. The commercial and institutionalgreen building market continues to growat more than 50% per year (see Figure1). In 2005, LEED-registered projectsand project area grew by more than50%, and LEED-certified projects grewby nearly 100%. LEED statistics indicateconsiderable growth potential for thegreen home market. Some of the LEEDprojects are multifamily residential struc-tures, typically above three stories.

2. The new federal energy bill(Energy Policy and Conservation Act of2005, or EPAct; see Table 1),which pro-vides increased incentives for residentialsolar systems; prolonged oil prices above$60 per barrel; and natural gas pricesabove $8–$10/MMBtu ($0.80–$1.00per therm) have changed the psychol-ogy of the consumer for the first timesince the oil price shocks of the 1970s.New credits for home builders shouldspur more investment in energy-effi-cient homes.

3. In November 2005,DOE’s EnergyInformation Administration raised itsprojected 2025 oil prices, in today’s dol-lars, from $33 (2004 forecast) to $54 perbarrel, a 65% increase.Over time, this willprobably translate into higher electricityand gas prices for residential applications,and more interest on the part of homebuyers and homeowners in investing in

conservation. In 2003, well before thecurrent rise in energy prices, marketstudies for the King-Snohomish MasterBuilders Association (Seattle area) showeda willingness on the part of home buyersto pay 1% more—about $2,500 on anew $250,000 home—for a homeenergy package. Isn’t it likely that homebuyers will soon be willing to pay $5,000more, especially with the new $2,000home builders’ incentive?

4.The continued movement of babyboomers back into urban cores will bringmore discriminating buyers to condodevelopments, requiring builders to havea green point of differentiation.The com-panies that employ these boomers willwant to offer greener office buildings tobuild a recruitment and retention edge.What people learn from working ingreen office buildings will also translate totheir choices at home.The rise of the cre-ative class, first chronicled in a book bythe same name by Richard Florida in2002,has the potential to change Ameri-can demographic geographic patterns as

dramatically as the riseof Levittown and thesuburban lifestyle didafter World War II.Today, that pattern hasbegun to reverse itself.People want connect-edness, they want theamenities of urban liv-ing, and they don’twant to commute forhours each day for theprivilege of mowing apatch of grass on Sat-urdays. This trendalone will lead to moreenergy-efficient homesand remodels, with aheavy focus on existingurban landscapes.

5. These sameboomers will want toupgrade their single-family homes to makethem energy efficient,

both to save on future utility costs and toshow a concern for such issues as globalwarming and environmental protection.The strong role played by GovernorArnold Schwarzenegger’s solar programsin promoting solar energy should help tokick-start the solar industry in California,for example. With the new solar PVincentives, look for a rapid rise in 1kWsolar-electric systems and $5,000 solarwater-heating systems, as homeownersdiscover that installing these systems is themost visible way to show that they aredoing something to save energy. (Rightnow, there is a shortage of semiconduc-tor-grade silicon for producing PV panelson the market,but this shortage should beover by next year.) (See “Solar Subsidiesare Booming,” p. 6, for more on solar.)

6.A growing body of successful greenhome developments with a strong focuson solar and conservation features, in allmajor growth regions—includingFlorida, California, and the rest of theSunbelt—will give developers confi-dence in their ability to deliver a high-

12 www.homeenergy.org JULY/AUGUST 2006 • HOME ENERGY

Gre

en B

uildin

g Jerry Yudelson,PG, MEA, chairsthe U.S. GreenBuilding Council’sGreenbuild International conference andexpo, the world’slargest green

building gathering. He is the author of TheInsider’s Guide to Marketing Green Buildings(available at www.yudelson.net).

JERRY YUDELSON

400

350

300

250

200

150

100

50

0’00 ’01 ’02 ’03 ’04 ’05

’00 ’01 ’02 ’03 ’04 ’05 Cum. LEED Reg. x 10% 4.5 47.5 62 107.7 179.2 281.0Cum. LEED Cert’s 1.0 115.0 24 1168.0 167.0 323.0Cum. LEED Area, MMSF 8.4 51.0 80 141.0 217.0 350.0

Cum. LEED Reg. x 10%

Cum. LEED Cert’s

Cum. LEED Area, MMSF*

*million ft2

Num

ber

Green Building Activity, 2000-2005

Year

Source: U.S. Green Building Council

Twelve Reasons Why the Green Home MarketIs Ready to Surge

In 2005, LEED-registered projects and project area grew by more than50%, and LEED-certified projects grew by nearly 100%.

JERRY YUDELSON

performance green development on aconventional budget.A good example isShea Homes, in San Diego, California.Shea is the country’s tenth largest builder,and in 2001 it developed a good packageof energy conservation and solar tech-nologies. Shea’s new product line, theHigh-Performance Home, meets the

requirements of an Energy Star Home,meaning that it is designed to use 30%less energy for heating,cooling,and waterheating than would the same footprintbuilt to 1993 National Model EnergyCode standards.These homes are fittedwith advanced features, including radi-ant-barrier roof sheathing that reflectsheat away from the attic and thermosta-tic expansion valves that are designed toimprove HVAC system performance. In

addition to these energy efficiency mea-sures, High-Performance Homes incor-porate passive-solar thermal waterheating, and PV for electricity produc-tion. Shea Homes joined the industry’sBuilt Green program in 2005—furtherevidence of its commitment to buildingenergy-efficient housing.

7. A risingtrend forboomers and thenew creative classis to relocate intothe top 30 majormetropolitanareas, wherethere are moresophisticatedbuilders whowill understandthe need forgreen homes.Weare already seeingthis trend in

Atlanta,Chicago,Boston,New York,Seat-tle, San Francisco, and Portland,Oregon.This segment of the population is espe-cially well represented in the Lifestyles ofHealth and Sustainability (LOHAS) psy-chographic market grouping, which issaid to encompass up to 30% of the U.S.population (see Table 2). Of this marketgrouping,65% are women.

8.The LEED for Homes (LEED-H)program,now in its pilot phase,expects to

roll out its finalized programguidelines in 2007. Given thesuccess of the LEED for NewConstruction (LEED-NC) pro-gram and the growing recogni-tion of the LEED brand name,LEED-H should begin to affectthe residential market in signifi-cant numbers by 2008. Otherlocal programs, such as the home-builders’ Built Green program(which is now in seven states) andthe programs of certain local util-ities, as well as the National Asso-ciation of Home Builders(NAHB) voluntary certificationprogram, should also keep thenew-home energy conservationmarket growing rapidly.

9. Related green buying habitsshould begin to affect the home-buyingand retrofitting market. Look at theimpact that the $228 billion LOHASmarket has had on organic foods, hybridvehicles, ecotourism, and organic cotton,to name just a few examples. If homeenergy conservation could be marketedas more of a consumer product than atechnical product, imagine how greenhomes could benefit from this growingconsumer trend.

10. More cities will begin to requirethat standard commercial projects be builtgreen—especially projects that have amajor impact on the infrastructure.Theserequirements and policy directions willspill over into the home-building marketover the next half decade. In 2005,manystates and quite a few cities began torequire LEED Silver level certificationfrom their own buildings. One can viewthe growing tendency of home buildersto undergo voluntary certification pro-grams as an attempt to forestall legislativeaction on the part of states and cities, andone can predict that the green buildingtrend will overwhelm that attempt overthe next five years.The success of LEED-H will begin to make itself felt in the2008–2010 time frame as a tool for greenbuilding advocates to use in persuadinglocal governments to adopt green build-ing requirements in all new homes.

11. Look for Energy Star to marryup with LEED to promote energy-effi-cient and zero-net-energy, or carbon-neutral buildings.We will begin to see

HOME ENERGY • JULY/AUGUST 2006 www.homeenergy.org 13

Gre

en B

uild

ing

Table 1. EPAct 2005: Key Provisions for Commercial BuildingsAffected Technology Tax CreditPhotovoltaics 30% (residential limit is $2,000 credit)Solar thermal systems 30% (residential pool credits eliminated)Microturbines 10% (up to $200/kW credit)Energy conservation $1.80/ft2 (federal tax deduction ifinvestments for HVAC, exceeding 50% savings vs. ASHRAE envelope, lighting, and 90.1-2001 standard); up to $0.60/ ft2 water-heating systems for lighting retrofits alone New homes exceeding 50% energy savings vs. model code $2,000 credit for site-built homesSource: www.fsec.ucf.edu/EPAct-05.htm.

Table 2. LOHAS Consumer Markets, 2006 Sustainable Ecological Alternative Healthy Personal Economy Lifestyles Health Care Lifestyles DevelopmentGreen building Ecological Health and Natural, Mind, body, and and industrial home and wellness organic food spirit products goods office products solutions and beverage (CDs, books, tapes)Renewable Organic/ Acupuncture, Nutritional Personal energy and recycled homeopathy, products development alternative fiber products naturopathy seminarstransportation Resource- Eco-friendly Holistic Dietary Yoga, fitness, efficient appliances disease supplements weight loss products prevention Socially Ecotourism Complementary Personal care Spiritual responsible and travel medicine products and investing services U.S. Market: U.S. market: U.S. market: U.S. market: U.S. market:$76.5 billion $81.2 billion $30.7 billion $30 billion $10.6 billionSource: Natural Marketing Institute

buildings routinely cut energy useto 50% or more below currentstate standards through integrateddesign and innovative technologi-cal approaches. As we becomemore aware of the carbon prob-lem, and of the ways in whichbuildings and urban settlementpatterns contribute to globalwarming, architects and others inthe design and construction indus-try will begin to face up to theirresponsibility to find ways toaddress these issues. One sign ofthis change is the position state-ment adopted by the AmericanInstitute of Architects (AIA) inDecember 2005,calling for a min-imum 50% reduction in buildingenergy consumption by 2010. Inits statement, the AIA supported“the development and use of rat-ing systems and standards that pro-

mote the design and construction” ofmore resource-efficient communities.Aspublic companies, the major home

builders will have to become moresocially responsible, if they want to gettheir projects permitted,built, and sold—and if they want to attract top talent tokeep their revenues and profits growing.Look for the corporate governance andsocially responsible investing movementsto begin to influence how the top tenbuilders (who account for 30% of allnew homes in the country) plan, design,and market their homes.

12.The U.S. Green Building Coun-cil’s LEED green building rating systemregistered more than 1,000 projects lastyear for the first time ever, totaling morethan 130 million ft2 of space. I predictthat the total number of LEED-regis-tered projects will increase more thanfourfold by the end of the decade, andthat it will continue to increase at morethan 20% per year thereafter. I furtherpredict that the number of LEED-certi-fied projects will exceed 500 by the endof 2006.This means that homeownersand home buyers everywhere will con-tinue to see more information about

green buildings in their cities andtowns. I believe that this will translateinto significantly increased activity inthe home energy markets, both for newhomes and for conservation retrofits.

FOR MORE INFORMATION:

For figures on projected 2025 oilprices, see U.S. Department of Energy,Energy Information Administration,Annual Energy Outlook 2006 atwww.eia.doe.gov/oiaf/aeo/aeoref_tab.html.

For a PATH evaluation report, see theToolbase Web site atwww.toolbase.org/tertiaryT.asp?DocumentID=4120&CATEGORYID=1505.

For more information on green marketing, see the Natural MarketingInstitute Web site atwww.nmisolutions.com.

To view a copy of the AIA’s positionstatement, go to www.aia.org.

14 www.homeenergy.org JULY/AUGUST 2006 • HOME ENERGY

Gre

en B

uildin

g

ABSTRACTSolar electric systems increase the value of homes in severalways. They can reduce or eliminate the energy operating costof the home. They hedge against or eliminate the effect ofelectric rate inflation. As a component of the home, in manycases they can provide an attractive vehicle for financialinvestment.

These monetary benefits are financially quantifiable. A solarelectric system increases home value by $20,000 for each$1,000 in annual reduced operating costs, according to theAppraisal Institute. A solar electric system compares veryfavorably with other home improvements in percentage of costrecovered. Often, a solar system can recover much more than100% of its cost, and this percentage actually increases overtime as electric rates rise.

A solar electric system can also supply numerous intangiblebenefits that may be valued by some buyers.

1. INTRODUCTIONFor solar to be accepted by the broadest spectrum of society, itmust compete on the financial terms society expects,regardless of the intangible health or social benefits itprovides. These intangible benefits are highly valued by some,but seem not to be something for which the broader crosssection of society will pay more. To compete on a financialbasis, it must provide a “good” financial rate of return.However “good” is relative to its comparative risk. Infinancial circles, this is termed “Risk vs. Reward.”

For solar to be evaluated as an investment, the risk must bequantifiable and understandable. The solar industry is gettingbeyond the feared risk that the systems won’t work. There isnow much proof that they work very well. Another risk isliquidity. If the owner must sell the property before the systemhas achieved payback, can they get some money back out ofthe system? How much and at what rate does it depreciate?

This paper will show that solar electric systems in Californiawill increase a home’s value. The increase in value is often asmuch or more than the systems initial net cost. Hence thepayback risk may be eliminated from the beginning. Thispaper will also show that the solar system’s value as acomponent of the home’s value will appreciate, not depreciateover much of its 30-year design lifetime.

2. DIRECT SAVINGS INCREASE VALUE2.1 Solar Reduces Home Cost Of OperationA properly designed and installed solar electric system canreduce the net electrical consumption and electric bill of ahome. Electric bills can often be reduced to nearly $0.00 permonth. In some cases there are minimum fees. Factorsaffecting the reduction in the electric bill include:ß How much energy was generated by the solar system.ß When the energy was generated.ß When energy was consumed in the home.ß Net-Metering of energy exported to the utility.ß Time-of-Use rate tariffs on the imported and exportedenergy.ß Reduction in penalty surcharges due to offsetting high usageamounts (see Fig. 1).

Fig 1: PG&E Rate Tiers with penalty surcharges for highlevels of usage.

Average users use 130% of baseline (the first two tiers). Highusers are penalized for excess energy consumption. Usageabove average (130% of baseline) is charged at $0.194,$0.238, or $0.258 per kWh.

2.2 Reduced Cost Increases ValueAccording to articles by Nevin in the Appraisal Journal1,2, theincrease in appraisal value for a home with an energyefficiency measure (in this case, a solar electric system) isabout twenty (20) times the annual reduction in operatingcosts due to that energy efficiency measure.

That is to say, if a solar system can reduce the electric bill by$1,000 per year, the home is worth about $20,000 more inincreased appraisable value.The rational is that if the $1,000 is not spent on electricity, it isavailable to be spent on a larger mortgage payment at no net

WHY IS A SOLAR ELECTRIC HOME WORTH MORE?Andrew J. Black

Member of the American Solar Energy Society, OnGrid Solar4175 Renaissance Dr, #4

San Jose, CA 95134andy@ongrid.net(408) 428-0808

(Presented at Solar 2004, Portland, Oregon, July 2004, to the American Solar Energy Society)”Copyright 2004, Andy Black & the American Solar Energy Society. All rights reserved

change in the cost of living. The amount of mortgage that canbe supported by $1,000 depends on mortgage rates and the taxrate of the borrower.

Nevin states that after-tax mortgage rates have averaged about5% over the longer term. At 5%, a $20,000 mortgage costs$1,000 per year, hence the 20:1 ratio. Mortgage rates vary, sodepending on market conditions, the ratio has ranged from lessthan 10:1 to over 25:1. As of March 2004, long term mortgagerates at historic lows of 5.5% before tax, or 3.3% after-tax. Atthese very low rates, the ratio is about 30:1.

The assurance to a consumer of good resale value for the solarsystem may be important over the near-term, mid-term andlong-term futures. It would be inappropriate to assume rateswill stay at low levels over the mid-term and long-term, so it ismore reasonable to continue with Nevin’s estimate of 5%after-tax, giving the 20:1 ratio. This will be referred to as the“20:1 ratio product.”

Table 1 illustrates the relative increases in appraisal valuecompared to system net cost for several examples inCalifornia’s PG&E service area. In California the penaltysurcharges increase as the electrical usage increases.Therefore, the larger systems in the example are payingrelatively higher electric rates and see substantially largersavings in proportion.

2.3 Comparison To Other Home ImprovementsA solar electric system compares very favorably with otherhome improvements in percentage of cost recovered. Often, asolar system can recover much more than 100% of its cost.The last column in Table 1 shows the percentage of costrecovery for the three solar cases.

Remodeling Online3 reported in its “2003 Cost vs. ValueReport” on the relative cost recovery of common types ofhome improvements based on data from national homeremodeling and home resale surveys. Some of these projectsare highlighted in Table 2. The best cost recovery of allcommon remodeling projects was the addition of a deck. Onaverage it returned 4% more in resale value than it cost.

It should be noted that all these resale values are in addition tothe benefit enjoyed by having and living with each projectafter completion. The same can be said of solar. The solarowner gets to enjoy the utility bill savings and any desirednon-financial benefits.

TABLE 2: 2003 NATIONAL AVERAGES OF COSTRECOVERY FOR REMODELING PROJECTS.

ProjectProjectCost

ResaleValue

Percentageof Cost

RecoveredDeck Addition $6.3K $6.7K 104%Bathroom Remodel $10.1K $9.1K 89%Window Upgrade $9.6K $8.2K 85%Kitchen Remodel $44K $33K 75%

2.4 Probable Limits to Immediate AppreciationWill a homebuyer pay more for a used solar system on anexisting home than the net cost of a new system that theycould retrofit to the home after purchase? That is, why shoulda buyer pay 153% (see Table 1) for a used solar system, whenthey can get a new one at 100%? This is an open question.

However, buyers apparently do pay about 4% more for homeswith decks than if purchased a home without a deck andcontracted for its installation. Even more striking, RemodelingOnline3 reports that in Boston, San Francisco and St. Louis,homebuyers paid over 215% of the cost of the retrofit. Thissame phenomenon occurred with other types of improvementsin certain cities, even though the national average was lessthan 100%.

2.5 Appreciation, then DepreciationAs the systems age, they should appreciate if electric ratesrise. The more rates rise, the larger the 20:1 ratio product onsavings. This will continue until near the end of life whendepreciation can be assumed to occur (Note: “depreciation”here refers to the real loss in financial value, and is unrelatedto the “depreciation schedules” used in taxation).

Depreciation will begin to occur a few years before the 25year warrantees on the solar modules expire, as the invertersbegin to need replacement, and as the system requires moremaintenance due to age. During this period, it is anticipatedthat the system’s 20:1 ratio product based on the much largerfuture savings will be discounted by the depreciation into endof practical life.

2.6 Price SupportIn the future, homebuyers may not be willing to pay more than100% of contemporary costs for a new system. The 20:1 ratioproduct shows there may be price support for paying at least

TABLE 1: EXAMPLE APPRAISAL INCREASES IN VALUE FOR CALIFORNIA HOMES

Pre-SolarBill

Pre-Solar Usage(kWh per Month)

SystemAC Size

MonthlySavings

Final NetCost

Appraisal EquityIncrease @ 20:1

% CostRecovered

$80 600 2.6 kW $73 $17.5K $17.6K 100%$190 1100 5.2 kW $184 $31.4K $44.2K 141%$310 1575 7.8 kW $303 $46.3K $72.6K 157%Variables: $3.00/W Rebate, 7.5% State Tax Credit, 31% Federal Tax BracketNet cost includes a Permit Fee of $600 & Time-of-Use meter fee of $277Simple roof installation by a full service provider with no complications. Utility Territory PG&E XB.

100%. This will provide a current owner the assurance thatthey can get their money back out of the system if they need tosell. In the mean time, they can enjoy its benefits.The “100% of contemporary costs for a new system” levelwill vary over time. In much of the world, this is a decliningamount. In California, where the rebate on solar systems isdeclining more quickly than gross system installed costs, thenet price to consumers is increasing. In California this shouldlead to increasing levels of price support compared to costspaid.

3. HEDGE AGAINST INFLATION3.1 Electric Rates Have Generally IncreasedThroughout history, electric rates have generally trendedhigher. Fig 2. illustrates the average 6.7% annual compoundedincreases from 1970 to 2001. This is an effective doubling ofrates every 12 years.

Fig 2: California Public Utilities Commission 30 YearCalifornia Electric Rate History4.

3.2 HedgingHedging is a financial term meaning “to counterbalance withanother transaction to limit risk.” A solar system offers a“hedge” or protection against continued rate increases.

A home that substantially cuts its net electric usage is lesssubject to inflation and price spikes. The present value of thesefuture savings can be quantified using discount rates andestimates for inflation rates. Larger California residentialcustomers were also subjected to changes in the rate structureestablished by the tiered pricing (see Fig 1).

3.3 Kilowatt-Hours Not PurchasedThere are many small charges bundled with the electricgeneration charge for each kWh. Charges for NuclearDecommissioning, Trust Transfer, Transmission, Distribution,Bonds, and taxes are all eliminated for each kWh that is notpurchased. Future charges added to the electric rate will beavoided as well.

4. ADDITIONAL INVESTMENT IN THE HOMEA solar system offers an additional avenue for investment inthe home. Like adding another room, the solar system allowsthe owner to put more money to work in the real propertyinvestment. There are several ways to view and test thisinvestment.

4.1 Financial Investment Viewpoints and TestsA financial life cycle analysis can test the feasibility of a solarproject. The simplest test looks at all the costs and all thesavings, including inflation, over the 30-year life of theproject. If the net savings are larger than net costs, then theproject pays for itself in these simple terms. Generally solarsystems pay back 2 to 4 times as much as they cost. This testdoes not account for the “Time Value of Money” which isakin to not accounting for the lost interest you could haveearned elsewhere if you didn’t have to pay for the solar systemup front.

This test can also be expanded into the Payback test, whichasks when a system has “Paid For Itself.” This is considered acrude test, because it does not account for the future value ofall the assured savings that will be accrued due to the longwarrantees on solar electric modules. Usually paybacks occurin 7 to 15 years, leaving 13 to 20 years of system liferemaining to be enjoyed.

A more detailed test looks at the Rate of Return over the same30-year project life. All the costs and all savings are accountedfor in their relative timeframe. Using an “Internal Rate orReturn” analysis, the effective interest rate paid by the projectcan be found. This interest rate can be compared with otherinvestments. Residential solar projects in California often haveInternal Rates of Return in the 10% to 20% range, whichcompares favorably with the long term stock market at 10.5%over the last 80 years.

Fig 3: Cash flow effect of 5kW solar on a $175/month bill.

Cash flow is another type of test. It compares the savings onthe utility bill with the cost of financing the system. In manycases starting the first month, it costs less to borrow the moneyto put a system in, than it does to keep paying the utility.Borrowing at a fixed interest rate gets more advantageous asthe electric rates go up and the effective savings grow, but theloan payment stays the same. These projects often achievepositive cash flow right away, and improve as inflationincreases the electric bill savings. See Fig. 3 for an example ofa 5kW PV system offsetting a $175/month bill.

Generally, homes that spend $65 or more a month onelectricity tend to be good candidates. Cases that show solar tobe a good investment will naturally attract homebuyers whowill want to get that good investment.

© Copyright 2004, REgrid Power. All rights reserved.

5. INTANGIBLE BENEFITSThere are numerous intangible benefits that will attract buyersas well; environmentally sound energy use & self-production,the feeling of independence from the utility and its high orrising rates, and incorporation of high technology that somewill enjoy having built into their home.

6. EXAMPLES IN THE MARKETPLACE6.1 Few Comparables To DateThere are few if any documented cases where a solar electrichome clearly sold for a quantifiable higher amount vs. itscomparables.In California, as of March 2004, there are about 9,000 gridtied solar homes, 94% of which were installed in the last threeyears, since the power crisis. There are about 4,000 more inthe queue to be installed in the next year.

Since the normal occupancy time of a home is about 7 years,many of these new solar homes have not sold. It is likely thatmost homeowners who install solar are planning on staying intheir homes longer than average, or they would likely not havemade the investment. Therefore, relatively few solar homeshave sold throughout the state.

Once these homes begin going on the market in largenumbers, and the market can evaluate the claims of reducedoperating costs and assign them a value, studies can beconducted to determine the validity of the claims in this paper.It will then be possible to compare a solar home side by sidewith a similar non-solar home.

6.2 Reasons For ConfidenceApproximately 13,000 homeowners in the last three yearshave seen enough value in solar systems to make a majorfinancial commitment. As long as their systems perform, theyare likely to have that value realized. This will support themarket in two ways. They have a higher likelihood ofpurchasing solar on their new homes when they move. Theauthor has already seen this happen in three individual cases.They will provide examples and word-of-mouth in theircommunities that the systems have and create value.While the 13,000 may have purchased primarily for their ownuse, it is reasonable to conclude there are others who would beinterested in purchasing, thus creating a market support forsome extra, but as yet unquantified value.A survey conducted for the California Energy Commission’sRenewable Energy Program showed that 50% of Californianswould be willing to pay more for a home already equippedwith solar technology, and more than 60% would be moreinterested in a home that has a renewable energy system thanin one that doesn’t5.

6.3 Counter Examples and CautionMany homeowners and purchasers have opinions about theattractiveness of various solar technologies on residentialroofs. Some like it, some do not, some don’t know what theyare looking at and don’t object. If the home looks weird it canhurt value.Toronto real estate appraiser Alan Wood finds that whilehomeowners are willing to invest solar, most are unwilling to

purchase a more expensive home custom-built for thispurpose6. Wood further states that market appeal and resalevalue are lowered when the energy-conserving home looksnoticeably different from most others.

7. CONCLUSIONSeveral ways of demonstrating that solar electric systemsincrease the value of homes have been shown, reducing thefinancial risk to purchasers. Solar electric systems can reduceor eliminate the current and future energy operating cost of thehome. They hedge against or eliminate the effect of electricrate inflation. As a component of the home, in many casesthey can provide an attractive vehicle for financial investment.These tangible benefits are financially quantifiable. A solarelectric system increases home value by $20,000 for each$1,000 in annual reduced operating costs due to the system. InCalifornia, a solar electric system compares very favorablywith other home improvements in percentage of costrecovered, often recovering more than 100% of its cost.

8. RECOMMENDATIONS8.1 Future Areas of StudyA survey is needed of actual retail sales of solar homes. Thestudy might test resale value against comparable homes andcontemporary local net installed system costs.Another study might evaluate the change in resale value whenboth buyer and seller are informed of the ways of valuing asolar system on a home.

8.2 Suggestions for Implementation in Other AreasIn the author’s opinion the most important factors that couldimprove solar financial viability in other areas are:ß Implementation of Time-of-Use Net Meteringß Establishing a tiered electric rates penalizing high usersß Small and declining subsidies as neededSmall subsidies may be needed in certain regions with lowelectric rates until electric rates rise and solar costs fall as hashappened in California. There are several states that havesufficiently high electric rates. If those states adopted Time-of-Use Net Metering and a tiered rate structure, solar for largeusers to be very close to financially viable without anysubsidy, as is the case in California.

9. REFERENCES (1) Nevin, Rick et al, Evidence of Rational Market Valuations for HomeEnergy Efficiency, The Appraisal Journal, The Appraisal Institute,http://www.natresnet.org/herseems/appraisal.htm, October 1998(2) Nevin, Rick et al, More Evidence of Rational Market Values for HomeEnergy Efficiency, The Appraisal Journal, The Appraisal Institute,http://www.natresnet.org/herseems/appraisal.htm, October 1999(3) Alfano, Sal,.2003 Cost vs. Value Report, Remodeling Online,http://www.remodeling.hw.net, March 5, 2004(4) CPUC Energy Division, PowerPoint Slide: California Electric RatesResidential, Small Business and Large Business Sectors 1970 to 2001,California Public Utilities Commission, November 2001(5) Local Government Commission, Californians Willing to Pay More forSolar Homes, Currents Newsletter,http://www.lgc.org/freepub/energy/newsletter/may_jun2002/page04.html,May/June 2002(6) Pursaga, Joyanne, Healthiest Homes Not Catching On, New MediaJournalism,http://www.fims.uwo.ca/newmedia/energy/energy_pursaga_hhouse_d2_p.htm, December 2003