Readily accessible credit has often been cited as a necessary ingredient to open up the market for residential photovoltaic (PV) systems. Though financing does not reduce the high up-front cost of PV, by spreading that cost over some portion of the system's life, financing can certainly make PV systems more affordable.
As a result, a number of states have, in the past, set up special residential loan programs targeting the installation of renewable energy systems and/or energy efficiency improvements, and often featuring low interest rates, longer terms, and no-hassle application requirements.
Historically, these loan programs have met with mixed success (particularly for PV), for a variety of reasons, including:
- historical lack of homeowner interest in PV,
- lack of program awareness,
- reduced appeal in a low-interest-rate environment, and
- a tendency for early PV adopters to be wealthy, and not in need of financing.
Although some of these barriers have begun to fade – most notably, homeowner interest in PV has grown in some states, particularly those that offer solar rebates – the passage of the Energy Policy Act of 2005 (EPAct 2005) introduced one additional roadblock to the success of low-interest PV loan programs: a residential solar investment tax credit (ITC), subject to the Federal government's "anti-double-dipping" rules. Specifically, the residential solar ITC—equal to 30% of the system's tax basis, capped at $2000—will be reduced or offset if the system also benefits from what is known as "subsidized energy financing," which is likely to include most government-sponsored low-interest loan programs.