Olivia Nix's blog

Despite the uncertain future of comprehensive federal climate legislation, states continue to move forward with energy policies that reduce greenhouse gas emissions and save consumers money on their electricity bills. One policy in particular is quickly gaining traction in the states: Property Assessed Clean Energy, or PACE, programs. Twenty-three states plus Washington, DC, have PACE legislation, and 13 others have proposals on the table including Kentucky, South Carolina, Nebraska, and Pennsylvania.

PACE is an innovative funding mechanism that addresses many of the financial barriers to energy efficiency and renewable energy retrofits on residential, commercial, and industrial properties. In general through PACE states delegate authority to local governments to designate an improvement district and issue bonds, which provide low-interest, long-term loans to property owners for energy saving measures. The loans are paid back through an addition on the property tax bill and often over a 20-year period. If the property is sold, the debt transfers to the new owner. PACE programs usually create a lien on properties that is “senior” to (i.e., takes precedence over) other obligations on the property.

Because PACE is run by local governments, there are different styles of implementation for the various program elements including: program administration, underwriting criteria, source of funds, eligible measures, and quality control.  For example, San Francisco uses a third party for administrative functions and issues “mini-bonds” to be purchased by a pre-determined investor, while Babylon County, in New York, uses in-house staff to administrate and has repurposed an existing solid waste fund for financing. 

The White House strongly supports initiatives that make it easier for homeowners to get loans for energy efficiency and renewable energy improvements, and PACE programs have benefited from $150 million in stimulus funding. In an effort to standardize best practices and ensure that PACE is good policy for all stakeholders, the White House released a Policy Framework for PACE Financing Programs in October 2009. The measures initially accelerated the adoption of PACE and served as a guide for the second generation of PACE programs.

However, both existing and developing programs have been slowed or halted entirely due to opposition from Freddie Mac and Fannie Mae.  In May, both agencies sent letters to mortgage lenders reminding them that an energy-related lien may not be senior to a federally backed mortgage. The letters place a burden on the lender to determine if they originate mortgages in any state or locality that permits a first lien priority on energy loans. Proponents of PACE and its senior lien provision say it is a necessary requirement for local governments to raise funds. 

Following Freddie and Fannie, on July 14 the Federal Housing and Financing Agency (FHFA) released a statement of their opposition to PACE. As a result, the California attorney general’s office has sued the FHFA, Fannie Mae, and Freddie Mac for their actions and unwillingness to guarantee properties with PACE assessments. The July 14 lawsuit asks the court to declare that PACE does not violate the standards of Fannie and Freddie and also requests an injunction to prevent the agencies from taking action against home owners with PACE loans. Congress is also working on legislation that would require Freddie and Fannie to use underwriting standards that would facilitate the use of PACE programs. With a scarcity of financing options that overcome the high upfront cost of retrofits, this is an issue worth watching closely.

Olivia Nix is the Innovative Solutions intern

A group of nearly 50 companies and organizations, including the Center, sent President Obama a letter this month asking the Administration to lead the way to providing all consumers access to their energy information.  The April 5 letter calls for giving consumers access to this information via devices such as computers and phones; making it easier for them to monitor and manage their energy use.

With timely and actionable information on energy consumption, households and businesses can avoid inefficiencies that drive up consumer costs and greenhouse gas emissions.  Through its Make an Impact program, we also works to weave sustainability and energy efficiency into the fabric of its partners’ corporate culture. The program provides accessible information to employees and their communities on ways to reduce energy use, lower their carbon footprint, and save money. These savings can be significant: If every U.S. household saved 15% on its energy use by 2020, GHG savings would be equivalent to taking 35 million cars off the road and would   save consumers $46 billion on their energy bills each year. 

In February 2009 Congress passed the American Recovery and Reinvestment Act (ARRA or the stimulus package) providing the largest single investment in clean energy in American history.  About $84 billion of the $787 billion in stimulus funds targets energy, transportation, and climate investment in the form of grants, tax cuts, and loan guarantees.  Given the magnitude of this investment and its anticipated role of laying the groundwork for American leadership in a global clean energy economy, it is beneficial to follow how these funds are spent.   

We recently published the first installment of a  brief on the spending of ARRA funds by the U.S. Department of Energy (DOE), the agency with jurisdiction over the majority of energy expenditures.  The brief specifically examines how the funds have been appropriated, awarded, and spent as a way to track how quickly the money is moving out the door along with the impact of this spending on job creation.  We plan to keep tabs on the use of ARRA funds over time and update this brief accordingly.

On the whole, ARRA money is moving at a slower pace than expected – as of November 13, 2009 only 3.9 percent of the DOE’s total appropriated ARRA funds had been spent. But ARRA is leveraging private investment and, as Vice President Biden noted in a recent memo to President Obama, “jumpstarting a major transformation of our energy system.”  For example, with these funds and additional leveraged private investment, renewable energy generation is expected to double from 27.8 GW in January 2009 to 55.6 GW by 2012.¹

ARRA funds will also lead to significant growth in the manufacturing capacity for clean energy technology, advanced vehicle and fuel technologies, components of a smarter electric grid, home weatherization, and carbon capture and storage technologies.  New industry and funding for programs already in existence will create and save jobs in the clean energy sector.  At the end of October 2009, the Bureau of Labor Statistics reported nearly 10,000 jobs created from the DOE’s use of Recovery Act funds.  This number is expected to grow considerably as more of the ARRA money is committed to and spent by recipients (Biden’s memo predicts 253,000 jobs will be supported from new renewable generation and advanced energy manufacturing alone).         

Stay tuned for updates as we continue to follow the spending progress and impacts of DOE ARRA funds. 
 
Olivia Nix is the Innovative Solutions intern

1. Biden, Joseph. Memorandum for the President from the Vice President. Subject: Progress Report: The Transformation to A Clean Energy Economy. 15 December 2009.

Bacteria that produce gasoline.  “Blown wing” technology for wind turbines. Enzymes that capture carbon dioxide. Batteries that store solar energy overnight.  This is a short list of the 37 projects recently selected as the recipients of $151 million in research grants from the Advanced Research Projects Agency-Energy, or ARPA-E. In short, it’s the Department of Energy’s version of going rogue.   

ARPA-E is a new agency within the DOE that aims to fund cutting-edge energy and climate research. This may not be the conventional approach of government programs, but it is not unprecedented: ARPA-E is modeled on a Defense Department program, known as DARPA, that played a significant role in the commercialization of microchips and the Internet along with other high-tech innovations.

ARPA-E was created by Congress in August 2007 under the America COMPETES Act, but was left unfunded until Congress authorized $400 million for the agency in this year’s stimulus bill. The agency began to mobilize its resources this fall. In September, Arun Majumdar, a scientist at the Lawrence Berkeley National Laboratory in California, was confirmed as the agency’s director and soon after announced the winners of the first round of proposal solicitations. The 37 winning projects represent 1% of submitted proposals and include high-risk and high-payoff ideas and technologies in all stages of development. ARPA-E hopes that down the line the more promising projects will get picked up by venture capitalists or major companies willing to invest more resources to bring these projects from the laboratory to the marketplace.

The focus on high risk and high payoff means that ARPA-E must expect failure as well as success. Energy Secretary Steven Chu, one of the original visionaries of the ARPA-E concept, believes a few projects could have “a transformative impact.” In this economic climate, many investors overlook high-risk, but also high-reward, energy research and technology development. ARPA-E is an innovative and welcome approach to keep these projects in the pipeline, as a radical breakthrough in advanced technology could facilitate a U.S.-led transition to a global clean energy economy.        

Olivia Nix is the Solutions intern