Increasing Your Energy Efficiency Options: The Story of PACE Financing

As you may have heard, the State of California recently set a number of ambitious goals to reduce our impact on the environment. Unsurprisingly, many of these goals face multiple barriers with the potential to impede their progress. Two of these goals in particular: “50% renewable electricity” and “Double energy efficiency savings at existing buildings” are limited by the availability of financing for renewable energy and energy efficiency projects. SBC has seen this firsthand. In the development of the 10 Energy Actions Plans we have helped to develop the greatest barrier to renewable energy and energy efficiency projects identified has been financing. Thankfully, financing opportunities have been developed to help overcome such barriers. 

The past ten years have seen several innovate financing options become available to residents and businesses in California. One of these financing options is Property Assessed Clean Energy (PACE) financing. PACE enables low-cost, long-term financing for energy efficiency, renewable energy and water efficiency projects. PACE is innovative because it allows property owners to fund projects with no out-of-pocket costs and because of the ability to finance up to 20 years, most projects are cash flow positive from day one. We see PACE programs as a key resource for local governments to help implement their Energy Action Plans and help residents and businesses achieve energy and cost savings.

In California, PACE was first enabled in 2007 by AB 811 and was strengthened through the passage of SB 77 which setup a loan loss reserve fund for residential PACE programs. Since then PACE programs have flourished providing over $2 billion in financing for projects in California, creating jobs and improving the comfort and efficiency of our homes and businesses. Today there are 12 active PACE programs in the state.

So, how do you access PACE financing for your home or business? The answer is relatively simple: your local government must opt-in to each program. Some local governments have chosen to develop their own in house program, like mPOWER Placer, while others have chosen to have third party implementers handle all of the administration. By opting into programs administered by third parties, local governments are able to opt into multiple programs, which creates competition in the marketplace.

While PACE financing has been incredibly successful, there have been Federal and State legislation introduced that would limit the potential impact of PACE programs. For instance, the PACE Act of 2017 introduced on April 5, 2017 would put unnecessary and overly burdensome regulations on PACE programs including changing the way local governments collect property taxes, requiring them to license as mortgage brokers, and imposing lengthy delays in funding projects.

PACE is not a mortgage and should not be treated as one. Instead PACE is local government assessment financing designed to achieve energy and job creation public policy goals. It is important for consumers to be protected from predatory lending and that is why PACE providers have worked with consumer advocates and the real estate industry to strengthen consumer protections in California including “know before you owe” disclosures and a three-day waiting period among other protections.

Stay tuned for future posts on other financing programs and opportunities available in California. If you have questions on PACE financing, please contact SBC’s Climate Planning Program Director Paul Ahrns (that’s me), at pahrns@sierrabusiness.org.