Publication

"Property Assessed Clean Energy (PACE): Emerging Technique for Financing Energy Efficiency Encounters New Obstacles"

As President Obama and Congress explore ways to encourage energy efficient technologies to combat climate change and wean the nation off foreign oil, state and local governments are also looking for solutions. Perhaps the most significant innovations have been aimed at increasing energy efficiency in buildings, which account for 40 percent of the country's energy use. One tool employed by an increasing number of local governments is Property Assessed Clean Energy (PACE) financing – loans for energy-efficiency retrofits that are repayable through property taxes.

However, as the use of PACE financing spreads, it may be facing its biggest obstacles – mortgage lenders, who insist on the seniority of their loans over increases in property assessments associated with energy efficiency retrofits, and concerns raised by the Federal Housing Finance Agency (FHFA) regarding the "safety and soundness" of PACE financing.

This article looks at the reasons why PACE financing is so popular with government and energy efficiency enthusiasts and so distrusted by lenders.

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