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Selected tag(s): PACE

California’s Capital Leads the Nation in Energy Efficiency Financing

By Climate Corps Fellow / Published: July 30, 2013

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.

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Combining Solar And PACE In Connecticut: A Potential Game Changer For Commercial Properties

By Brad Copithorne / Published: July 19, 2013

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!

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Texas Picks Up The Clean Energy PACE

By Kate Zerrenner / Published: May 23, 2013

Chairman John Carona’s Property Assessed Clean Energy (PACE) bill, Senate Bill 385 (SB 385), which was sponsored by Chairman Jim Keffer in the House, is headed to the Texas Governor’s desk!  Building upon successful legislation passed in 2009 to authorize “PACE districts” in Texas, SB 385 clears some of the hurdles that prevent commercial and industrial properties from taking advantage of new financing for water and energy conservation efforts.

PACE is an innovative, market-based approach that helps alleviate the steep, upfront costs property that owners generally incur for water and energy improvements by using loans that are seamlessly repaid through an additional charge on their property tax bills.  The loan is then attached to the property, rather than the owner, and can be transferred if the property is sold.  PACE loans can be issued by city or county financing districts or financial institutions, such as banks.  Property owners who participate will start saving money on their utility bills each month as a result of water conservation, energy efficiency and/or renewable energy improvements, while repaying the loan annually when they file their taxes.  In other words, they will see net gains despite increased property taxes.  The program is entirely voluntary.

In 2009, Governor Perry signed House Bill 1937 (HB 1937) by Mike Villarreal, which established PACE districts in Texas for the first time.  Although cities and counties across the state began the process of setting up PACE districts, the entire process was derailed when the Federal Housing Finance Agency (FHFA) created an obstacle for residential PACE programs.  FHFA expressed concerns about the senior lien—that is, if a homeowner with a PACE loan defaults, the repayment of the PACE obligation would take priority over settling the mortgage.  There were also some structural concerns which would have “required the Texas legislature to amend or replace the existing statute.”  This new bill, SB 385, addresses the structural problems and applies to commercial and industrial (rather than residential) property owners, thus removing the senior lien concern from the equation. Read More »

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