Homeowners: PACE finances green energy upgrades

A California home with solar panels installed on the roof. (Photo: orachonphoto, via Shutterstock)

A point of pride for the people of California is our state’s leadership in the clean energy economy. Over the past decade, Californians have had access to a great tool that puts homeowners front and center in the fight against climate change. This tool, Property Assessed Clean Energy (PACE), enables homeowners to conveniently finance renewable energy, energy and water efficiency, and earthquake safety upgrades to their homes.

PACE works like this: property owners decide to voluntarily place an assessment against their house to fund, for example, an energy efficient AC, space or water heater, or solar panels. The assessment is then collected as a line item on the homeowner’s local property taxes. The homeowner gets a fixed, usually single-digit interest rate, and can spread payments out over 5, 10, 15, or 20 plus years.  This financing structure brings payments into a more affordable range than loans or credit cards.

California PACE-financed projects are on track to save more than 10 billion gallons of water and reduce carbon dioxide emissions by over 4 metric tons.

PACE financing was first launched as a pilot program in my hometown, Berkeley, in 2007 and then relaunched in 2008 throughout California administered through partnerships between PACE financers and local government. More than 30 other states have since followed suit, passing their own PACE-enabling legislation.

Since its inception, PACE has been responsible for huge gains in energy efficiency, solar installations and safety improvements in California’s housing and commercial building stock, yet like any successful program it’s had hiccups. A few contractors that advertised PACE financing inaccurately promoted it as a ‘free government program.’ Some homeowners did not fully understand their obligations, not realizing that their biannual property tax bill would increase due to a PACE assessment, and if they missed payments didn’t understand they might risk losing their home.

To renew confidence in this California grown program, my staff and I met with consumer advocacy groups, the PACE financing industry, mortgage experts and other stakeholders to develop comprehensive legislation that would add safeguards and strengthen PACE as a better and more transparent financing tool.

The result: two companion bills, SB 242 and AB 1284, authored by myself and Assemblymember Matt Dababneh, continue California’s leadership and revitalize PACE with strong consumer protections. Now signed into law by Governor Brown, these bills strengthen PACE by requiring

–Income verification and underwriting based on the property owner’s ability to repay.

–Recorded, live confirmation call between the PACE provider and homeowner, similar to the federal Know-Before-You-Owe mortgage disclosure already required by California law.

–A three-day right to cancel.

–New standards on how a contractor can market the program.

–California Department of Business Oversight to serve as the watchdog for consumers and PACE providers.

Importantly, AB 1284 recognizes the unique, tax-based structure of PACE financing – and regulates it accordingly.

As a champion of PACE, I know firsthand that it is unmatched in providing homeowners green financing for improvements such as energy-efficient heating, ventilation and air conditioning systems, insulation, water pumps and lighting. California PACE-financed projects are on track to save more than 10 billion gallons of water and reduce carbon dioxide emissions by over 4 metric tons. As PACE continues to grow, the benefits it can yield are substantial.

It is no surprise that California Energy Commissioner David Hochschild called PACE the single most important tool for promoting and financing energy and water upgrades.

With our growing understanding of the urgency to act to address climate change it is vital that a green energy financing program, like PACE, remain accessible and affordable. By enacting SB 242 and AB 1284 California has renewed the promise of PACE and enabled it to expand responsibly. PACE states across the country can and should act similarly.

Ed’s Note: State Sen. Nancy Skinner, D-Berkeley, represents the 9th Senate District in the East Bay. She previously served in the state Assembly from 2008-2014 and on the Berkeley City Council from 1984-1992. From 2015-2016, she served as a Senior Policy Fellow at UC Davis focusing on energy, efficiency, and transportation.

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