Rhode Island Introduces New PACE Program

by ANDREW GREENOUGH on Jul 9, 2013 • 11:20 am
New England Clean Energy Council

Before its adjournment last week, the Rhode Island General Assembly passed a bill promising affordable options for energy efficiency project financing. The Property Assessed Clean Energy (PACE) program has been implemented in 28 states and the District of Columbia, and Rhode Island state legislators believe a PACE program can promote clean energy improvements and create renewable energy incentives in the residential sector.

PACE allows local governments to support low-risk renewable energy investments by providing project loans to homeowners. Since many households cannot fund the up-front costs required in clean energy investment, the PACE model enables communities to provide the initial capital to homeowners. In the Rhode Island plan, municipalities will recoup the funding through an assessment paid over time to a third-party lender. PACE loans stay with the property if ownership changes before the repayment of the loan, ensuring stability to the system as the loans increase property value. The project costs are repaid over a period of 10 or 20 years.

 

To read the rest of this story, at the New England Clean Energy Council blog site, click here.

It looks as if this program is aimed at mainly at the residential sector, and it has some unique elements. In a related story, cited by Greenough, Alex Kuffner of the Providence Journal writes:

Twenty-eight other states and the District of Columbia have passed legislation setting up similar programs, though nearly all are targeted at commercial properties, according to PACENow, an advocacy group.

Rhode Island’s was modeled after one of the few residential programs, a scheme in Vermont. But unlike the program in that state or others elsewhere, the Rhode Island legislation does not allow repayment of energy loans through property taxes. Instead, a third-party lender will handle payments.

The legislation is enabling, meaning it is up to individual cities and towns to follow through. The program will be managed by the state Office of Energy Resources. The office will also create a loan-loss reserve using about $1 million in federal stimulus funds as a form of insurance for lenders.

Even though repayment is not made through the property tax, there is nevertheless a special assessment “much like an assessment for a new sewer or water connection,” which is presumably what makes it a PACE program. But focusing on residential, and requiring homeowners to pay a third party rather than having the payment included in the regular property tax bill (like “an assessment for a new sewer or water connection”) would seem to be hobbling the program with additional challenges from the outset, as long as the FHFA maintains its opposition to residential PACE in Washington. (See “National Groups Submit More than 38,000 Comments Supporting Residential PACE” for more on FHFA’s ruling on residential PACE and the clean energy community’s overwhelming response favoring it.)

Although there is nothing in New Jersey law preventing the inclusion of residential properties, the NJPACE program is focused exclusively commercial, industrial, and major nonprofit-owned properties. Residential properties are only involved in the case of apartment complexes or multi-use buildings with more than six residential units. This is a policy choice on the part of our program, as is the requirement for lender consent and third-party measurement and verification of savings. These are in the property owner’s and in the public interest, by ensuring that the property owner is not violating the terms of their mortgage loan agreement, and ensuring that the savings actually materialize to offset the cost of the project.

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