New York communities may soon receive federal stimulus funds to help property owners make energy efficient renovations and investments in renewable energy that can significantly lower their energy bills. And – hopefully – it’s only the beginning.
A new program called Property Assessed Clean Energy (PACE) shows promise for providing a way for more Americans to finance efficiency and renewable projects on their property and start feeling the savings in their bills. PACE is not only good for the environment, it’s also good for property owners’ checkbooks. It eliminates the need for property owners to cover the upfront costs of a retrofit, and allows owners to pay for the projects over time in increments that are smaller than the amount they will save on their energy bills, meaning property owners come out on top from the beginning!
Any day now, the Department of Energy is expected to announce the winners of competitive grants under the Retrofit Ramp-Up Program here in New York. This program allowed large and small jurisdictions across the country to compete for approximately $450 million of federal stimulus funding to help establish sustainable energy efficiency retrofit programs with innovative options to finance them. Award sizes range from $1 million to $75 million.
The following New York jurisdictions applied for awards and are awaiting the announcements:
- Under the large jurisdiction category ($40 million - $75 million funding level), New York City and the New York State Energy Research and Development Authority (NYSERDA) submitted a joint application, as did a group of Long Island towns led by Babylon. (Check out this great feature piece about Babylon’s program in this recent article from OnEarth.)
- A number of New York communities also applied under the smaller jurisdiction category ($1 million - $5 million funding level) including Binghamton, Tompkins County and a consortium of 14 northern Westchester towns, led by Bedford.
What’s telling about the applications for these awards (and what could have implications for increasing energy efficiency and renewable energy around the country) is that PACE financing featured prominently in the Retrofit Ramp-Up grant applications.
How PACE works: PACE is an innovative mechanism for financing energy efficiency building renovations (and small scale renewable energy systems.) Property owners who opt to use a PACE program to finance these projects agree to an incremental charge on their property taxes over an extended term of up to 20 years. PACE financing is an improvement on traditional lending because no upfront costs are incurred, and the property owners’ annual energy savings typically exceed the annual additional property tax assessment charge. When a homeowner moves or the property is transferred, the new owner picks up the payments – and the energy savings – where the previous owner left off.
If homeowners are able to undertake these energy efficiency renovations on a national scale, they could collectively save $21 billion by 2020, as outlined in the OnEarth article mentioned above. Most residential energy efficiency upgrades can be done in less than a day – and can cut home energy usage by up to 40 percent. Because homes contribute about 20 percent of the country’s climate emissions, these retrofits represent a significant environmental impact in additional to the financial savings homeowners will enjoy.
Last year, Vice President Biden mentioned PACE as a promising new financing mechanism in the announcement of his Recovery Through Retrofit initiative. But before municipalities in the state of New York can create PACE programs, the state must first pass legislation to enable them to do so. New York passed PACE enabling legislation in November 2009 in order to enhance the state’s competitiveness when applying for the Retrofit Ramp-Up Program grants. But because time was of the essence, the legislation limited the sources of funding to federal grants or assistance (e.g., awards under the Retrofit Ramp-Up Program). In order to maximize the number of municipalities who can take advantage of the opportunity and allow more property owners to invest in efficiency and renewable energy – the state PACE enabling legislation must be amended to incorporate additional PACE funding sources such as state funds, municipal bonds, and other private capital financing vehicles.
NRDC, NYSERDA, New York City, and members of the PACEnow Coalition are working to develop alternative structures through which NY municipalities could raise funds for PACE programs using sources aside from federal grants or assistance. One of these structures is a statewide aggregating mechanism under design by NYSERDA, which would potentially lower the cost of the projects and make it easier for jurisdictions throughout the state to opt in to PACE.
Amending the current NY law to allow additional, non-federal funding sources for PACE programs will enable New York jurisdictions who win Ramp-Up grants to leverage their federal funds with additional capital. For jurisdictions that do not win grants, amended PACE enabling legislation will bring cities, counties, towns and villages across New York state one critical step closer to achieve their long term energy goals.
Bottom line? PACE is an enormous step forward in the urgent effort to make existing buildings more energy-efficient. If the applicants in our state win the Retrofit Ramp-Up grants, it will help some New Yorkers already. In the meantime, we’ll keep working to give more New York property owners an opportunity to save on their bills with efficiency and clean energy.