Reducing energy use by enhancing energy efficiency has long been viewed as “low-hanging fruit” in the drive to lower energy bills, boost economic productivity and reduce greenhouse gas emissions. Home and property owners, agricultural, commercial and industrial businesses, and energy sector players have been looking for ways to finance and make energy-efficiency upgrades and retrofits more affordable and accessible.
The Chula Vista Public Works solar project financed by the Ygrene Energy Fund.
Recognizing the multiple benefits to be had, local, state and the federal governments have introduced energy efficiency incentive and support programs. In 2008 Berkeley, California launched the nation’s first municipal PACE (Property Assessed Clean Energy) program, where property owners repay loans for energy efficiency upgrades and retrofits through property taxes over periods as long as 20 years. Solar photovoltaic (PV) installations are among the most popular kinds of energy-efficiency projects financed through municipal PACE programs.
On January 21, Ygrene Energy Fund and the newly named Golden State Finance Authority (GSFA) launched a program that the partners say will not only make “zero-down” PACE financing available throughout California, but will enable home and business owners to finance energy efficiency, as well as water conservation upgrades and retrofits much easier and faster than ever before.
Property-assessed Clean Energy (PACE) Finance Programs
PACE programs got off to a flying start following their introduction in Berkeley, and spread out and took root in municipalities in California and other U.S. states. Ongoing disputes with first mortgage lenders — most importantly the Federal Housing Finance Agency (FHFA), Fannie Mae (FNMA) and Freddie Mac (FHLMC) — subsequently stalled PACE financing and threatened to put an end to PACE programs.
Taking concrete steps to address mortgage lenders’ concerns, California revived PACE financing and programs in March 2014 by establishing the $10 million PACE Loss Reserve Program. Though that hasn’t resolved the issue completely, it was enough to revive PACE financing in California.
Ygrene and GSFA’s partnership is the latest indication that PACE programs are not only surviving, but have lots of room to grow.
Making Energy Efficiency More Affordable and Accessible
Leveraging the Ygrene Works PACE financing platform and GSFA’s experience working with municipal governments, California “cities and counties can now approve Ygrene Works in a single step, making this ground-breaking financing option effortlessly available for energy efficiency and water conservation upgrades to homes and businesses,” the partners stated in a press release.
Some 3.3 million California residents and businesses of all stripes have accessed PACE financing for energy efficiency upgrades and retrofits through Ygrene Works. That includes the installation of 3.5 megawatts (MW) of solar PV capacity.
Ygrene expects that number to swell over the course of 2015, according to Ygrene Energy Fund VP of district development and government affairs Michael Lemyre.
“There has been tremendous interest in PACE financing across the spectrum, and we’ve seen PACE programs really take off in California,” Lemyre highlighted.
Around $140 million in energy-efficiency upgrades and retrofits have been approved through Ygrene Works to date. Most of them were processed in under 30 minutes via Ygrene Works’ call center, Lemyre noted.
Energy and Water Savings, Green Jobs and Carbon Reductions
Financing all those energy efficiency projects has resulted in reduced carbon and greenhouse gas emissions. So far, projects financed by Ygrene Works have resulted in approximately 4,500 metric tons of CO2 emissions reductions. Emissions reductions over the projects’ lives are projected to total 81,000 metric tons.
In addition, the energy efficiency upgrades and retrofits financed via the Ygrene Works PACE program have created or sustained over 500 jobs.
“And since the projects pay for themselves over their useful lives, that results in a minimum of $140 million in energy and/or water bill savings to date over two years of project funding,” Lemyre told REW.
A mix of professional investment organizations are providing the capital Ygrene is using to finance PACE projects. These include hedge and private equity funds, private investment pools, banks, insurance companies and pension fund managers.
A distinguishing feature of the GSFA-Ygrene Works PACE program is that it enables participants to apply for small, single energy-efficiency upgrades and retrofits.
Doing away with stipulations requiring home and business owners to have whole-home or business energy assessments done, as well as others requiring multiple projects to be undertaken, makes having energy-efficiency upgrades and retrofit projects much more affordable, Lemyre and Caroline Holmes, GSFA’s marketing director, pointed out.
As a state Joint Powers Authority, GSFA has provided affordable housing in California for more than 20 years. Formerly known as the California Home Finance Authority, GSFA expanded into the energy efficiency space in 2010. Since that time, GSFA has assisted some 1,275 California homeowners in financing and carrying out energy efficiency projects. “We are hoping this partnership will make such financing that much more accessible and affordable to homeowners. We see a lot more potential to expand [in the energy efficiency space],” said Holmes.
As a Joint Powers Authority, GSFA represents and provides affordable home ownership programs to 33 California member counties, 20 associate member counties and two additional associate member cities.
To date — prior to the launch of the PACE program in partnership with Ygrene — GSFA has financed $30 million of energy efficiency projects. Project size has averaged $23,000 and resulted in avoiding approximately 97 million BTUs of energy per project, Holmes said. Spanning 44 California counties, GSFA-financed energy efficiency projects have also led to the creation or retention of 300 jobs.
Economy of Scale
Ygrene Works, for its part, is up and running in ten California counties and six cities. Partnering with GSFA should enable Ygrene to scale the program up state-wide in short order, according to Lemyre.
Approaching local government authorities on its own and convincing them of the merits and comparative advantages of Ygrene Works one by one is a time-consuming and costly process, he pointed out.
“Through our partnership with GSFA, county and municipal authorities can enact a resolution and activate the program with minimal to no staff time and no ongoing expenditures. It offers economy-of-scale on the municipal side of our partnership and lowers the cost of innovation, and it provides a way for local government to launch a program that benefits constituents and property owners,” said Lemyre. “While launching PACE programs in the 40 or so California counties that don’t have one will take some time, perhaps it can take as little as two months. We think that many jurisdictions will participate in 2015.”