Feds screw up local innovation - PACE on hold throughout the country

I've tried to keep this blog confined to city, county, and state solar news, but I can't keep quiet about the infuriating stupidity coming out of Washington DC these days.

The mortgage Goliath Fannie Mae and Freddie Mac have taken a very serious swipe at the David of solar financing - PACE.  The newly hatched plan by local governments to use their taxing authority to come up with clever ways to break through the "first cost" barrier for energy efficiency and small scale solar, wind, geo, etc. was dealt a huge blow back in March when Fannie/Freddie announced that they wouldn't buy any mortgage with a PACE lien on it.

This is an extraordinary over-reach into the taxing authority of local governments.  Basically, the mortgage giants are determining which government taxes they believe are worthy and which aren't.  It really isn't that simple, but it is potentially precedent setting.  Fannie/Freddie don't like this tax lien "cutting in line" in front of the mortgage repayment in case of default.  That would be fine if PACE were truly a traditional loan instrument, but it isn't.  It behaves like a taxing district like a storm-water, garbage collection or street lighting improvement district.  The improvement is passed along with the property instead of having to be paid off upon sale of the property.

Having Fannie/Freddie dis PACE like this had an immediate chilling effect on these programs everywhere.  Boulder backed out of their next bond issue and returned deposits to people, San Francisco just launched and then aborted their PACE program.

Other PACE programs in the works, including local governments here have been waiting for the promised "clarification" from the mortgage backer's regulatory parent - Federal Housing Finance Authority (FHFA) - but were shocked when the agency made a bigger mess of things with their letter.

Most people in the business see the FHFA letter as the final blow to an administrative fix and now believe the only way to fix this once and for all is to seek a legislative remedy - Congress.  That should be quick and easy right?

The Department of Energy - a backer and early proponent of the widespread implementation of PACE - now is telling block grant recipients that were using those funds for PACE start-up to rethink that strategy.

All is not lost though.  The PACE concept is readily accepted by both political parties, so it actually has a shot in Congress unless it gets stuck to a more controversial bill.  And FHFA doesn't touch the commercial market, so PACE could still be used to help improve office parks, industrial buildings and other non-residential properties.  This isn't the major focus of PACE, but could keep it alive long enough to show that it is a successful model for the rapid deployment of efficiency and small scale renewables.

Enough ranting for now - next time I hope to have information about local plans to deal with this mess.

Related articles:

New York Times, July 3rd -Loan Giants Opt to Block Energy Programs

Grist, July 6th -Fannie and Freddie to clean-energy program: Drop dead
Environmental Leader, July 7th - Fannie, Freddie Kill PACE Program

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