Retrofits pick up the pace

Cities are gearing up efforts to fund efficiency retrofits and renewable energy systems. Photo credit: Robert J. Pennington

One of the most highly touted hopes for funding renewable energy and efficiency projects sputtered out last year just as it was getting off the ground when federal mortgage agencies effectively froze fledgling Property Assessed Clean Energy programs. 

This year could see PACE resurrected, thanks to efforts by federal lawmakers and legal action from cities and counties. Meanwhile, other programs, backed largely by federal stimulus dollars, could ensure that residential retrofits – and the nascent retrofit industry -- don’t languish along with PACE financing.

Through PACE -- born in Berkeley, Calif., in 2008 -- homeowners and businesses repay loans for rooftop solar systems and home energy improvements through 20-year assessments on their property tax bills. But last year, the Federal Housing Finance Agency decreed that government-chartered mortgage agencies Fannie Mae and Freddie Mac could not purchase loans with PACE liens on them. That brought most PACE programs to a halt and led some banks to insist that homeowners pay off their PACE loans before they would refinance a mortgage.

“I think the impact has been devastating, and very harmful to the economy, renewable energy and communities’ emission reduction goals,” says Cliff Staton, vice president of marketing for Renewable Funding, an Oakland, Calif., firm that administers PACE programs for municipalities and counties.

Not every city has halted its PACE program. In Palm Desert, Calif., the city launched a program in 2008 as part of its goal to cut its citywide energy use by 30 percent. It paused the program for two months last year but resumed it in August with inclusion of a disclosure statement warning potential participants that they might violate their mortgage agreements by assuming a PACE lien.

As a result, the stream of applicants has slowed to a trickle. About seven applications have been filed since the program was resumed, according to Benjamin Druyon, an official with Palm Desert’s office of energy management. The program has funded more than 100 projects so far.

“It’s really stunted our movement,” says Druyon.

Palm Desert is one of several cities and counties that have filed lawsuits against the FHFA in an effort to restore PACE. Federal lawmakers have also introduced a bill to restart stalled programs.

Meanwhile, alternative efforts to fund renewable energy systems and efficiency retrofits are gearing up, thanks in large part to federal stimulus dollars.

One such program has already financed retrofits for about 500 Portland homes and is being used as a model for a similar program in Seattle. Called Clean Energy Works, it pays for energy-efficiency improvements through 20-year loans, which homeowners repay through their utility bills.

The program, which was launched in 2009, is winding down its pilot phase. In early 2011, Portland plans to roll out an expanded version, hoping to retrofit 1,000 housing units by the end of the year, according to Andria Jacob, program manager for the Portland Bureau of Planning and Sustainability.

The U.S. Department of Energy last year awarded Clean Energy Works $20 million in stimulus funds and has granted more than $450 million to 25 cities, including Seattle and Los Angeles, as part of its “Retrofit Ramp-Up” initiative.

Overall, that federal initiative could leverage almost $3 billion in private investment for home energy retrofits over the next three years, according to the Energy Department. In Portland, the goal is for Clean Energy Works to become self-sustaining within three years.

“Our job is to figure out how to leverage private capital,” Jacob said. “Billions in private capital is out there looking to invest.”

Meanwhile, as part of a three-pronged initiative aiming to accelerate home energy retrofits, the Obama administration in November launched a pilot program that will offer Federal Housing Administration-backed loans of up to $25,000 to qualified homeowners. Called PowerSaver loans, they can be used  for  renewable energy, such as solar or geothermal systems, or energy efficiency improvements.

The agency is seeking banks for participate in the two-year, $25 million pilot that is set to begin in early 2011 in markets that have already taken steps to encourage energy retrofits.

As cities, government agencies, businesses and nonprofits piece together the financing puzzle for renewable energy and efficiency retrofits, Jacob said there’s another important factor to keep in mind: driving consumer demand.

“We thought as soon as we added financing this thing would fly off the shelves, but that didn’t turn out to be the case,” Jacob said. “You have to convince people of the value of retrofit.”