A new tool in the clean energy toolbox
It’s called commercial and industrial property assessed clean energy — a mouthful of jargon that doesn’t tell the uninitiated much, even with its acronym C-PACE.
It’s actually a reasonably innovative way to finance energy efficiency and clean energy systems and upgrades with low interest loans that are paid back through assessments added to property tax bills. If the property is sold, the assessment stays with it — just like a property tax.
In Connecticut’s case PACE can be used for projects in commercial, industrial and multifamily properties. It’s officially operational as of a few days ago with a website and 11 communities signed on and another couple of dozen getting close, said David Goldberg of the Clean Energy Finance and Investment Authority, which was designated by law to develop the program.
PACE has had a bit of a rocky history here and throughout the U.S. It was designed some years ago for homeowners to finance energy upgrades without having to pay a lot up front. But the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said it would no longer allow them to underwrite mortgages on homes with PACE assessments because in the event of foreclosure, PACE loans would have “first lien status,” meaning they could be repaid before the mortgage.
In fact Connecticut passed a residential PACE program in 2011, but like others, because of the Fannie/Freddie problem, it’s been nonfunctional. So last year state legislators decided to try a commercial PACE program. It died during the session along with the rest of the giant energy bill it was in, but was one of a few pieces resurrected — and passed — during a special session.
Under CEFIA’s program, municipalities have to allow the use of PACE, since it involves their property tax bills. So far Stamford, Bridgeport, Norwalk, Hartford, Middletown, Durham, West Hartford, Beacon Falls, Windham, Simsbury and Westport have.
In theory there is no need for anything other than private capital for the financing, but CEFIA is providing some of its ratepayer funds as loan guarantees. That means if a borrower defaults, CEFIA agrees to cover a portion of it if needed. Taxpayer money is not involved.
“Ideally it’s all private capital,” Goldberg said. “CEFIA will provide some loan loss reserve or supplemental money, not the financing money.”
Goldberg said CEFIA has been working to introduce the concept and the specifics of the program to banks.
“We wanted to get the banking community comfortable,” he said. “We want to make sure ultimately we’ve structured the program in a way to encourage them to invest and participate rather than scare them.”
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