PACE financing : charge it to your tax bill

State pays up front, you pay back in taxes

The problem with many renewable energy (solar pv/thermal and wind turbines) and energy efficiency retrofits (new windows, efficient hvac system, insulation, etc.) is that they cost a fair amount of money up front. In times like these, many people don't have the cash laying around to cover that initial costs; even if these projects do pay off in the long run. Luckily many states are adopting a a form of financing called PACE to remove the burden of residents having to come up with the cash for their clean energy projects.

PACE stands for Property Assessed Clean Energy. In its simplest it works like this:

Your local government puts down the cash to pay for your retrofit (clean energy)
You pay back the initial cost through your property tax (property assessed)
Everyone wins (except your local utility, who wont be selling you as much energy. Boo Hoo.)

I first mentioned PACE financing when I covered Vice President Biden's "Recovery through Retrofit" plan. Biden's plan mentioned PACE as a great alternative to traditional financing for energy projects.

Thankfully, there is a wealth of resources on the web for this topic. Renewable Funding is a company that is focused on renewable energy financing and they have a ton of information on their site regarding PACE. They provide a detailed description as follows:

A local government creates an improvement district; a bond, secured by real property within the district, is issued; and the bond proceeds are used to fund renewable energy and energy efficiency projects. Property owners then repay the debt service on the bond in fixed payments as part of their property tax bill.

There are two major characteristics, however, that make PACE unique. First, property owner participation is 100% voluntary. Only those property owners who choose to participate in the PACE program pay additional costs. Second, the bond proceeds are used to pay for prequalified clean energy improvements on participating properties. Improvements that a property owner may often choose from include renewable energy technology like solar panels, energy efficiency projects like a high efficiency furnace, and in some states water conservation measures.

Renewable Funding also has an extensive resources section and a great U.S. PACE map where you can find out if your state offers any renewable funding opportunities.

Another great resource for information on PACE financing is the D.O.E.'s Energy Efficiency and Renewable Energy (EERE) site for financial products. I took the image below which describes the advantages and disadvantages of PACE off of their site:

PACE advantages and disadvantages

The city often cited as one of the first PACE success stories is Berkeley, CA (Renewable Funding - seen above - was the third party administrator for Berkeley's program).

So what can you do to help bring PACE funding to your neighborhood? Tell your state legislature you demand it! One way to do this is on Vote Solar's website where you can fill out a form to send to your elected official. There was a great post on SolarPowerRocks.com back in November of 2009 calling for New Yorkers to petition their lawmakers to allow for cities to offer PACE financing. Guess what, it was passed by a unanimous decision. Even great ideas have to trudge through the bureaucratic system.

PACE financing doesn't just help with the up-front cost of clean energy projects, it also allays any worries about moving before the project's payback. For example, say your solar panel project won't payback until year 9, but you can see your family moving in 5 years. If you have PACE, no problem. Since your project is amortized - usually over 20 years - on your property tax bill, the payment is just passed on to the new owner for your house. But they don't incur any more financial burden, because they are getting the advantage of lower energy bills! It's a win/win.

I really can't see many disadvantages to this method of funding clean energy projects. Let's face it, the fossil fuel status quo is hard to compete with, so clean energy needs all the help it can get. Take a few minutes to voice your desire to have access to PACE financing to your state lawmakers, start talking about PACE with your friends and neighbors, and bring on a clean energy revolution in your city!

Comments

Anonymous (not verified) Thu, 10/14/2010 - 10:50

Trying to affirm the avaliablity for towns, villages and cities to serve Central New York customers. How is the interest rate, loan term determined? How does a customer file for applicaiton? How long does it take for approval?

Anonymous (not verified) Mon, 04/12/2010 - 23:06

Hi. I just wanted to let you know about the website pacefinancing.org. We are getting a discussing of PACE programs going on there and trying to get as many resources available to readers as possible. Check out the page and feel free to make any comments or add to what we have. Also, we made a wikipedia page--it sounds like you have a lot of info--if you want to edit that and add anything there that would be great too (http://en.wikipedia.org/wiki/PACE_Financing) Great to hear others are interested in this option for going green!

Anonymous (not verified) Wed, 02/10/2010 - 12:20

There are some quirky corners where win-win isn't quite so obvious. What happens if the system breaks and is out of warranty? Then the owner of the house still has the increased taxes, but isn't getting the benefit of reduced utility bills. Perhaps it would be good for the sponsoring government agency to also buy insurance to cover fixing the system across the whole period when taxes are increased (rolling the cost of doing so into the extra taxes). Then the homeowner has a sure-fire way to get the system repaired without worrying about some large bill (inverters are expensive).

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