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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Gov. Crist signs PACE bill

Good news for solar and other small scale renewable energy - Governor Crist signed the Property Assessed Clean Energy bill yesterday.  The issue wasn't really in doubt with significant bipartisan support from the Florida Legislature (as rare as a spotted owl nowadays) and with no notable opposition.  Repubs like it because its a "voluntary tax" - the only type they tend to support. And Dems like it because of the blue-collar job creation implications.

Everyone else likes it because it makes sense.

There's drips of news out there on this, but I found a News Release from the Florida CFO (running for Governor herself) on the matter:

CFO Sink Commends Governor Crist for Signing Energy Efficiency Legislation

Gov. Charlie Crist weighs bill to help cities go green

Gov. Crist is reviewing a bill passed by the Legislature last month that would help establish a `green corridor' PACE program among several South Florida cities. The measure would allow the communities to purchase clean energy systems for residents' homes

BY HOWARD COHEN

Going green could extend to consumers' wallets if Cutler Bay Mayor Paul Vrooman's plan passes muster with the governor.

The program Vrooman has championed, Property Assessed Clean Energy (PACE), enables property owners to borrow money to buy solar panels, wind generators, insulation or shutters for their homes with little upfront expense.

The program would establish a municipal ``green corridor,'' consisting of Cutler Bay, Palmetto Bay, Pinecrest, South Miami and Coral Gables. The five cities would lend money for a homeowner to install a proven energy-saving device -- say, $30,000 in solar panels or $3,000 for solar plumbing.
In return, the cities would place a lien on the home until the loan was paid off by the homeowner, who would be assessed a monthly fee for the loan's duration.

Link to the rest of the Miami Herald story

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Well, there's a bunch the Herald got right and a bunch they totally munched with this story.  I know there's a drive to make all stories have a local angle, and there's a good one with what the cities in the southern part of  Miami-Dade are trying to do, but it isn't everything.  PACE is an umbrella name for using tax-bill financing to get around tight credit markets and the uncertainty of investing in something that may take longer to "pay back" than the homeowner may actually live there.  With Floridians notorious for uprooting themselves every half-dozen years, it is exceedingly difficult to get the average joe-homeowner to invest in their property beyond the granite countertop or whatever Realtor friendly improvement will immediately bump resale value.  So PACE is a tool to get past that since you don't have to settle the debt like you would with a second mortgage or other "traditional" financing vehicle.

Where the Herald totally goofed was mixing the "green corridor" idea with PACE.  The former is a way for small cities like Cutler Bay and its neighbors to bring enough volunteers together for the issuance of debt to start the latter.  That's it.

The County is also pursuing this.  I think there's a report out from the Mayor in response to a Commission directive to come up with a set of options on how to pursue a PACE program for those of us living in the unincorporated area and maybe even the cities.  I'll see if I can find it and will post that here as well.

Update: here's the link to the report.  Summary: County administration thinks PACE is a great idea but they want to bring in a company to do most of the work because of they're cutting budgets and jobs and they don't have the people to manage the program.

  

 

South Florida Business Journal: Florida’s popular solar rebate program may fade into the sunset

One step forward and two steps back.  Florida was close to catching up with the rest of the States that have been competing for new green solar energy jobs through tax incentives and through a mash of local programs.  The most effective tool in Florida's kit was the creation of the solar energy rebate program four years ago.  The program provided rebates worth about half of the installed cost of solar photovoltaic systems for homes and businesses and a token $500 rebate for solar thermal heating systems.

But, as usual, the Florida Legislature wouldn't let a good program last, and they neglected to put any funds into the program this year, leaving thousands of Floridians who already installed systems and awaiting rebates in the lurch.  The program would have probably died last year if the Governor and the Florida Energy Office hadn't squirreled away $10 million in Federal stimulus funds for the program.

What's really needed is a public benefits fund - a trust fund of sorts (protected better than the State operated trust fund) - that would be used to fund PV and solar thermal rebates for residents and small business installations.  It could fund testing and permit streamlining efforts and more.  Instead we have a push for offshore oil drilling only on hold long enough for our collective memories of the Deepwater Horizon to fade, massive subsidies for nuclear power, and legislators inserting language calling synthetic gas made from coal ash "renewable."

The following piece about the loss of the rebate program and the budding businesses that will probably be crushed by its demise appeared in the South Florida Business Journal - and NOWHERE ELSE.  Thanks to our local papers for missing this story entirely.  I guess they were too busy running "Earth Day" advertising from FPL as "news."

After four years of successfully spurring investment in solar energy, Florida’s solar rebate program is facing its final sunset.
The popular program, which paid homeowners up to $20,000 and businesses up to $100,000 for installing electricity-producing solar photovoltaic systems, is another victim of Florida’s budget crunch.

Read the rest at South Florida Business Journal

Tax bill financing for efficiency and renewables passes Fla Legislature

A bill making it OK for local government to set up tax bill financing of small scale solar, wind, efficiency, and even hurricane hardening, passed the Legislature on the last day of the session.  The Senate took up HB 7179 passed earlier in the week in the House and passed the bill to allow local governments to create a volunteer program for homeowners and businesses to fund energy efficiency and renewable energy improvements.

The concept, first started in Berkeley California, is pretty simple.  Most people cannot make a huge investment in major renewable energy systems in their homes and businesses (or major efficiency investments for that matter) because of the heavy up-front cost.  They get trapped into the "payback period" concept where you figure out how many years it will take to recover your initial investment.  A better way of evaluating these improvements is through a "return on investment" model.  Property Assessed Clean Energy programs (PACE for short) allows a ROI model instead of payback.  So would a home equity loan, but here's the advantage with PACE - the loan rides with the property, not the owner.  Since these are often substantial permanent investments into the structure that provide benefits that stay with the property, it makes sense that the repayment of the loan stay with the property that is receiving the benefit.  With bank lending at a near standstill, this type of program will give local governments a tool to really boost local investments and job creation.  And property owners will have a new tool to help them make that final commitment to serous energy improvements.

Finally, a decent piece of energy legislation out of Florida.