Legislature pushes loans for energy efficiency
In Pennsylvania, momentum is building for a bill that would enable municipalities to authorize a new type of loan for commercial and industrial energy efficiency projects, although at this point it would not apply to residential homeowners.
Property Assessed Clean Energy, or PACE, financing allows property owners to borrow money for upgrades, like new heating systems, lights, solar panels and insulation, that will help them cut down on energy costs. The loan is attached to the property and paid back in the form of a voluntary tax assessment.
More than half of the state Senate has signed on to sponsor Senate Bill 234, which also has broad outside support from environmental, building trades and energy efficiency groups.
“We have a lot of bipartisan support for the bill,” Sen. John Blake, D-Lackawanna, the bill’s prime sponsor, said.
The bill’s focus on businesses is not an accident, said Rob Altenburg, director of the energy center at the statewide environmental organization Penn Future.
Laws enabling commercial PACE have been adopted in 33 states plus the District of Columbia, and about twothirds of those states have active financing programs.
Active residential PACE programs are rarer and more controversial. Consumer advocates say they would not want the Senate legislation to apply to homeowners and they oppose a bill with dimmer prospects in the House — House Bill 996, which would apply to residential property owners.
Adopting commercial PACE is “a way we can design a program for Pennsylvania, see what works, see what the concerns are, and use that to build on the program,” Mr. Altenburg said.
Environmental and energy efficiency groups support the eventual expansion of PACE programs to homeowners as long as they carry reasonable consumer protections.
Consumer advocates say that in other states such programs have had problems. Among them: misrepresentation and, in some instances, outright fraud by home improvement contractors who god oor to door marketing the loans; costly upgrades that don’t pay for themselves in energy savings; and loans given to consumers without properly screening their ability to pay, according to a brief from the National Consumer Law Center.
Making sure consumers have the ability to repay the loans is paramount, said John Rao, an attorney at the National Consumer Law Center.
“That’s one of the great lessons that we did learn from the Great Recession: there were too many loans on stated income, without insuring the homeowner can repay,” Mr. Rao said.
“We view residential PACE as inherently dangerous. It is a product that is prone to abuse and prone to prey on people who otherwise can’t get financing in more traditional ways,” said Patrick Cicero, executive director of Pennsylvania Utility Law Project.
“This has been subject to abuse other places,” Mr. Cicero said.
His organization doesn’t object to commercial PACE loans.
Julian Boggs, policy director for Keystone Energy Efficiency Alliance, a trade group backing the commercial PACE bill, said the timing of the criticism is odd.
“I wouldn’t consider residential PACE something that is being discussed or has any traction in the Legislature,” Mr. Boggs said.
The commercial lending proposal, on the other hand, “really could crack open an energy efficiency market here in Pennsylvania.”
“We’ll have a lot more investment in energy efficiency, we’ll have a lot more contractors doing this kind of work,” he said. “Hopefully it will be an opportunity to build trust.”
PACE financing makes renewable energy and efficiency upgrades more accessible for property owners who might not otherwise adopt them, even if their energy savings would eventually make up for the initial costs, Mr. Altenburg said.
And since the assessment is attached to the land, the cost of the investment more likely will be recovered if the property is sold.
“You are not worried about making a 15-year investment in your property that you might hang onto for only three years,” Mr. Boggs said. “The person who buys the property from you and then is receiving the benefits of the energy efficiency improvement will repay the remainder of the loan.”
Eventually, if programs are expanded to residential properties, families weighing whether to upgrade and sell a house can make the same calculation.
Right now, because energy efficiency attributes are undervalued in the marketplace, “people can decide that the HGTV makeover is going to return more on their investment,” Mr. Altenburg said. That’s unfortunate because “energy efficiency in general is the most cost-effective energy resource we have.”