This week New York approved a new means of financing renewable energy and energy efficiency improvements. The legislature passed a bill enabling homeowners and businesses to finance improvements through higher property taxes, thus avoiding substantial up-front payments.

By enabling homeowners to pay for clean energy projects through higher property taxes, the new method allows them to avoid the hefty up-front costs typically associated with these projects. Traditionally, the municipality (which can borrow at low rates) covers the up-front costs, and then the homeowner pays the money back through property taxes. New York has made it clear that it wants its municipalities to have access to that new pool of funds.

Since the financing mechanism works through property taxes, the system allows homeowners the ability to pass on the cost of energy improvements to future owners. Without the new legislation, each municipality would have to get their own individual legislation passed to allow them to set up such a program. The passage of the law means that all municipalities now have the ability to enact such a program once they also pass a local law, but New York still needs a law that provides incentives to put in solar systems that meet only a fraction of their energy needs.

To implement their financing program, the definition of solid waste was expanded to include CO2 so that $2.5 million of the solid waste reserve fund could be used to finance energy retrofits. The program funds cost-effective energy efficiency measures such as air sealing, insulation, caulking, and replacing space heating and hot water systems. The program can also finance solar energy improvements, but only if the home meets the Energy Star standard for new home construction. 16 states now allow these programs, which originated in Colorado and California last year.

View a previously written post by Mouli Cohen about Energy