Snaring the Sun on a Small Scale

A Minnesota tire and auto-supply dealer is probably the last place you’d expect to find an innovative national model for making solar power cheap and accessible to small businesses across the country.

But that’s exactly what’s been developed by Rick Murphy, the owner of Grandview Tire and Auto in Edina, in cooperation with local solar installer Bradley Hanson, the Edina city government, and PACE, a program that’s changing how home and business owners finance clean-energy projects.

Murphy’s father opened Grandview in 1975. The Murphys, like many Minnesotans, are green-minded. Rick Murphy liked the idea of installing solar panels for his business—in theory. About five years ago, he began researching the project and discovered that, in practice, there was no way that solar power made sense for his bottom line. The up-front costs of installing the panels were too high, even if they were offset by a generous mix of state and federal grants and the promise of future savings from generating his own power. “We got a few bids and realized the price just wasn’t reasonable. There was no way we could justify it. We wanted solar power, but we just didn’t have the means to get it implemented,” Murphy says.

But last year, Hanson, a contractor with Minneapolis-based Blue Horizon Solar, approached Murphy with a bid to put solar panels on his building—and a proposal for financing the project that would allow Murphy to bypass the steep up-front costs while reaping big savings on his electricity bill in less than a decade.

Hanson proposed that Murphy finance his solar panels using a program called PACE, which stands for Property Assessed Clean Energy. Through PACE, city and county governments act as the conduit to finance clean-energy and energy-efficient building projects, which home, business, and building owners pay back over 10- or 20-year periods as an addition to their annual property-tax assessment.

National Journal selected the Edina PACE project as our leading innovator in energy because the project offers a repeatable model for ordinary business owners to invest in renewable energy and energy efficiency not to soothe their green consciences, but because it saves them money. While some green-minded consumers can afford to pay a premium for clean energy that reduces the risk of global warming, most homeowners and businesses are unlikely to change until it benefits their bottom line. The Edina project shows a way to make that happen through a process that stimulates local communities both by creating jobs in installing energy-efficient and renewable infrastructure and by freeing up capital as small businesses enjoy lower utility bills.

“What was unique was that it was done on such a small scale,” said Stefanie Galey, the lawyer who helped Murphy, Blue Horizon, and Edina navigate the legal path of setting up the PACE loans. “People always assume that unless you have economy of scale it’s not going to work. Its success relies on being able to clone the model. You’ve got to have a first one.”

Although PACE-like programs have been approved in 28 states and the District of Columbia, many have yet to actually be deployed. Minnesota passed a PACE bill in 2010, but until last year had never actually put it to use.

When Murphy and solar contractor Hanson proposed using the program, city officials in Edina were game; they adopted and tweaked a PACE program that had been used for homes in Sonoma, Calif., to finance solar power for an auto-supply store in Minnesota. It was the first such program in the state, and one of the first in the Midwest.

Murphy ultimately spent about $130,000 to install the solar panels. He secured $100,000 through a mix of state and federal loans and conventional financing. PACE provided the remaining $30,000, which Murphy will pay back through his tax assessment over the next decade. But thanks to the $3,500 a year he’s projected to save on his electricity bill by generating his own solar power, he’ll have already paid himself back before then. Meanwhile, those savings will continue over the projected 25-year life span of the solar panels. Murphy estimates he’ll ultimately save $70,000 in energy costs over that time.

Already, Murphy’s model is spurring followers. Inspired by Grandview’s solar project, an Edina restaurant, Salut Bar Américain, is applying for a PACE loan for energy-efficient retrofits. Two other Minnesota cities, Eden Prairie and Northfield, have added PACE to their city-council agendas this summer.

“Whether or not solar panels are cheap or expensive, clean energy is always going to cost more up front,” says Matthew Stepp, a policy analyst with the Information Technology and Innovation Foundation, a Washington think tank. “This allows people to afford it. It’s a financial innovation, but it’s deeply critical to innovating technologies.”

See the finalists in each category: Digital Innovation | Expanding Exports | Workforce Training | Health Care | Financing Infrastructure | Disrupting Government | Regional Economic Strategies | Education | Energy