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Keeping Up the PACE

Last month, in what New York legislators called an "extraordinary" session, lawmakers voted to authorize municipal finance programs for clean energy improvements on homes and businesses. Called PACE (Property Assessed Clean Energy) financing, these popular municipal programs allow homeowners to go solar and make efficiency improvements without any upfront cost. Just how popular is PACE? There was not one single "no" vote in either house. New York's PACE legislation passed by a resounding 192 – 0.

And New York is not alone.  Fifteen other states have passed laws to allow PACE programs.  For those keeping track that’s: California, Colorado, Illinois, Louisiana, Maryland, Nevada, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Texas, Vermont, Virginia and Wisconsin. Municipalities in Hawaii and Florida can implement PACE programs without any special enabling legislation at the state level. So why is PACE suddenly the most popular flavor of state renewable energy policy?

PACE programs effectively remove the single greatest barrier to energy efficiency and solar adoption — upfront cost. It works like this: Cities set up special clean energy finance districts capable of issuing low-interest bonds.  Participating property owners can then opt-in to use the bond money to pay for renewable energy and energy efficiency improvements. They then pay the loan back through a long-term assessment on their property taxes.

This arrangement spreads the cost of a new solar system out across a 20-year payment plan that is easily transferable (along with those energy saving benefits) to the next owner if the property changes hands — a particular benefit to solar that can have longer payback periods. Best of all, the cost of that assessment is typically less than the electricity bill savings generated by the new solar system, so property owners see savings from day one.

Local governments understand the promise of PACE as well.  First, and perhaps most importantly in these volatile economic times, the bond-backed PACE model presents little to no impact on the city’s general fund. Or the state’s for that matter (thus why it’s proven such a popular policy for state legislatures this year).

In short, it’s a fiscally-responsible way for government to support local clean energy job growth, make climate change progress, and help lower energy bills in one fell swoop. Plus it’s based on a known and trusted municipal project finance structure, making PACE programs a relatively palatable new program for cities to implement.

Look at Austin, Texas.  Earlier this fall, Austin Energy, which had consistently provided one of the strongest rebates in the nation for customer-owned solar, announced that budget constraints were necessitating changes to the popular program. PACE looked to be offering the forward-thinking municipal utility one very viable alternative option. In October, the Austin City Council unanimously passed a resolution to get the ball rolling on a PACE style program for its residents. The plan, called Project Energize, would serve as an exciting supplement to the rebate program.

The White House also recently announced its support for PACE as a job creation and economic development tool. In addition to developing best practice guidelines and consumer protections, the federal government will allow cities to apply for a portion of $454 Million in Recovery Act funds to help launch a PACE program. With the deadline to apply for those PACE dollars coming up on December 14, New York’s late night legislative decision came through for Empire State municipalities in the nick of time.

Economic crisis is forcing leaders at all levels of government to make difficult decisions between very worthy programs: healthcare, education, public safety and the transition to a new energy economy. We can help them make the right choices, by offering easier ones. Through PACE, cities empower homeowners to invest private dollars in building a local clean energy market. At a time when budgets are constrained even beyond their normal parameters, that is music to all of our ears.

Click here for additional resources including a toolkit for helping your city develop a PACE program.

Annie Carmichael is Federal Policy Director with Vote Solar. Annie spearheads the organization’s federal efforts as well as a number of state initiatives. Shaun Chapman is East Coast Campaigns Director at Vote Solar. Based in New York, Shaun leads the organization’s efforts on the east coast.

Vote Solar is a non-profit grassroots organization working to fight climate change and foster economic opportunity by bringing solar energy into the mainstream. Since 2002 Vote Solar has engaged in state, local and federal advocacy campaigns to remove regulatory barriers and implement the key policies needed to bring solar to scale.

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