New legislation introduced in the U.S. House would support and expand Property Assessed Clean Energy (PACE) Bond programs (H.R.3836). A PACE bond is a small municipal bond where the proceeds are loaned to commercial and residential property owners to finance energy retrofits and who then repay their loans over 20 years via an annual assessment on their property tax bill.
The legislation, introduced by Rep. Steve Israel (D-N.Y.), would change the Department of Energy indirect loan guarantee program to provide 100% guarantees for PACE bond programs.
“PACE bonds are an innovative way to help property owners across America ‘go green.’ With a little help to finance energy efficient retrofits, property owners reap an immediate savings on their monthly energy bills,” said Rep. Israel. “My legislation will help communities initiate their own PACE bond programs by providing 100% loan guarantees through the Department of Energy.”
According to PACE Now, an independent coalition of PACE bond supporters, it is estimated that the potential for PACE bonds could exceed $500 billion. For most energy retrofit projects, property owners can expect to see an immediate energy savings of 20% – 40%. PACE bonds finance energy efficiency upgrades, such as double insulated windows, as well as the installation of clean energy technologies, such as solar panels or geothermal heat pumps. On October 19, Vice President Joe Biden and Secretary of Energy Steven Chu discussed PACE bonds as part of their “Recovery through Retrofit” plan.
PACE bond programs are endorsed by Alliance to Save Energy, Climate Communities, National Association of Real Estate Investment Trusts (NAREIT), Natural Resources Defense Council (NRDC), Real Estate Roundtable, Solar Energy Industry Association (SEIA), Stewards for Affordable Housing for the Future (SAHF), California Energy Commission, the American Institute of Architects and Polyiso Insulation Manufacturers Association (PIMA).
There are more 150 energy efficiency financing programs in the United States, but many have limitations that include short repayment periods, high interest rates, credit requirements that do not account for energy savings, a lack of options for recent homebuyers and limited availability for households most in need. PACE bonds have several advantages for participants over other financing options, including a longer repayment period (up to 20 years), a lien attached to the property–not the owner, reduced transaction costs, tax benefits and low interest rates.
Rep. Israel serves on the House Appropriations Subcommittee on Energy and Water. He is the co-chairman of the House Sustainable Energy and Environment Coalition.
PACE Bonds are a funding mechanism that grew out of an idea developed in Berkeley, California to fund residential solar pwer systems.
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