by Mimi Frusha
Property
Assessed Clean Energy (PACE) programs, which allow private property owners to
finance energy-efficiency and renewable-energy projects via their property
taxes, has been taking off around the country. These programs are designed to
spur private improvements to reduce our nation’s energy consumption, create
green jobs, and lower energy bills.
The first
PACE program was announced in Berkeley,
Calif., in 2007. Since that time,
17 states have adopted some version of PACE and more than 200 cities and
counties throughout the country are preparing to launch programs.
PACE
offers a bright spot in the efforts to jump-start investments in clean-energy
and energy-efficiency projects. With Berkeley’s
pilot program now completed, it is time to take stock of what was learned
through the experiment. In short, the Berkeley
pilot was a remarkable success: it proved that PACE financing is feasible and
taught us a lot about how to take programs to scale.
Berkeley’s pilot, called
BerkeleyFIRST, launched in November 2008 with a solar-only financing program.
BerkeleyFIRST was a small-scale program designed to test the idea of PACE-type
financing in the real world. The program’s 40 available slots were all claimed
in 9 minutes. Once approved, property owners had nine months to install their
projects. In the end, 90 percent of participants installed or plan to install
solar systems, 85 percent said the program was responsible for their decision
to “go solar,” and roughly a third of participants used BerkeleyFIRST financing
to pay for their new systems.
Listed
here are the top four lessons learned through the Berkeley pilot.
PACE works. When the City of Berkeley announced this innovative
idea to encourage property owners to go solar, nobody had ever tried the
approach before. It worked. Participants installed solar and are
repaying the costs through their property tax bills. Larger programs in Boulder
County, Colo., and Sonoma County, Calif., have shown that administering PACE
programs at a larger scale is not only possible, but can reduce administrative
and financing costs. Across the country, more than 2,000 property owners have
now taken advantage of PACE programs.
Bigger is better. Berkeley’s PACE pilot allowed that city to
learn what components work together to create a successful and sustainable
program. The City of Berkeley
has since opted to join a county-wide PACE program that was created in the wake
of the pilot. Alameda County’s program will make PACE financing available
to thousands of Berkeley
property owners, thus helping to reduce interest rates and bringing down
administrative costs for each participating property. The program is scheduled
to launch mid-summer 2010 as part of the statewide CaliforniaFIRST program.
Programs should ensure that
applicants are “ready to go.” In an
effort to make the program easily available to all property owners,
BerkeleyFIRST had a nominal $25 application fee and did not require that owners
have “shovel ready” projects with approved bids. Nor were property owners
required to commit to going forward with projects. While nearly everyone
installed a solar system or plans to do so, many property owners financed using
alternative means.
Some attrition is unavoidable in any voluntary program like
PACE, especially as many people have faced dramatic and unexpected changes to
their financial situations in recent years. However, attrition can be managed
by adjusting application fees, requiring projects to be ready for installation,
and asking property owners to make a strong commitment to completing their
projects as part of the application process.
Include a broad range of
eligible renewable-energy and energy-efficiency projects. Installing a
photovoltaic system on a home that is poorly insulated or sealed is a bit like
pouring water into a bucket that is full of holes. The Berkeley
program recognized this challenge by requiring homeowners to meet a basic
energy-efficiency standard to be eligible for financing their solar projects,
but in order to keep the pilot program simple, it did not help property owners
to pay for these improvements.
Nearly all PACE programs that are now coming online offer
funding for projects ranging from installing energy-efficient furnaces and
water heaters to improving insulation to covering solar or wind-power systems.
When Berkeley rolls out the next phase of its PACE financing through Alameda County, it will allow such improvements to be covered as well. This policy change will improve the economics of many projects as well as provide the opportunity for whole home energy retrofits.
Berkeley stepped up to develop a
new model for financing renewables and energy efficiency. It—along with other pioneers like Babylon, N.Y., Boulder County, Colo., and
Sonoma County
and Palm Desert, Calif.—helped to pave the way to a more
energy-efficient future. The lessons learned from Berkeley’s pilot have helped tremendously in
our efforts to develop a flexible and sustainable PACE model.
Editor’s note: The
author’s for-profit company, Renewable Funding LLC, was the third-party administrator for
the BerkeleyFIRST program.
Related Links:
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