Municipal Energy Financinga.k.a. Property Assessed Clean Energy (PACE)                                       John Farrell ...
New Rules Project @ ILSR•   Public Broadband•   Local Banking•   Independent Retail•   Community Energy         www.munine...
Municipal Energy Financing      •   Overview      •   Rationale      •   Potential      •   IssuesMunicipal Energy Financi...
Overview                                                           Sells bonds      Installs energy         efficiencyimpr...
Rationale: Financing MismatchAverage time in one residence:            5-6 years                                5-6 yearsF...
Solution: Property Tied FinancingLong-term financing stays with property            5-6 years                             ...
Rationale: Information Disjointed     State                                   Utility    rebate                           ...
Solution: One-stop Shop                                      Utility                                       State          ...
PACE Process                            Information                             EnergyPACE program advertised             ...
PACE Process                 Retrofity   Retrofit                                     Owner pays assessment,              ...
PACE Status• 22 states• 4 established municipal programs  – Almost $40 million spent  – 2,000 properties served           ...
PACE Status                                Spending in 2009                  PACE Programs $40Utility Energy Efficiency Pr...
PACE Potential                                Future Spending?             PACE Programs 2010 $300             PACE Progra...
Issue: Fannie Mae ObjectsLender Letter LL-2010-06May 5, 2010TO: All Fannie Mae Single-Family Sellers and ServicersProperty...
Issue: Fannie Mae ObjectsLender Letter LL-2010-06May 5, 2010TO: All Fannie Mae Single-Family Sellers and ServicersProperty...
Solution #1: Lawsuits• FHFA, Fannie, & Freddie sued by:  – California Attorney General  – Sierra Club  – Sonoma County, CA...
Solution #2: Legislation• The PACE Assessment Protection Act of 2010  – Fannie Mae and Freddie Mac must revise their    le...
Solution #3: Alternatives• On-bill financing  – Utility finances improvements  – Utility ties billing to the meter instead...
Solution #3: Alternatives• Junior liens (e.g. Maine)  – Does not come before mortgage in event of    default  – Still tied...
Solution #3: Alternatives• Subsidized home retrofits  – E.g. weatherization• Drawbacks  – Who pays for subsidy?           ...
Solution #3: Alternatives• Loan loss reserves  – Can insulate lender• Drawbacks  – Who pays for reserve?• DOE webinar on M...
Solution #3: Alternatives• Loan insurance  – Insulates lenders  – Low cost• Drawbacks  – Offered to FHFA, but rejected  – ...
Thank you!John Farrell• www.newrules.org• jfarrell@ilsr.org• http://twitter.com/johnffarrel  l*New*Community Solar Power: ...
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Municipal Energy Financing (PACE)

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A presentation by John Farrell on the Property Assessed Clean Energy financing concept to the Southwest Renewable Energy Conference in Santa Fe. Includes an overview of the policy, its status in 2010, and potential solutions.

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Municipal Energy Financing (PACE)

  1. 1. Municipal Energy Financinga.k.a. Property Assessed Clean Energy (PACE) John Farrell Institute for Local Self-Reliance Presentation to the Southwest Renewable Energy Conference (SWREC) Santa Fe| September 14, 2010
  2. 2. New Rules Project @ ILSR• Public Broadband• Local Banking• Independent Retail• Community Energy www.muninetworks.org Energy Self-Reliant States @ Inst. For Local Self-Reliance
  3. 3. Municipal Energy Financing • Overview • Rationale • Potential • IssuesMunicipal Energy Financing: Lessons Learnedhttp://bit.ly/munienergyfinance Municipal Energy Financing @ SWREC
  4. 4. Overview Sells bonds Installs energy efficiencyimprovements and on- site renewable energy Pays for property improvements Pays with long-term property tax assessment Assesses property for cost plus interest Municipal Energy Financing @ SWREC
  5. 5. Rationale: Financing MismatchAverage time in one residence: 5-6 years 5-6 yearsFinance terms: 10-15 years 5-6 years Municipal Energy Financing @ SWREC
  6. 6. Solution: Property Tied FinancingLong-term financing stays with property 5-6 years 5-6 years 10-15 years Municipal Energy Financing @ SWREC
  7. 7. Rationale: Information Disjointed State Utility rebate rebate Utility audit Energy Nonprofit Star rating energy guide Federal tax credit Municipal Energy Financing @ SWREC
  8. 8. Solution: One-stop Shop Utility State PACE program Federal Nonprofit Municipal Energy Financing @ SWREC
  9. 9. PACE Process Information EnergyPACE program advertised Sign-up sessions audits Municipal Energy Financing @ SWREC
  10. 10. PACE Process Retrofity Retrofit Owner pays assessment, completed,s contract enjoys energy savings City pays Municipal Energy Financing @ SWREC
  11. 11. PACE Status• 22 states• 4 established municipal programs – Almost $40 million spent – 2,000 properties served Legend Recently enacted PACE laws Pre-2009 statutes supporting PACE Municipal Energy Financing @ SWREC
  12. 12. PACE Status Spending in 2009 PACE Programs $40Utility Energy Efficiency Programs $3,600 $0 $1,000 $2,000 $3,000 $4,000 Millions Municipal Energy Financing @ SWREC
  13. 13. PACE Potential Future Spending? PACE Programs 2010 $300 PACE Programs 2011 $600Utility Energy Efficiency Programs $3,600 $0 $1,000 $2,000 $3,000 $4,000 Millions Municipal Energy Financing @ SWREC
  14. 14. Issue: Fannie Mae ObjectsLender Letter LL-2010-06May 5, 2010TO: All Fannie Mae Single-Family Sellers and ServicersProperty Assessed Clean Energy LoansPACE loans generally have automatic first lien priorityover previously recorded mortgages. The terms of theFannie Mae/Freddie Mac Uniform Security Instrumentsprohibit loans that have senior lien status to a mortgage.As PACE programs progress through the experimentalphase and beyond, Fannie Mae will issue additionalguidance to lenders as may be needed from time to time. Lender letter: http://tinyurl.com/3y2g4mw
  15. 15. Issue: Fannie Mae ObjectsLender Letter LL-2010-06May 5, 2010TO: All Fannie Mae Single-Family Sellers and ServicersProperty Assessed Clean Energy Loans1. We don’t come second.2. This isn’t a public good.3. “We’re buried in a subprime mess. Nothing new, please.” Municipal Energy Financing @ SWREC
  16. 16. Solution #1: Lawsuits• FHFA, Fannie, & Freddie sued by: – California Attorney General – Sierra Club – Sonoma County, CA – Town of Babylon, NY Municipal Energy Financing @ SWREC
  17. 17. Solution #2: Legislation• The PACE Assessment Protection Act of 2010 – Fannie Mae and Freddie Mac must revise their lending standards to conform with Department of Energy PACE Guidelines from May 2010. – FHFA, Fannie, and Freddie may not discriminate against any borrower in a community with a PACE program. Municipal Energy Financing @ SWREC
  18. 18. Solution #3: Alternatives• On-bill financing – Utility finances improvements – Utility ties billing to the meter instead of individual – “Pay As You Save” (now defunct)• Drawbacks – Requires utility participation – Utility billing system may need upgrade Municipal Energy Financing @ SWREC
  19. 19. Solution #3: Alternatives• Junior liens (e.g. Maine) – Does not come before mortgage in event of default – Still tied to property tax bill• Drawbacks – No secondary market – Can’t transfer between owners? Municipal Energy Financing @ SWREC
  20. 20. Solution #3: Alternatives• Subsidized home retrofits – E.g. weatherization• Drawbacks – Who pays for subsidy? Municipal Energy Financing @ SWREC
  21. 21. Solution #3: Alternatives• Loan loss reserves – Can insulate lender• Drawbacks – Who pays for reserve?• DOE webinar on Monday – http://tinyurl.com/37wt6o9 Municipal Energy Financing @ SWREC
  22. 22. Solution #3: Alternatives• Loan insurance – Insulates lenders – Low cost• Drawbacks – Offered to FHFA, but rejected – No private market right now Municipal Energy Financing @ SWREC
  23. 23. Thank you!John Farrell• www.newrules.org• jfarrell@ilsr.org• http://twitter.com/johnffarrel l*New*Community Solar Power: Obstacles and Opportunities Municipal Energy Financing: Lessons Learned http://bit.ly/munienergyfinance
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