Andrew J. Klimkowski

April 6, 2009

Mater atrium necessitas (necessity is the mother of invention). On March 23, President Obama said that the United States needs creativity in the energy sector to create jobs and reduce its dependency on foreign oil. Necessity has already sparked a current of creativity in some states. Just last year, the Colorado legislature enacted a law that allows local governments to help homeowners and businesses finance the construction of clean energy projects (e.g. solar panels) for their own use. Perusing the law's legislative declarations can be a surreal experience, for it seems that economics and environmentalism are beginning to see eye-to-eye--working in E/E Harmony. Clearly, Colorado's law is just the type of creativity that President Obama has called upon the energy sector to generate.

The Colorado legislature declared that the clean energy projects constructed under the law will be in the public interest because they will increase employment and stimulate other economic activity. The law will also help achieve "significant environmental benefits" by reducing greenhouse gas emissions, sponsoring energy-efficiency in buildings, and making the adjustment to renewable energy sources more affordable. This is poetic E/E Harmony.

Colorado's law allows for a form of creative, municipal financing that actually started in Berkeley, California, but perhaps no city is as accomplished as Palm Desert, California. Palm Desert receives about 350 days of sunshine per year, yielding abundant, available solar energy. Much of this solar energy would continue to go painstakingly underutilized in the absence of creative, municipal financing. And the longer clean energy is allowed to go underutilized, the more drastic will be the methods we employ to mitigate the adverse environmental effects associated with the production of nonrenewable energy (e.g. sea level rise). In short, the more we mitigate today, the easier things should be in the future. One Palm Desert resident, who secured municipal financing for his solar panel installation, already plans to save $3,000 a year or more on his power bill and has already prevented the emission of over 2,200 pounds of carbon dioxide! It is, at once, exciting and gratifying to see that economics and environmentalism are seeing eye-to-eye--working in E/E Harmony.

A municipal financing program essentially works as follows: 1) a local government issues bonds (generally twenty-year bonds with semiannual payments); 2) third parties purchase the bonds; 3) the proceeds of those sales are loaned to homeowners; 4) homeowners have the clean energy project constructed and then watch their energy bill decrease as payments on the loan are made over the subsequent years. Step four allows a homeowner to match the timing of his payments with the benefits he realizes from his project. Simply stated, municipal financing eliminates the daunting, initial cost of constructing a clean energy project and the ever so distant realization of the project's benefits. Consider this, the average initial cost for solar panels on an average Palm Desert home is approximately $48,000. That can be prohibitively expensive; perhaps even to the most affluent and inspired environmental advocate.

Homeowners pay back the loan with interest (perhaps tax-deductible interest) as part of their property taxes. Therefore, and perhaps most ingeniously of all, the obligation to pay the loan attaches to the house, so the next homeowner inherits the obligation. Consequently, every homeowner is allowed to match the timing of their payments with the benefits they realize from their project--E/E Harmony in action.

Despite municipal financing of clean energy project's positive attributes, there are some people who do not fully endorse it. Some say it would be wiser to focus on energy efficiency. One championed efficiency measure calls for cities to implement smart grids. Smart grids are energy systems that improve the reliability and security of a grid, thus reducing the likelihood of potentially disastrous blackouts. But, clearly, receiving energy from one's own clean energy source will take stress off the grid, thus reducing the likelihood of a blackout. So, while it is certainly necessary to implement smart grids, it is going to take time, and time is of the essence. So, in the interim, municipal financing of clean energy projects will generate economic and environmental benefits today, and achieve President Obama's request for the energy sector to create jobs and reduce its dependency on foreign oil. As stated above, one Palm Desert resident already plans on saving $3,000 a year or more on his power bill and has already prevented the emission of over 2,200 pounds of carbon dioxide! Hopefully this microcosm will be an impetus to a national and, thence, a global harmonic convergence.

Sources:

Colo. Rev. Stat. §§ 40-9.7-101 to 123 (2008).

John Bartlett, Bartlett's Familiar Quotations 124 (Justin Kaplan ed., Little, Brown and Company, 17th ed. 2002) (1882).

Philip Elliott, Obama Links Budget to the Environment, The Brownsville Herald (Brownsville, Tex.), Mar. 23, 2009, http://hosted.ap.org/dynamic/stories/O/OBAMA_ENERGY?SITE=TXBRH&SECTION=HOME&TEMPLATE=DEFAULT.

Merriam C. Fuller et al., Toward a Low-Carbon Economy: Municipal Financing for Energy Efficiency and Solar Power, Environment: Science and Policy for Sustainable Development, Jan.--Feb. 2009, http://www.environmentmagazine.org/Archives/Back%20Issues/January-February%202009/FullerPortisKammen-full.html.

Intergovernmental Panel On Climate Change (IPCC), Climate Change 2007: Synthesis Report 26, 30--31 (2007), available at http://www.ipcc.ch/pdf/assessment-report/ar4/syr/ar4_syr.pdf.

Leslie Kaufman, Harnessing the Sun, with Help From Cities, N.Y. Times, Mar. 15, 2009, at A16, available at http://www.nytimes.com/2009/03/15/science/earth/15solar.html.

Patrick Mazza, Climate Solutions, Poised for Profit in Clean Energy: Powering Up the Smart Grid 1--5 (2005), available at http://www.climatesolutions.org/publications/CS_Powering_Up_the_Smart_Grid_2007-10-18_17.pdf.