PACE Programs: Enabling Investments in Clean Energy

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PACE Programs Enabling Investments in Clean
Energy

• Merrian Fuller
• Lawrence Berkeley National Laboratory (LBNL)
• November 18, 2009

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Why financing is a hot topic in the U.S.

• Savings Potential

• Investment Needed

If 20 of EE Recovery Act funds used for
financing 1.26B 0.42 of 300
Billion Private capital is required

• Significant commitments at the federal, state and
  local levels
• gt11 Billion in Recovery Act funds for EE
• Ramp up of rate payer funding for EE
• Federal Recovery through Retrofit plan
• Many state and local commitments
• Pending climate energy legislation

• 240 BILLION spent on residential energy in 2008
• Assume most homes can save 20-30
• Savings potential of 48 to 72 BILLION every
  year

• Assume 30 million homes (27) get retrofits in
  the next 10 years
• 10,000 average per home
• 300 BILLION investment required
• (over 1 TRILLION for all homes)

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Employment Impacts
8 from direct installation

• Assume 12 jobs per 1M investment

4 from manufacturing of parts materials
360,000 jobs sustained over 10 years
Retrofitting 30 million homes
3.6 million person-years of employment


Fewer jobs per spent for commercial projects
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Barriers to Energy Efficiency

• Not worth the effort (i.e. transaction costs)
• Lack of information
• Uncertainty about the energy savings
• Split incentives
• High upfront costs
• Others

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If you had to buy 20 years of minutes in advance,
would you have a cell phone?

• Ciscos PGE Bill
• 129/ month
• 1548/ year
• 30,960/ 20 years

• Ciscos iPhone Bill
• 119/ month
• 1428/ year
• 28,560/ 20 years

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EE Residential Financing Case Studies
On-Bill Loan
Conventional

• AFCs Keystone Home Energy Loan (PA)
• City of Cambridge
• Efficiency Vermont
• KEMAs California EE Loan Fund (terminated)
• MN Center for Energy and Environment
• NYSERDA's Energy mart Loan Fund
• NYSERDA's HPwES Loan Program
• Nebraska Energy Office
• Sacramento Municipal Utility District (SMUD)
• Vermont Gas Systems
• Viewtech Financial Services (CA)

• BC Hydro (terminated)
• First Electric Cooperative (AR)
• Manitoba Hydro
• NW Natural Gas (terminated) (Portland)

On-Bill Tariff

• Maui Electric Company
• Midwest Energy (KS)
• New Hampshire Electric Coop (terminated)

Property-Assessed Clean Energy
Paper available uc-ciee.org/energyeff/documents/
resfinancing.pdf

• City of Berkeley

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On-Bill Loan
Upfront
Repaid on utility bill

• Identifies work contractor based on utility
  criteria
• Repays financing on utility bill
• Remaining balance must be repaid when the tenant
  moves

• Creates approval process and project criteria
• Provides upfront capital

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On-Bill Tariff
Upfront
Repaid on utility bill

• Identifies work contractor based on utility
  criteria
• Repays financing on utility bill
• Repayment obligation transfers with tenancy

• Creates approval process and project criteria
• Provides upfront capital
• Attaches repayment obligation to the meter

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Residential On-Bill Repayment
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Issues with On-Bill Repayment

• Changing billing system appears to be difficult
  for some utilities
• Repayment allocation (i.e., who gets paid first)
  is an issue when customers partially pay their
  bills
• Using On-Bill Repayment for improvements that
  save fuels not included on the bill may be
  confusing (i.e. if bill is electricity-only)
• The commitment of the utility to the On-Bill
  Repayment program is critical

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Property-Assessed Clean Energy (PACE)
Upfront
Repaid on tax bill

• Identifies work chooses contractor
• Repays financing as a line item on the property
  tax bill
• Repayment obligation transfers with ownership

• Creates financing district approval process
• Provides upfront capital
• Attaches repayment obligation to the building

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Benefits to Cities and Counties

• Low risk financing tool for cities and counties
• Helps cities and counties meet their climate and
  energy goals
• Program costs can be paid out of the financing
• No liability or other exposure to a citys
  general fund
• Financing mechanism well known to local
  governments and bond market
• Promotes the green economy, creates green jobs

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PACE Programs
Enabling legislation now exists in 15 states.
PACE How To Guide other PACE resources http//r
ael.berkeley.edu/financing
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Legal Authority
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Boulder County

• Rounds one and two
• About 10 million in projects
• Vendors indicate significant impact/multiplier
  Average loan size 17-18k, well above estimate of
  10k
• 20-25 under 10,000
• EE--over half of total dollars
• PV, windows, and insulation are top three
  measures in dollars
• Income Qualified Loans
• 1/3 of dollars
• About half of loans

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Sonoma County
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Town of Babylon
Misc 2
Windows 2
Wall insulation 8
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Issues with PACE

• Often administratively difficult to set up,
  especially for limited local government staff
• Small territory (city or county) limits scale
• Still working on easy access to capital through
  the municipal bond market
• Unclear how the assessment will affect property
  values

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Characteristics of Strong Programs

• Credit enhancement is critical for
• Giving access to credit for those who need it
• Increasing the use of private capital
• Successful programs often engage networks
  of contractors
• Programs must carefully manage costs scale
  is important for viability
• Make it easy for both customers AND contractors
• Get support from the organizations and leaders
  the customer already trusts use more dynamic,
  appealing messages

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Resources

• Merrian Fuller mcfuller_at_lbl.gov
• DOE Resource Portal for Financing Programs
• http//www.eecbg.energy.gov/solutioncenter/financ
  ialproducts/default.html
• How to Guide for PACE Programs
• http//rael.berkeley.edu/files/berkeleysolar/HowT
  o.pdf
• Federal Governments Policy Framework for PACE
  Financing Programs http//www.whitehouse.gov/asset
  s/documents/PACE_Principles.pdf
• State legal authority for PACE programs is
  tracked by the DSIRE database http//www.dsireusa.
  org/incentives/index.cfm?EE1RE1SPV0ST0sear
  chtypePTFAuthsh1
• Websites of the programs featured in this
  webinar
• Berkeley - http//www.berkeleyfirst.renewfund.com
  
• Boulder County - http//www.bouldercounty.org/bocc
  /cslp/
• Babylon - http//ligreenhomes.com ,
  www.TheBabylonProject.org
• Sonoma County - http//www.sonomacountyenergy.org/
  energy-improvements.php

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Contact Info

• Merrian Fuller
• Lawrence Berkeley National Laboratory
• Email MCFuller_at_lbl.gov
• Phone [phone]