Chu: Solar Phoenix 2 is Ideal Model of Private Solar Funding

by Kristen Wright, senior editor

U.S. cities easily could replicate Solar Phoenix 2, the ideal national model of private solar funding, Energy Secretary Steven Chu said during the project’s May 15 unveiling.

The energy secretary said he expects renewables such as solar and wind to be cost-competitive with natural gas generation by 2020 or 2025—without subsidies.

Solar Phoenix 2 is the second phase of the nation’s largest city-sponsored, residential solar-financing program. It will receive no federal funding.

The original Solar Phoenix program, announced in November 2009 and completed in 2010, was available only to Phoenix residents.

Arizona’s largest community bank, National Bank of Arizona, contributed some $26 million to buy solar photovoltaic (PV) panels, then leased them to more than 400 residential customers with good credit. Homeowners incurred no up-front costs but made monthly lease payments to the bank.

Zero customers from the original Solar Phoenix program defaulted on their leases, so the bank committed another $25 million for a larger, second phase.

Solar Phoenix 2 will allow up to 1,000 qualifying single-family homeowners within the Arizona Public Service Co. (APS) and Salt River Project (SRP) service territories to install solar PV systems on their homes also with no up-front investment. The project will run through the end of 2012.

Energy Secretary Steven Chu, left, and Phoenix Mayor Greg Stanton during the May 15 unveiling of Solar Phoenix 2 agree: The future’s so bright, they’ve got to wear shades.

The biggest challenge to sustainable energy independence in the United States, said Craig Robb, managing director of National Bank of Arizona and Zion Energy Link, is the cost of capital and availability of financing.

“Our $25 million commitment to support Solar Phoenix 2 is the start of a long-term vision to help overcome the barriers to entry for solar power,” Robb said.

The systems are designed to generate some 60 to 80 percent of the homes’ annual energy use.

At night and other times the PV systems produce less energy than they consume, customers simply purchase power from APS or SRP.

All of the project’s rooftop solar arrays will qualify for a 30 percent tax credit, but only the owner of the panels—the bank, not the homeowners—will get the credit.

The leases come with other perks for homeowners, who can lock in current low electricity rates for as long as they use their PV solar energy systems—up to 25 years.

“It’s as if you had locked into a price for gasoline 25 years ago—imagine how much you would have saved by now!” the Solar Phoenix website states.

The site’s FAQs also address equipment upkeep.

“That is part of the beauty of a solar lease,” the website states. “Homeowners get the economic and environmental benefit of clean solar energy without the hassle of taking care of the equipment. The solar energy system is insured and guaranteed to produce a certain amount of power each month. If it doesn’t, or if the system needs a checkup, the system installer will take care of maintenance and repair for the full term of your agreement.”

During the Solar Phoenix 2 unveiling, Chu and Phoenix Mayor Greg Stanton released other details about the program.

“We are tapping into Arizona’s greatest resource, we’re making solar happen and we’re creating real jobs in our city,” Stanton said.

The program is estimated to generate 234 direct and indirect jobs.

“Solar Phoenix 2 reaffirms that Phoenix is the definitive place for investment in solar energy and opportunity and for a sustainable and successful economic future,” Stanton said.

The process takes about two to three months from start to finish. The primary criterion for a homeowner to qualify is a FICO score of 700 or greater and good credit history.

Homeowners may begin in two ways. They may learn more and sign up at or call a toll-free number to speak with a solar consultant.

Upon their credit approval and signing an agreement, customers may schedule installation. Site audits are conducted to determine appropriate solar system sizes and locations.

Then, systems are designed and submitted to customers for approval.

Next, the city of Phoenix issues building permits, and installation is scheduled. After installation, the city schedules a building inspection, and APS or SRP schedules a utility inspection.

When all inspections are passed, the utility connects to the system, and solar power generation begins.

Assumptions for the Economic Impact Analysis

The assumptions used in the analysis of Solar Phoenix 2 are as follows, according to a release on the project:

ࢗ  The project consists of the installation of solar PV systems on 1,000 residential properties, assuming the costs are $25,000 per system and $25,000 in program value; and each system is assumed to:

ࢗ  Be 5 kW in size;

ࢗ  Produce a monthly lease payment from the homeowner of some $130;

ࢗ  Have an installation cost around $25,000;

ࢗ  Result in 5 MW of total installed capacity; and

ࢗ  Have an installation value of $25 million.

The analysis assumes there will be 158 engineering, design and installation jobs involved in the solar PV system installations on residential rooftops and a total payroll of $8,234,819.

Greater Phoenix Regional Economic Impact

The potential regional economic impact will consist of the one-time impact of jobs for PV system installations.

Similarly, indirect jobs also are considered one-time and temporary. According to the impact analysis, there is a 1.49 total jobs multiplier associated with direct job creation.

Greater Phoenix Fiscal Impact

The fiscal impact to the region, according to the release, will consist of the one-time impact of the installations and jobs associated with the installations and ongoing lease payment tax revenues.

The impact includes sales tax, utility tax, state shared revenues and other local taxes. According to ARS 42-11054, for property tax assessment purposes, “solar energy devices” are considered to add no value to property.

Greater Phoenix Impact Model

GPEC, according to the release, employs a proprietary impact model that uses multipliers to assess the economic and revenue impacts of business operations within the region.

Direct job creation figures and supplier and consumer employment multipliers are used to estimate supplier and consumer job creation. The multipliers, developed by IMPLAN, are Maricopa County-specific and based on the region’s local economy.

Minnesota IMPLAN Group Inc. is the developer of the IMPLAN economic-impact modeling system.

IMPLAN multipliers are used by leading economic development consulting firms in greater Phoenix. (IMPLAN grew out of research at the University of Minnesota.)

GPEC and its partners came together in February 1999 to develop the region’s first consensus-based revenue and economic-impact model.

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