California cities and counties set the PACE in financing energy efficiency projects

Amongst the barriers of implementing energy efficiency solutions, project financing often tops the list. It’s a decades old paradox: Most (smart) energy efficiency projects generate sufficient energy savings (cash flow) to pay for the facility improvements over time, but property owners and tenants often lack the up-front capital to finance projects. What to do?

Fortunately, a number of new and pragmatic energy efficiency project financing mechanisms are emerging. And, not too soon, particularly given the tremendous waste (energy and money in inefficient buildings) and lucrative incentives (federal, state, local and utility incentives). Given our focus at Octus Energy to rapidly implement smart energy solutions, we’re acutely focused on what’s available and what’s in the pipe.

Property Accessed Clean Energy (PACE) financing is an innovative solution that might be the – or, at least, an -- answer to mitigate the financing migraine. This financing program was originally developed by Berkeley-based Renewable Funding, when they partnered up with the City of Berkeley to create BerkeleyFIRST. PACE programs, according to Renewable Funding, “enable local governments to finance clean energy and energy efficiency projects on private property, including residential, commercial and industrial properties.”

Here’s how it works:

1. Local government creates an improvement district;
2. A bond, secured by property within the district, is issued;
3. Bond proceeds are used to fund renewable energy and energy efficiency projects; and,
4. Property owners repay the debt service in fixed payments as part of their property tax bill over a period of up to 20 years.

Simple, clean and, hopefully, catalytic. Following Berkeley’s lead, other California cities and counties have sagely developed analogous financing programs, including:

• Palm Desert’s Energy Independence Program
  
• Sonoma County’s Energy Independence Program
  
• San Francisco’s GreenFinanceSF
  
• Placer County’s mPower Placer

CaliforniaFIRST, established by the California Statewide Communities Development Authority (CSCDA) with a program team that includes Renewable Funding as the program administrator and Royal Bank of Canada, is primed to be a statewide PACE. The pilot phase of the program includes 14 counties and more than 120 cities throughout California. Utilizing ARRA stimulus funds, the California Energy Commission awarded CaliforniaFIRST $16.5 million to pilot the programs as part of the State Energy Program, with Sacramento County as the lead grant contractor.

Paradox solved? At Octus, we’re bullish. As the economics of energy efficiency continue to improve with the advent of more efficacious technologies, smart financing solutions – presuming common sense and economic theory prevail – will hopefully proliferate.