Propert Assessed Clean Energy Financing
Current PACE Financing = Business as Usual
Local retrofit program reveals the limitations of tax-assessed financing for energy improvements
Property Assessed Clean Energy (PACE) financing – which allows home and business owners to pay for energy improvements using low-interest loans linked to their property tax bills – has been touted as the secret to unleashing consumer demand for whole-house efficiency retrofits. But an analysis of initial program data from one California county offers compelling evidence that financing alone is not enough to create a viable market for Home Performance retrofitting.
Efficiency First recently crunched the numbers for a progressive energy retrofit program in Sonoma County just north of San Francisco – one of the first local governments to embrace tax-assessed financing for both solar and efficiency retrofits under the terms of California Assembly Bill 811, which authorizes voluntary creation of PACE financing districts statewide. The program began accepting AB 811 loan applications in March 2009.
While the Sonoma program was explicitly tasked with boosting adoption rates for multi-measure energy improvements, records of actual loan applications from the first 17 weeks of the program show that borrowers overwhelmingly requested funds for big-ticket single-measure jobs – not the kind of cost-effective whole-house retrofits that our market needs. About 40 percent of the applications were single-measure proposals for photovoltaic installations alone, and only about 9 cents of every dollar requested was for anything other than PV, replacement windows or cool roof projects. In other words, while Sonoma County home and business owners are benefiting from low-cost financing, the kinds of work they are commissioning is really just business as usual.
Sonoma County’s real-life experience with tax-assessed financing shows that in order to achieve maximum benefit from such programs, a fundamental shift is needed in the way PACE financing is implemented. Low-interests lending must be bolstered by well-defined performance standards for the industry, and by performance-based rather than product- or technology-based incentives.
###
Copyright © 2009 Efficiency First ·
Powered by
Have local performance contractors in Sonoma been marketing the financing options to clients? I gather local solar installers have been aggressive in their marketing of AB 811, as rebates and financing tools have always been integral to sales for the PV industry.
Another thing to consider….has the municipality been promoting retrofits?
This data perhaps says more about marketing/ outreach effectiveness, than the effectiveness of PACE financing.
Marketing is crucial, but the whole-house approach to energy savings is a very hard-sell. We are used to being sold “things”. The public gravitates towards pv panels and other tangible measures which are a lot “sexier” than caulk and insulation. I had one audit client who whined that $4,500 was too much for an energy upgrade then went out and bought $50,000 worth of pv. It’s about perceived value. I’d like to see a national, or at least regional, marketing campaign that explains the benefits of audits and whole-house retrofits. If it’s on TV, then maybe, the idea will begin to seep into the public consciousness.
Mary you describe the monster in the corner (is that the saying?) of our industry- the hard-sell of our work compared to PV and sometimes windows.
The PACE financing structure provides an opportunity for municipalities to get behind the most cost effective efficiency upgrades. The marketing barrier that we all face can be alleviated with PACE financing as a tool to sell the job, but more importantly, to have an additional ‘neutral’ party- the City- advocating for home performance services.
Here in the town of Babylon who has created their own financing, business is up and in fact is starting to see a surge. Yes it is still a hard sell, but the financing makes it so much more easier. We have a 70%-80% closing rate and our average cost including replacement of the heating and DHW systems is around $12000. But this didn’t happen overnight like we thought it would. It took some marketing to get the word out. We now have to adjoining towns that are looking to replicate it.
I’m all for the free-market over government mandates in many cases, but is it unreasonable for entities providing the PACE financing – especially when it’s funded by or backed with tax dollars – to mandate that the “whole house approach” be adopted, in order to ensure measures are prioritized in a logical order? That seems to be an acceptable practice for lenders offering EEMs, for example; those projects must demonstrate cost:savings in order to obtain the financing, which naturally pushes people toward EE measures first.