Cutting Through the Red Tape

Sustainable Energy Financing: Bringing Solar to Houston’s Residents

March 01, 2010

By Sara Mansur, H2010

In cities across the nation, a new model for solar financing is popping up. This model, called PACE (Property Assessed Clean Energy), allows municipalities and city governments to provide the upfront financing for property owners to purchase and install solar panels and energy efficiency improvements on their homes. Property owners repay these low interest rate loans over an extended period of time, as a line item on their property tax bills. PACE Sustainable Energy Financing Districts are rapidly proliferating in municipalities across the country, from Boulder County, CO to Berkeley, CA to Austin, TX.  The crux of any PACE program is that it eradicates the highest barriers that property owners face when trying to enter the market for solar energy: high upfront costs.

Land-secured financing districts are commonly used tools in municipal finance. In traditional assessment districts, a municipality issues bonds to fund projects that are explicitly in the public interest, such as streetlights, sewer systems, etc. Typically, each resident in the land-secured district will pay a special tax towards these improvements. The PACE program allows a local government to establish a voluntary assessment district, such that only those property owners who wish to take part in the program will “opt-in” to the district. These property owners will then pay back the loan they have received from the government in the same way as their property tax bills. This allows the municipality to offer a loan to its residents without tapping into its General Fund, while minimizing risk of default. In turn, property owners are afforded access to a low-interest rate, long term loan for solar installations and energy efficiency improvements that would not normally be provided by the free market.

I believe PACE presents an opportunity for the City of Houston – where I am serving my year as a City Hall Fellows – to encourage the proliferation of an innovative technology across its residential and commercial sectors. In Berkeley, the pilot program reached capacity enrollment within the first 15 minutes of the opening of applications. By establishing a market for solar renewables and energy efficiency initiatives, the City of Houston can attract stakeholders in the industry across the supply chain, from manufacturers to contractors and installers. A PACE consultant recently estimated that a PACE program brought a 9% increase in positive job growth to the construction industry in Southern California. Such a program can provide immediately tangible results for Houston, in the form of economic development and sustainable employment across the city. Most crucially, however, PACE would be an important step towards encouraging the proliferation of clean energy alternatives among property owners and ultimately addressing climate change in the City of Houston.

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