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PACE - New Funding Model for Renewable Energy Is Gaining Ground

22 states have authorized local governments to start Property Assessed Clean Energy (PACE) programs to support renewable energy adoption by homeowners.

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This week, Missouri and Georgia both approved legislation that will help residential and commercial property owners make energy efficiency and renewable energy improvements to their properties.

PACE addresses two important barriers that have prevented property owners from making energy upgrades:

  1. Up-front costs
  2. Who pays for ongoing costs for upgrades when properties are sold.
Financing strategies are as essential as efficient technology in the commercialization phase of new technologies such as renewable energy using solar, wind or geothermal.

Property Assessed Clean Energy (PACE) Financing Programs

Through PACE programs, city and/or county governments issue bonds whose proceeds are made available for renewable energy and energy efficiency projects by property owners.

Convenience of Property Tax - Based Loans

Property owners apply for loans for their projects, which they can pay off over a long period of time (usually 20 years) through their property taxes. Property owners can expect to save as much money on their energy bills as they will have to pay in increased property taxes. If the property changes hands, the cost of the upgrades is passed on to the next property owner.

According to a report on PACE released by the White House in October 2009,

"If only 15 percent of residential property owners nationwide took advantage of clean energy community financing, the resulting emissions reductions would contribute 4 percent of the savings needed for the U.S. to reach 1990 emissions levels by 2020."

PACE is among many innovative financing mechanisms that state and local governments are developing to reduce Americans' greenhouse gas emissions and our dependence on oil.

Green Job Creation with PACE

PACE programs also create jobs in home weatherization and renewable energy installation. Advocates can educate local policy makers about the realities of clean energy jobs created by PACE programs by including job quality and job training standards in their PACE programs.

It would be counter-productive if any segment of the workforce were to co-opt these funds by applying restrictive or misguided policies that would exclude the private small businesses who have innovated so many of the clean energy technologies.

Local Adoption of PACE

Even after a state authorizes the development of PACE programs, local governments must still act to actually create the programs.

PACE Financing Advantages

PACE programs streamline financing of energy efficiency investments in three key ways.
  1. Property assessments provide a secure, well-established payback mechanism that will lead to lower borrowing costs. The security of the payback mechanism often makes it possible for PACE financing to be offered with no money down requirement.

  2. The economies of scale from making PACE financing available to a large group of borrowers can reduce overhead and transaction costs.

  3. Effective administration of PACE programs at the local-government level will create more consumer confidence in the economic value of energy efficiency investments.

Edited by Carolyn Allen
| pace | solar financing | renewable energy finance | clean energy investment |

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