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.