What Happened?
More than 100 cities in California and 14 counties have united to launch the nation’s largest “PACE” program, which will provide innovative financing for commercial building clean energy and water upgrades.
So What?
The joint effort could be a model for other municipalities, and is worthy of review.
What is PACE?
PACE stands for Property Assessed Clean Energy. These programs are financing mechanisms used to fund energy improvements, like rooftop solar panels.
Under most PACE programs, cities or towns offer a bond to investors; the money raised is then loaned to businesses that retrofit or install energy improvement projects. The loans are repaid over a specific time period, usually through increased property tax assessments. Pioneered as a residential initiative, PACE programs have taken off in the commercial space.
What About This Initiative?
The “CaliforniaFIRST” initiative functions like a standard PACE program: commercial property owners can use municipal bonds to finance clean energy upgrades. That could include energy efficiency, water efficiency, or renewable energy initiatives. The owners would repay the loans through a special assessment on their annual property tax bill.
This is ostensibly a public-private partnership, as private capital will be used to supply the upfront funding for the work. As a result, local government budgets will not be impacted.
A press release stated that the CaliforniaFIRST initiative is “the first multi-jurisdictional program of its kind to be essentially statewide in scale.”
The Catalyst
According to recent studies, “financing” is considered the major barrier to pursuing energy efficiency projects. That barrier has prevented property owners from making upgrades that could save billions; the U.S. Department of Energy estimates that cost-effective upgrades could save more than $100 billion, and reduce energy use by 25 percent.
PACE programs aim to solve that financing problem. And as a result, use of PACE programs is on the rise; one research firm estimates that investment in PACE financing for commercial buildings will total $2.5 billion by 2015.
“Building owners are very interested in saving money and energy,” says Johnson Controls VP Beau Engman. “What has been lacking up until now was affordable upfront capital to do the work. We see PACE as a promising means of financing deep commercial energy efficiency upgrades.”
Action Items
A great guide for cities is available, with details on getting started, defining eligible projects, and more. The guide, published by the University of California at Berkeley, includes five case studies and helpful information on both legal and financial matters.
The Department of Energy created a very informative (though lengthy, at 60 pages) PowerPoint presentation, which was delivered as part of a Webinar. A shorter primer is also available, as is a more detailed information resource on PACE programs.
A more detailed status update on PACE programs around the country is also available, with examples and data.
Contacts
The CaliforniaFIRST program is administered by Renewable Funding, which manages PACE programs in Maryland, Oregon, Colorado, Louisiana, and Washington. If you’re interested in talking to them, try CEO Cisco DeVries, or call them at (510) 451-7900.
Clean Fund of San Rafael, California, is another PACE program provider. They also can be reached via email or at (415) 256-8000.
Most major financial services firms also have PACE program offerings now; contact your bank or your city’s financial advisors to see what is available.
If you have experience with—or insights on—PACE programs, we’d love to hear from you; you can email us with your thoughts or article ideas. Also, consider joining us for our next Regional Conference on municipal revenue and savings, which will address a number of issues related to public-private partnerships.