As concerns about reliance on foreign energy resources increase and we try to combat climate change by reducing our emissions and expanding renewable energy use, there has been an increase in talk about public financing of clean energy improvements. A number of states, such as Colorado, already enable public financing for clean energy, including installation of solar power, and even more states, like Arizona, Texas, Virginia, and Washington have introduced similar legislation.

One of the greatest obstacles for property owners in installing solar power is the large up-front investment. For an average sized home the cost of installing a solar power system is about $48,000, but the price tag can be much higher for larger homes. Although over the long term property owners may recoup the installation cost through reduced utility bills, the up-front cost is still daunting, especially for those with not a lot of discretionary income. While individuals could explore private financing opportunities for such projects  property owners often choose to forgo such assistance, because if they move, they will still be responsible for financing the solar power system although not reaping any of the benefits.  

In an attempt to mitigate the up-front financial barriers and lessen the long-term personal financial burden  associated with making clean energy improvements, some states are passing or changing laws to ensure municipalities can create municipal financing programs for clean energy. Under municipal financing, municipalities loan property owners money to help with the initial cost of the improvements.  The benefits of municipal financing compared to private financing are two-fold. First, any property owner, regardless of their credit level, is able to receive a loan, and second the loan repayment is tied to the property, not the individual. This means that if a property owner invests in a solar power system and then moves they will not have to cover the cost of the upgrade despite no longer receiving the the financial benefits derived from the associated energy savings. Further, municipal financing programs can potentially, especially if they include clean energy projects and energy-efficiency retrofits, facilitate job creation.  

While there are are critics who believe that municipal financing programs promote energy generation that the market might otherwise not support, states and localities have considerations beyond money, such as helping ensure our nation takes the necessary steps to combat climate change.