PACE financing allows home owners to install solar panels and repay the loans through their property tax bill. Photo source: Michael Coghlan Flickr.
Last week saw the completion of two exciting finance transactions that will increase investment in and reduce costs for clean energy projects.
In the first transaction, Renovate America, announced that it raised $50 million in venture capital funds to expand operations. The San Diego-based company develops residential Property Assessed Clean Energy (PACE) programs, which allow home owners to repay loans for energy efficiency and/or renewable generation through their property tax bill. Renovate America runs the successful HERO program, which in its first two years of operation provided $130 million in financing to homeowners in western Riverside County to retrofit their homes and reduce electricity bills.
So far this year, Renovate America has invested an additional $120 million to fund retrofits across California. EDF hopes the recently announced $50 million capital injection will not only allow Renovate America to continue its California expansion, but to expand to other states in the near future as well. We plan to work closely with Renovate America and their primary competitor Renewable Funding, which closed its venture round in April by raising $20 million. EDF’s collaboration with both companies will help additional states create residential PACE programs, attract investment for homeowners, and create jobs. Read More
Last week, I wrote about the continued success of Texas’ wind energy industry, but the growth in solar is also impressive. Nationally, solar energy accounted for 74 percent of all new electric generation in the first quarter of 2014. Plus, residential solar installations surpassed commercial projects for the first time in history earlier this year. This is significant, proving that more homeowners are making the switch and investing in a cleaner energy supply.
According to the Center for American Progress, “more than 60 percent of solar installations are occurring in zip codes with median incomes ranging from $40,000 to $90,000." This is an important revelation as the price of solar comes down quickly, projected to be cost-competitive with fossil fuels by 2020, more homes can and will add solar panels. In fact, experts expect more than half of all American homebuilders to offer rooftop solar as an option in new single-family homes by 2016. That’s a significant uptick from just 12 percent in 2013.
These findings make clear that people are taking their energy use into their own hands, highlighting the power of people in the new energy landscape, where customer-centric demand-side resources – rooftop solar, energy efficiency, demand response (which compensates electricity customers for conserving energy), electric vehicles, and energy storage- will play a key role. I discussed this trend in a radio interview with Voice of Russia a few weeks ago in a segment entitled Whole Home Automation: Promising for Consumers and Climate. Read More
Last week, Connecticut’s Clean Energy Finance and Investment Authority (“CEFIA”), the state’s Green Bank, announced the sale of $24 million in loans for clean energy retrofits of commercial properties. The loans were originated through the state’s Property Assessed Clean Energy (PACE) program, which allows property owners to access 100 percent up-front financing for energy efficiency and renewable energy improvements on their buildings. Repayment is attached to a lien on the property tax bill, making PACE loans very attractive assets for investors.
According to Jessica Bailey, Director of PACE for CEFIA, “Connecticut’s PACE program is able to provide financing for commercial property owners to implement money saving clean energy projects. Without PACE, most of these property owners might not have access to attractive financing and these projects would not be completed.” Read More
By: Matt Golden, Senior Energy Finance Consultant
Texas currently has the highest rate of energy consumption of any U.S. state and accounts for 10% of the country’s total energy consumption. Most of that energy goes to energy-intensive industries, such as aluminum, chemicals, forest products, glass, and petroleum refining, which consume 50% of the state’s energy, compared with a national average of 32%.
Last year, the Texas legislature passed statewide legislation enabling cities to use their property assessment as a way to finance clean energy and energy efficiency for industrial, agriculture, water, and commercial buildings. This innovative financing tool, generally referred to as property-assessed clean energy (PACE), has the potential to unlock a considerable amount of funding for both renewable energy and energy efficiency projects in the state, while simultaneously offering building owners cheaper financing options and secure repayment through their property assessment. Read More
When it comes to protecting the environment and fighting climate change, California has always been a first mover.
Now the state is boldly acting to unleash a new market that saves energy, cuts pollution, and drastically increases clean energy investment for California’s residents.
Last week, California approved a $10 million reserve that will revive the Property Assessed Clean Energy (PACE) program for residential customers.
PACE allows customers to take advantage of energy saving upgrades to their home with no money down. Customers simply use a portion of their savings to pay off the investment over time through their property tax bill. Financing can be entirely provided by private lenders at no cost to taxpayers. Read More
By: Matt Golden, Senior Energy Finance Consultant
The Investor Confidence Project (ICP) and Commercial Property Assessed Clean Energy (PACE) programs offer many opportunities for collaboration in the buildings and energy efficiency sector. We will be exploring this potential for partnership in the upcoming webinar, Commercial PACE: Raising Confidence in Energy Savings to Ramp-Up Investment and Demand, held on January, 30th 2014, at 2pm ET/ 11am PT.
This one-hour, Environmental Defense Fund (EDF) / PACEnow webinar is designed to help Commercial PACE administrators, investors, project developers and building owners understand how standardization can facilitate multiple stakeholder alignment, ensure underwriting needs are met and enable energy efficiency investment while lowering transaction costs. It will include a brief presentation on EDF’s Investor Confidence Project, followed by panel discussion focusing on how Commercial PACE programs are using ICP to address the owner and investor projected savings-confidence challenge, which has been an impediment to energy retrofit financing nationwide. Moreover, the panel will share how ICP is enabling energy efficiency financing to become a mainstream financial asset class with the high degree of standardization, predictability and scale that investors demand. Read More
By: Matt Golden, Senior Energy Finance Consultant, Environmental Defense Fund
Nearly 40% of U.S. energy is consumed by both residential and commercial buildings, which emit more than a third of our country’s greenhouse gases. Realizing all of the available cost-effective energy efficiency savings would require roughly $279 billion of investment, resulting in more than $1 trillion in energy savings over ten years.
Environmental Defense Fund’s Investor Confidence Project (ICP) opens up energy efficiency to investment markets by laying the foundation necessary to enable organizations to tap into this vast potential. This means turning energy efficiency upgrades in the commercial building sector into an asset that can be bought and traded, much like stocks and bonds. By developing a straightforward set of protocols that define a clear road-map for upgrades, ICP creates an investment-quality asset class whose risks and returns are transparent. Ultimately, large-scale adoption of the ICP framework will reduce transaction costs and engineering overhead, while increasing the reliability and consistency of savings.
ICP will be hosting a series of webinars targeted at specific stakeholders in the energy efficiency sector, and strongly encourage individuals and organizations interested in the future of the energy efficiency industry to attend. With the assistance and feedback of industry leaders, investors and programs, ICP has developed a range of Energy Performance Protocols tailored to market needs and project types that will reduce transaction costs, manage performance risk and increase deal flow. Our webinar schedule this fall will focus on how these protocols can create value for individual projects, organizations and the energy efficiency industry as a whole.
This commentary originally appeared on EDF's California Dream 2.0 blog.
I spend most of my time working to establish On-Bill Repayment programs that allow property owners to use their utility bill to repay loans for cost-saving energy efficiency or renewable energy upgrades. Many of my colleagues work on a similar program known as Property Assessed Clean Energy (“PACE”), which uses the property tax bill for repayment. Since both utility and property tax bills are usually paid, both PACE and OBR are expected to lower the cost and increase the availability of financing for clean energy projects.
Last week, I was invited to attend a meeting of the leading PACE program administrators, property owners and other market participants in the country — and was pleasantly surprised to learn how much progress is being made.
Connecticut launched their program in January and is expected to close $20 million of PACE transactions for commercial properties by year end. The Toledo, Ohio area expects to have executed $18 million of commercial transactions by the end of 2013. Sonoma County, with a population of less than 500,000, has already completed $64 million of financings for residential and commercial properties. In late 2012, CaliforniaFIRST launched a PACE program for commercial properties that has already received 130 applications.
This commentary originally appeared on EDF's California Dream 2.0 blog.
By: Kate Daniel, EDF Climate Corps Fellow
Kate Daniel, Climate Corps Fellow
Great news for California and the future of energy efficiency in Sacramento.
Today I took part in an announcement by Sacramento Mayor Kevin Johnson unveiling the nation’s largest Property Assessed Clean Energy (PACE) project in the country — and potentially a huge boost for businesses in the state’s capital.
Launched by Clean Energy Sacramento, the property owners of Metro Center, Metzler Real Estate, will now be able to take advantage of PACE financing to fund $3.1 million in energy efficient upgrades, including high efficiency rooftop units for heating and cooling and a state-of-the-art building management system. Ultimately, these upgrades will save $140,000 in annual utility costs for the property.
This project is not just good news for Metro and Metzler, but for the entire Sacramento region. Here’s how it works: Under the PACE program Metzler will receive private funding from Ygrene Energy Fund, who covers the upfront costs of the project Metzler pays the costs back on their property tax bill while Johnson Controls will design and implement the upgrades.
In my last post about Connecticut’s clean energy finance efforts, I alluded to an important innovation in their Property Assessed Clean Energy (“PACE”) financing program for commercial properties. PACE programs have been in place for several years, and the basic concept is that property owners are able to pay back clean energy financing through their property tax bill over time. Rates tend to be low because property taxes are almost always paid back and the PACE assessment will survive foreclosures.
To date, PACE transactions have generally been structured as a set of fixed payments to finance retrofits managed by the property owner. Functionally, these transactions have been quite similar to loans. In the solar industry, however, the vast majority of financings have been structured as leases or power purchase agreements (PPAs) in order to fully capture the tax benefits associated with solar investments. This has generally resulted in fairly low use of PACE by solar installers and limited installations of solar on commercial properties. (Most commercial properties have large mortgages and are not good candidates for additional financing unless PACE or On-Bill Repayment (OBR) can be used to improve credit quality. The exceptions are buildings that are owned or occupied by very high quality credits, such as a large corporation or city.)
Connecticut is breaking new ground by allowing leases and PPAs to participate. The lease or PPA payments would simply become part of the property tax bill. If necessary, true-up mechanisms could be used to adjust payments and ensure that customers are not overbilled. Additionally, we understand that this flexibility will likely be available for innovative energy efficiency financing for commercial properties. EDF has long advocated for this type of flexibility (and we see this as a major benefit of OBR), but – to date – PACE programs have not incorporated this feature.
Hats off to Connecticut for once again showing us how to get things done!