With all of these solar acronyms flying around, the renewable energy conversation can often times get a little confusing. One of the more common acronyms we continually hear is PACE financing. So what exactly is PACE?
Property Assessed Clean Energy (PACE) arrived on the scene in 2008 and continues to be a strong renewable energy development mechanism used by many local and state governments. PACE financing is a way to finance renewable energy and energy efficiency projects. One of the obstacles that many renewable energy projects face is the large upfront capital costs required to develop a project; PACE financing eliminates this barrier.
How does PACE financing work?
At the high level, a municipality would offer an assessment (kinda sorta like a loan) that would be paid back through property taxes over a specific term period. Unlike other loans, PACE programs are tied to the property rather than the owner of the property, meaning they are transferable if the property is bought or sold. PACE financing programs are most often utilized by commercial properties.
Following the completion of an project, the owner of the property repays the government assessment with their property taxes, usually over a 15 to 20 year term period.
An assessment might seem similar to a loan, and you would be correct. Both a loan and an assessment are essentially debt that is paid over the term period; however, assessments under PACE programs are not legally considered loans. This long term payback period makes it much easier for a business or homeowner to finance energy upgrades since the costs are spread over a long-term payback period.
What kinds of projects can qualify for PACE financing?
Since there isn’t one overarching PACE program, different programs will have various terms, conditions, and eligible projects. However, common project categories include ones that promote renewable energy or energy efficiency development.
For example, under the CaliforniaFirst program, projects are broken down into three major divisions: energy efficiency, renewable energy, and water efficiency. These are then broken down into categories with lists of approved measures.
Where did the first PACE financing program occur?
Not only can PACE programs save money on energy, but these programs can also work to reduce carbon emissions. In fact, this is what spurred the first program located right in the Bay Area. Beginning in 2008, the city of Berkeley, CA, developed a financing program for solar PV installations known as BerkeleyFirst. This program served as a way for the city to help achieve the Bay Area climate goals and became the model for the PACE programs we see today.
PACE has become so popular that 29 states, plus the District of Columbia, authorize the use of PACE financing.
PACE financing is also promotes economic growth and new job creation. A study done by the Department of Energy on PACE impacts in Boulder County, Colorado, found that with almost 600 homes participating and $9 Million spent on renewable energy and energy efficiency projects, roughly $7 Million would be generated in personal-income gains and about 126 jobs would be created between the county and state.
What is the largest PACE financing project in the nation?
California is not only home to one of the most successful PACE programs in the nation, but it is also home to the largest PACE project in the nation. The Hilton of Los Angeles is utilizing the LA Pace program to implement over $7 Million worth of sustainable retrofits and upgrades. According to the group, this program will save about $800,000 annually on energy and reduce annual water consumption by 2.8 Million gallons.
Clean energy and energy efficiency development has grown dramatically in past few years once companies and governments realized the environmental and financial savings that they offer are substantial. PACE is a show of innovation and a willingness to do what it takes to push the renewable energy movement forward. PACE financing is a prime example of our progress in developing a 100% clean energy world.