U.S. Department of Energy - Energy Efficiency and Renewable Energy

WIP – Technical Assistance Resources

Property-Assessed Clean Energy (PACE) Programs

Note: Please see the Status Update for Pilot PACE Financing Programs for latest developments

The Property-Assessed Clean Energy (PACE) model is a financing structure that enables local governments to raise money through the issuance of bonds or other sources of capital to fund energy efficiency and renewable energy projects. Land-secured financing districts (also known as "special tax" or "special assessment" districts) are a familiar tool in municipal finance. In a typical assessment district, a municipality issues bonds to fund projects with a public purpose such as streetlights, sewer systems or underground utility lines. The property owners that benefit from the improvement repay the bond through property assessments, which are secured by a property lien and paid as an addition to the property tax bill.

The extension of this financing model to energy efficiency and renewable energy improvements allows a property owner to install improvements without a large up-front cash payment. The financing is repaid over a set number of years through the "special tax" or "assessment" only on those property owners who voluntarily choose to attach the cost of their energy improvements to their property tax bill. The financing is secured with a lien on the property and in the event of foreclosure, the energy financier is paid before other claims against the property. If the property is sold before the end of the repayment period, the new owner inherits both the remaining repayment obligation and the financed energy improvements.

Picture of a domed building and the front of a house

Transaction Points

The PACE model is a tool that is most appropriately utilized for planned major energy efficiency or renewable energy retrofits for the residential and commercial markets. It takes longer than a personal or business loan to arrange but can finance much larger projects over a much longer periods (often 15 to 20 years).

 

Advantages Disadvantages

+ Allows for secure financing of comprehensive projects over a longer term
+ Repayment obligation passes with ownership, overcoming hesitancy to invest in longer payback measures
+ Taps into private capital, such as the municipal bond market
+ Allows municipalities to encourage energy efficiency and renewable energy without putting their general funds at risk

— Legal and administrative expenses to set up
— Slower turn around for financing, more appropriate for larger projects
— Some resistance by lenders whose priority in bankruptcy may be reduced.

Resources

Past Webcast Presentations

Below are presentations from previous Webcasts. The presentations are available as Adobe Acrobat PDFs. The audio files are available as MP3 files. Download Windows Media Player.

Webcast Date Presentation Audio Transcript
Legal Issues Regarding PACE Financing Programs 12/15/09 (PDF 265 KB) (MP3 62.3 MB) (Text)
Getting Started: Legal Authority and Administering PACE Financing Programs 12/11/09 (PDF 1.81 MB) (MP3 68.6 MB) (Text)
Introduction to Property-Assessed Clean Energy (PACE) Financing Programs 11/18/09 (PDF 16 MB)(Q&A PDF 63 KB) (MP3 70.4 MB) (Text)

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