Property-Assessed Clean Energy programs, commonly referred to as PACE, are poised for major growth as more municipalities consider legislation that would allow homeowners this new way to pay for energy efficient retrofits.

Here’s how it works. A local government creates an improvement district, then a bond, secured by real property within the district, is issued. The proceeds are lent directly to participating homeowners to be used for renewable energy and energy efficiency projects. Projects may include solar panel installations, energy efficient water heater and furnace installations and improvements in insulation, ventilation, windows and doors, to name a few.. Some municipalities also cover water saving upgrades.

Property owners pay next to nothing upfront. Instead, they repay the debt on the bond in fixed payments as part of their property tax bill. The debt is tied to the property, not the homeowner, so it can be passed along to the next homeowner, who also receives the benefit of lower utility costs, which the retrofits made possible.

PACE programs significantly reduce the hesitance of homeowners who might be interested in retrofits but worry that the upfront costs will be too high. And since the payments are tied to the property, PACE can overcome homeowner concerns that they won’t reside in the home long enough to recoup the costs of energy efficient upgrades. Whoever lives in the home will both pay toward the retrofits and reap the rewards in saved energy costs. The terms of the loans usually run from 10 to 20 years.

The town of Babylon, N.Y. has had a program in place since 2008. Its Web site touts that consumers will see money savings immediately, because in most cases utility bill savings exceed the additional tax assessment.

As of right now, 18 states have passed legislation allowing such programs, and according to Green Inc., another 12 are considering similar legislation.

With the purchase of so many home improvement products associated with these programs, it is imperative that building professionals be aware of where they are popping up and what kinds of products will be covered under their auspices. And with water shortages and water rights issues top of mind in communities all over the country, it seems only logical that new programs should include water-saving retrofits as well as energy efficient ones.
It’s essential that the building products community be involved in crafting new PACE programs nationwide to ensure that the right products are covered under the law and that homeowners are aware of the opportunities available to them as well as the benefits of involvement.
For more information on PACE programs and where they are being implemented, check out these links.