Keeping PACE: Increasing consumer protections is strengthening a clean energy financing program for homeowners.

Author:Durkay, Jocelyn

California is the founder of PACE and my own hometown, Berkeley, was where it was initiated," says Senator Nancy Skinner (D), referring to the Property Assessed Clean Energy financing program, launched in 2008, which allows homeowners to pay for energy efficiency, renewable energy or water conservation improvements through an assessment on their property taxes.

California has the largest residential PACE, or R-PACE, market. "We've already empowered more than 150,000 homeowners in California," she says, "which we're very proud of." But, like most new programs, "Once it's out in the field, you learn where it needs improvements." So, after hearing consumer complaints about some abuses in the program, California lawmakers recently made some changes.

How It Works

Homeowners who want to make certain improvements--switching to an energy-saving heating or cooling system, adding solar panels to the roof or increasing the home's resistance to storms or earthquakes--but who don't have the savings to pay for them all at once, can sign a PACE contract. With funding from the private sector, PACE requires no down payment and pays the contractor in full when the work is completed. The customers then repay a PACE administrator slowly, over time, through an assessment (or lien) on their property that is added to their tax bill.

PACE programs are private-public partnerships: State legislatures must enact enabling legislation, localities may choose whether to opt in (requiring them to collect payments), and private-sector administrators finance and manage the programs.

Residential PACE was a $2 billion investment in 2016. In a study that year of California's R-PACE program, the average assessment in the state was slightly more than $20,000--a sizable improvement project for many homeowners.

According to publicly reported California data, the most common R-PACE assessment has a 20-year contract length with an average principal of $28,233, resulting in an average annual payment of $2,720. Several concerns have made their way to the California Legislature, however, since the program began almost a decade ago: deceptive contractors, unclear repayment terms, customers' lack of understanding about PACE's structure and customers defaulting on their assessments. Even though the reports represented a small percentage of the projects, lawmakers took them seriously--and responded.

Protecting Consumers

Last year, California became the first state to adopt comprehensive...

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